Better Business: Can a friend be a client?

What should you do if a friend or family member wants financial advice? Maria Merricks asks advisers for their tips.

Having friends as clients has always been a bit of a grey area. On the one hand, you want the best for them and they know and trust you well. On the other, what if something goes wrong?

“Money can change people’s attitudes,” says Adrian Lowcock, senior investment adviser at Bestinvest. “You hear of it in so many different situations: friends who have rented or bought a house together, or a husband and wife who have ended up divorced. You certainly do not want a situation where friends end up losing money and blaming you.”

With this in mind, what is the best way to protect your friendships?

Advising in a social situation

Whether it is in the back of a taxi or at a dinner party with friends, mention you are an IFA and the questions will soon follow: what do you think of an ISA? Is my pension right for me? In these situations it can prove difficult to separate opinion from advice. What is the best way to deal with it?

Danny Cox, head of advice at Hargreaves Lansdown, says advisers need to be careful to give an honest but neutral reply. In cases where the issue needs more than a quick response, Cox will highlight the fact he needs to be a bit more involved and will suggest they pick it up at a different time.

“You do not want to give them some off the cuff advice that might be inaccurate and so, people are usually quite happy with that,” he says.

All very well, but now they have arranged to see you as a potential client – what next?

Keeping it professional

Dave Penny, managing director at Invest Southwest, has been advising friends for years. For him, the situation is simple: treat friends exactly the same as you would any other client, perhaps even more professionally.

He suggests starting the advice process as normal: before the first meeting send out the relevant terms of business with a client agreement and a budget planner to complete. Outline the objectives for the discussion and give them time to prepare all the necessary information.

At the beginning of the meeting advisers should introduce themselves formally, outline what they do and how they work, then they should conduct the discussion fully and formally, agreeing on the objectives. Crucially, for Penny, all meetings should be at the adviser’s office:

“I will never go to a friend’s home as you are most likely to end up with the television on and talking to wives and children. Along the way I have learnt things tend to go wrong when you abandon the structure of meetings and I tend to feel uncomfortable I have not done a professional job.