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Use a Client's Investment Idea to Prove Your Value

By Crucial Clips     May 1, 2013
The following text is a transcript of a portion of a speaker's presentation made at an industry conference or during an interview. This transcript solely represents the view of the individual who spoke, and not the view of Financial Advisor IQ or any other group.

TOM COYLE, ASSOCIATE EDITOR, FINANCIAL ADVISOR IQ: So here's the question: What should you do when a client comes into your office with an investment idea of his or her own? I talked to a number of financial advisors about this, and what I learned is that you should first of all not roll your eyes, not laugh out loud and definitely not get angry about it. It is, after all, an idea that could be close to your client's heart. And overall, this might be an opportunity to grow closer to the client.

Every advisor I spoke to said you have to take the idea seriously enough to look into it. Where there is potential for fitting the idea into the investment portfolio, well then, then it goes. Perhaps, anyway. Where there isn't such a fit, it might belong in a play account, a discount brokerage portfolio the client might open with or without your oversight for the account. But it will be a small percentage of the overall assets. And it would be, in effect, a hobby.

Where the potential for trouble creeps in is sometimes in private investments, in somebody investing in a friend's business or something like that, that could tie up a lot of capital and could interfere with the long-term outcome of a retirement plan or some other goal the client might have in mind. At that point, advisors tell me they have to really pull up the charts. Show in detail how this investment might not be a good idea. In doing this, again, you can cement a relationship. You can grow closer to a client, and you can show your value as a financial advisor. At least that's what the people I talked to told me.

I'm Tom Coyle, and I'm here with Financial Advisor IQ. And I hope you will come back and see me soon.