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Topics: blog| Premier Wealth Management| Things clients say
Premier Wealth Management’s Adrian Shandley couldn’t quite believe a client’s stance on the dwindling value of his property.
Five years ago, I went to see a client who had retired with a lump sum of £500,000 to invest.
At that time, he decided to invest £250,000 into a commercial property (with a further loan of £200,000). The balance, some £250,000, he invested into one of our low cost, asset allocated portfolios.
At the time, he queried the fees, and I told him that we would charge 2% to invest his money. “That’s extortionate!” he said and we spent almost an hour explaining the reason why there was a 2% charge (which we all know is at the lower end anyway!).
I asked him “how much is it costing to buy the property?” and he responded, “not that much!”
We then went into the stamp duty, the legal fees in relation to the purchase, the drafting of a lease for the tenant, bank arrangement fees, the valuation costs etc., and it was quite apparent that he was paying in excess of 4% to buy the property.
When I explained this to him, his answer was “oh yes, but that’s different”.
Last month I went to see him to discuss his investment portfolio and the performance it had achieved. Like many investment portfolios over the same period, it had actually lost approximately 1.5% of its value. “That’s a disaster!” he exclaimed, “you’ve had my money all that time and it’s still gone down?”
“Have you seen what’s been going on in the markets?” I said. “That’s not the point, if I pulled my money out now, I’ve actually lost, I could have put it in the bank”, he replied.
“How’s the property going?” I asked, “Has it gone up in value?” I added.
“No, it’s gone down by about 30%” he said, “but it’ll come back!”
He then went on to explain that he had no tenant currently in the property and that, for the past six months, he had actually had to pay the mortgage himself. Equally, the previous tenant had left with rent arrears that he was unlikely to recover, and he had significant legal bills.
I said: “So let me get this straight, you’ve lost 30% of your money in that property, the investment has asked you to pay into it for the last six months, you’ve had legal bills, and if you wanted to sell it tomorrow, it would probably cost you 3% to get out with estate agent fees and legal bills? In fact, when the gearing is taken into account, you’ve lost a lot more than 30% because of the debt,” I added.
“Yes, but it’ll come back, it’s bricks and mortar, it’s quite safe,” he added. “Not like your investments, they’ve actually lost proper cash!”
Sometimes, you just can’t win.
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Life's too short
I think after that last meeting, this would be one ex-client of mine!
Posted by: Glenn Anderton
404 error - reality not found
I would refer this client to the loony bin. Obviously he lives in a different reality to us...
Posted by: K Smith`
What clients say
LOL! We have all had clients who are too blinded by the belief that property is safe.But well done to you for your response.
Posted by: Michael Gould
Obvious really
Your cardinal error was taking him on in the first place. I only allow clients one sentence and 10 seconds if they want to complain about my fee – then I show them the door. This was a guaranteed outcome from your initial discussion. It’s only a wonder that you were surprised when he complained. As I have so often remarked in the past some advisers don’t seem to know when to say no and walk away. Oh and by the way with regard to your firm’s name I refer you to Chris Gilchrist’s article in this week’s Money marketing.
Posted by: Harry Katz
Error of Definition
Sorry to say you don't have a client - you have a customer. You clearly don't understand him and he has no idea of what you do. Did you arrange the mortgage for the commercial purchase?, recommend a solicitor, set his pension up in the first place, do you know if he has other investmemnts, savings or Perhaps an IHT issue? Can't work out if this is the Chaps fault or yours .
Posted by: Darren
Grrr...
I think there are those people who will only believe what they want to believe. One trick could be to actually get THEM to say the answers to all your questions...rather than you spelling out the facts, as it were. Otherwise, I have often swiftly said to people "Look, tell you what, have a think on it and call me back..." I say this knowing they won't call back. This allows me to move on much more quickly from those false hopes we all create for ourselves.
Posted by: Giles Sanger
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I want no risk and 10% per annum
Sounds very familiar to a client I have at present that is moaning about a discretioanry managed portfolio that has only made 1.5% over the past year although the higher charges relating to a personal service and regular speaking with the manager have been taken into account. He wanted low volatility, ability to express his market views with the manager and low risk, all of which have been deliverd and achieved, but now we are being asked all sorts of irrelvant aspects as to why the fnd managers are taking more in charges than has been achieved in growth (all charges that were discloded properly in detail before the investment was made).......A great lack of understanding and no consideration for the challenging market conditions. Thankfully these clients are the minority but they take up a considerable amount of time. Most clients are very relaxed and understand all investments have good and bad periods, the importnat aspect being the performacne against their peers and the market conditions relevant to the time period.
Posted by: IFA Agreeing