Three difficult client conversations – and how to handle them

Difficult conversations with clients are part of being a financial advisor. Whether it’s discussing a client’s mental capacity or market downturns, advisors have to tread carefully.
“Our job as advisors is not to wait until the tough conversations become tough,” says Zael Miransky, chief executive officer of MCO Private Wealth at Global Maxfin Investments Inc. in Richmond Hill, Ont.
“You have to say to somebody: ‘This is what we’ve seen happen.’ Start having these conversations before so you don’t have to have tough conversations when your hands are tied.”
Nevertheless, Susan Latremoille, partner at Next Chapter Lifestyle Advisors in Toronto, says advisors should be careful not to overstep.
“With difficult conversations, it’s easy to get in over your head,” she says. “But we’re not trained as therapists to deal with some of these more emotional and psychological issues.”
She says it’s a good idea to empathize but keep a neutral stance – and to reach out for external support if needed.
“A good advisor has a network of other professionals,” she says, be it a divorce lawyer, mediator or psychotherapist. “You can reach out to them.”
Ludmila Paciora, investment advisor and financial planner with The Waterfront Group at Wellington-Altus Private Wealth Inc. in Burlington, Ont., says close relationships with clients can ward off issues.
“The more you know about your clients, the better it is,” she says. “Because then you can understand if there’s something that’s not right.”
Here are three challenging conversations advisors may face with clients, and tips on how to prepare for them.
Knowing your client means keeping tabs on their spending habits, Ms. Paciora says – even if the spending might not end up being problematic.
One of her wealthy clients was recently withdrawing $30,000 to $40,0000 a month. While she found it difficult to address the withdrawals, Ms. Paciora felt it was her duty to reach out and ensure all was well, which it was.
“At some point, you want to start asking clients where exactly that money is going,” she says. “Sometimes, when people have a lot of money, they’re used to higher expenses. But at the same time, it’s better for us to check and make sure that everything’s okay than to miss anything.”
Ms. Latremoille, who was formerly an advisor with Richardson Wealth Ltd., has found herself in that situation as well – with a different result. She had a client from a wealthy family who was very philanthropic.
“She inherited the money and had both a fairly expensive lifestyle as well as a very generous spirit, and she started to give a lot of money away,” Ms. Latremoille says, adding the client hadn’t been raised with any financial guidance.
Ms. Latremoille noticed the overspending when running the client’s financial projections. She advised the client to develop a budget, rein in her spending and not be as generous with her giving.
“She was most grateful as that was one of her fears in life – that she would end up homeless,” Ms. Latremoille says.
A frank conversation is paramount when advisors suspect their clients are being taken advantage of. Ms. Paciora recalls a client in her 50s who had invested approximately $150,000 from the sale of a property.
“Within a matter of a few months, she started to come in and make large withdrawals,” Ms. Paciora says. “At first, she would say, ‘I’m just helping a friend.’ Then she was saying, ‘I just need it.’”
Despite repeated questioning, Ms. Paciora and her colleague were unable to intervene until it was too late. The client was being defrauded in a romance scam and was left with almost no savings.
Ms. Paciora says this situation occurred before advisors were allowed to ask clients for their trusted contact person.
“Once the trusted contact person was formally implemented at the end of 2021, it allowed us to have that tool – to have a specific person that we can contact and involve a member of the family or maybe a close friend,” she says.
Divorce can lead to some difficult dialogue, particularly if both parties are clients, Mr. Miransky says.
In these situations, he says the advisor’s role is to separate the emotions from the money.
“The higher-income earning [spouse] always feels like the lower-income earning one is trying to squeeze them for what they’re worth,” he says. “And the lower-income earning one always thinks the higher-income earning one is trying to hide money.”
He says the advisor has to convince both parties that the more emotional the situation becomes, the longer the process will be drawn out. And when that happens, “whatever you think you’re entitled to will just end up in the lawyers’ hands.”
Ultimately, advising clients in these scenarios comes down to empathy. Mr. Miransky believes being an advisor is “being a human and taking care of the people you care about.”