How to deal with a know-it-all

The vast majority of your clients will value your advice and recommendations, but a few always think they know better. Rahul Odedra asks advisers how they cope with the know-it-alls...

A client walks in your door and excitedly tells you about a great investment opportunity he is keen to take a punt on. What do you do?

It is a situation all too familiar to Mel Kenny, a director and Chartered Financial Planner at Radcliffe & Newlands. Kenny believes it is crucial to assess the nature of the client in the initial meetings, and to gauge whether they might be more suited to investing direct.

“There are different types of clients out there, from people who haven’t got a clue, to the DIY-ers who don’t really want advice,” he says.

“Below that, you’ve got people who want advice but try to steer it a bit too much. I set my stall out from the beginning, explain my role, and ask them what level of involvement they would expect.”

Explain your position

Andrew Elson, a Chartered Financial Planner with Honister Partners, agrees there are some individuals who do not appear ready or willing to receive advice. But he insists it is sometimes possible to bring them around.

He says: “We had a few who come in with ideas, thinking they know what they want to do, but they’re just trying to look cleverer than they are. It’s down to us to explain our proposition properly and about things like risk assessment, asset allocation and platforms.”

As for existing clients, the potential for any problems can come when they may have read the latest economic predictions or interesting investment ideas in the newspapers.

However, Elson believes making sure clients know exactly how the advice process works, and what the role of an adviser is, can help.

“We get a lot of people that might have read something in the papers, and they’ll ask us for our views on something. Because they know our process,” he says.

Kenny agrees it is important for the adviser to reassure the client about the existing plans and not let them get caught up in any hype.

“You get people saying they’ve heard of a new fund, for example the Fidelity China [investment trust] run by Anthony Bolton,” he explains.

“It’s about being level-headed and not getting swept away by the big marketing pushes.”

Finding safe ground

Philip Pearson, partner at P&P Invest, says there are situations where the adviser has to accept the client will make an investment choice on their own.

“The most recent farce was clients piling into Lloyds Banking Group shares, just because the price had collapsed and not for any good reason,” he notes. “Of course, since then, it has collapsed even more.”

“As long as you document the conversations you’ve had with clients, you are on safe ground. If customers want to gamble their money, as long as you are not recommending it, then everyone understands what’s happening.”

But even super-confident, do-it-yourself investors often realise they can benefit from professional advice, Kenny adds.

“I give them my card and tell them to get back to me when they come up against any problems. For example, they can’t get the best annuity rates or haggle with providers. Also – and this happens often – their investments underperform the market.”