‘It’s not you, it’s me. The classic break up line.
I have just come off the phone with a potential new client. We were having a frank conversation as part of our exploratory work and he joked about this feeling like ‘we were on a date’.
He didn’t realise quite how poignant his words were. Quite recently I ‘broke up’ with a client. Like any relationship that didn’t work out as expected, it leaves you feeling bruised and questioning what you could have done differently.
Hence the blog. After all, it is all well and good reading about successes. You will learn as much about us by knowing about the failures (and yes, I do regard this as a failure).
This client came to us with a reasonably substantial ISA and pension portfolio that was being managed by Bestinvest. He wasn’t getting any financial advice (despite paying a small fortune in fees) and had run down all his available savings but also wasn’t prepared to take any income from his investments. In other words, he had got himself into a bit of a pickle.
First up, we cut his costs substantially but also spent a lot of time nursing him through a plan and making the incremental decisions to get things on an even keel. He was quite challenging but our view was that he needed an initial period of ‘intensive care’ to get him in shape and we were more than happy to do that.
He began sending occasional newspaper cuttings on different pieces of financial advice he had read and asking us to explain why we didn’t do it this way. None of it was overt criticism, but it was unusual so soon after an exhaustive financial planning process (particularly as he could have selected any of these other advisers over us if he wanted). To be fair, we persevered and I think that, over time, we managed to build his faith and trust in our ability to help him make better financial planning decisions.
But now we get to the bigger bugbear. Past performance.
We know that a common private investor pitfall is to get all hot under the collar about short term past performance – both good and bad – and populate their portfolios with all the recent top performers. We also know it is a flawed strategy and that our approach to investment management is rational, sensible and based on many years of knowledge and experience. We also know that we go to great lengths to clearly explain it before anyone becomes a client.
Our client began trawling the ‘best buy’ tables and wanting to invest in whatever had the highest current rating. Without wishing to sound harsh, this client fell into the category of ‘a little bit of knowledge is a dangerous thing’. But by now, despite lengthy and clear explanations from us, his confidence was growing and he was starting to reject fairly innocuous recommendations and coming forward with his own selections.
Key to us is that we never lock anybody in to using us. He became a client for all the right reasons. We regularly reminded him of this. But he would neither listen fully to us nor assume the responsibility himself. We had two cooks following different recipes. Or possibly even trying to make completely different meals!
The start of the year marked a final attempt to get things back on track. After more questions, a very carefully crafted reminder to only use us if he felt we added value but also that we only worked with clients where we felt we could do something meaningful to help and that we would stand down if we felt that was no longer the case.
Which bring us to more recent times. A perfectly polite, and on its own, innocuous request that we provide a written summary of our fund selection process. As he uttered the words my heart sank. Of course we sent him the document, but I knew it was the end of the road.
What followed was a cumbersome and awkward conversation for both of us. I’m glad to say that I did manage to avoid the cliché of ‘It’s not you, it’s me’ and in fairly stuttering sentences somehow made it clear that we were ending the relationship.
And then we do the introspection and navel gazing about where do it all go wrong. We are confident we did a great job for this client. His portfolio had made a lot of money and performed well relative to any sensible benchmarks, he had a healthy ‘rainy day’ buffer, a regular income and an advice firm that would bend over backwards to help. Our failure here was in not identifying before we started that we were never going to be able to satisfy this client.
On a positive note, we left him with a good portfolio on a low cost platform that would allow him to look after matters himself moving forwards.
People are often surprised about how much work we do for nothing before taking on a new client. Hopefully this explains why we do that. It is not right or fair on either party to do it any other way. We like to enjoy what we do, enjoy working with clients and enjoy challenging the standards and accepted practices of the rest of our sector. The recent break up was a real shame. It did affect me and I carried it around for days thereafter. But I also know it was the right decision and probably one we should have made sooner.