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Determining what clients do and don’t have
Determining what clients do and don’t have

Nov 01 2023 / Round the Table Magazine

Determining what clients do and don’t have

What is your process for learning unexpected information about people’s finances?

By Matt Pais

Topics Covered

How do you determine when someone is living beyond their means, and how do you tell them that after figuring it out? During an MDRT Podcast recording, MDRT members discussed establishing trust with clients for whom perception may not be the same as reality. (Listen to the full episode at mdrt.org/what-clients-do-and-don’t-have).

Members participating:

Peter Jason Byrne is a 15-year MDRT member from Coorparoo, Queensland, Australia
Danielle J. Genier, CLU, CFP, is a 24-year MDRT member from Timmins, Ontario, Canada
Jonathan C. Godshall, MBA, LUTCF, is a nine-year MDRT member from Puebla, Mexico
Randall D. Kaufmann is a 42-year MDRT member from Camp Hill, Pennsylvania, USA

Godshall: For starters, you think a client is really wealthy because you see how he lives, and in the end, you see there’s really nothing there. It’s just pretend. There are people who like to show that they have a lot of money. They have a great car, a great house and everything. But they pretty much spend everything they earn every month. So, they don’t have anything left to save. 

Genier: Those can be tougher clients to have conversations with because they perceive themselves to be wealthy and they’re not. So, you need to have basic conversations about how to budget. But it can be intimidating to have those conversations with them. I always say I don’t have a choice; I have to have that conversation. They’re all surprised and respond, “What do you mean I overspend?” Yes, you overspend. You need to address this debt. I had a similar situation not that long ago, and I worked with the client constantly. Now that they’re about to retire, they’ll say, “Danielle, thanks for waking us up.”

Kaufmann: You’re right on. The perception and the reality are two different things. I met with a prospect, and at the time, my assumption was one thing. It probably took a good year for him to develop trust in me, and I in him, so that what we talk about is in the strictest of confidence. His business, although perceived as being one way, in reality was going the opposite, and he really had not talked to anyone about that. I ended up being the individual who was able to draw that out, and we built a great relationship. Later, he was able to incorporate other advisors into a team, and we really helped him get his business back on track. And it was just a matter of him being able to trust someone and admit that he needed help. Our role was specifically that — just creating the environment to do so. It was very rewarding. 

When you think of confronting a client who was tough in the beginning to when the relationship became good later, what comes to mind about the moments in between? 

Kaufmann: I think the moments in between are when we talked about staying in touch with people and valuing who we do business with. Did you ever get that gut reaction where you just feel there’s something there and someone isn’t really opening up the way you want, and yet you feel a purpose in trying to work with these people? That was the sense that I had. It was a matter of saying, “Hey, let’s have a cup of coffee someday. How are things going?” And just nurturing that relationship. It probably took about 90 days. “Listen, I want you to talk to my accountant.” That’s where the first step took place, and from there it got into more of a transition as to “How can we help you get your business back on track?” 

To follow up on something: Jonathan, when you realized this person wasn’t as well off as they might think, can you elaborate on what that meeting was like? 

Godshall: Well, it’s not just one meeting. It’s been a few. But I think you have to work with them. Maybe it’s not the time right now to work with them, but you have to let them know that they’re doing something wrong. They must repair some things so maybe later in the future they can work with you. Maybe you will start working for free by giving advice that will be really helpful. They’ll be grateful later, and then they can be your clients. 

Did a person ever get mad when hearing that they don’t need six motorcycles? 

Godshall: Well, I don’t think they get mad. I’m guessing nobody told them directly. 

Genier: They get defensive. 

Godshall: Yes, they get defensive definitely. But I don’t think mad is the word. Some of them do, and some of them don’t follow your advice at all. It’s up to them.

Genier: Well, the ones who don’t want to hear what you have to say don’t become your client, or they’ll never call you back if you’ve done a financial plan for them. And that’s OK because I feel I’ve done my job, and I’ve told them the truth. They’re not hiring me to make everything look pretty. They’re hiring me to tell them the truth. 

Kaufmann: Let’s go the other way. I’ve had some people where I walked in, and it was not the situation I thought it was one way or another. They had no insurance or no planning at all, and these are very successful people with successful businesses. I was surprised when I would ask someone, “Tell me a little bit about your business succession plan. How about some of your other planning?” They had nothing. How you can cultivate that into becoming something is always surprising to me. All they needed was someone to ask them and talk to them a little bit about their future. I’m really surprised at the number of — at least in our market — business owners who haven’t been communicating with their own professionals like their CPA and their legal counsel. The accountants do their thing. The attorneys do their thing. But I find we’re more of a quarterback than we realize from time to time. It’s amazing what can happen and the business you can get just by asking certain people if they have this or if they have that.

Byrne: I think you’re right, Randy. It’s our job. We have to ask those questions. I’ve found that you can’t have any presumptions on what people have or don’t have. But definitely in that business market, you run into very successful businesspeople who don’t have the appropriate protections or succession in place or even have a will, and yet they are dealing with other professionals like lawyers and accountants. In Australia, advisors pretty much take a project manager role. We can show clients it’s not as hard as they think, and we can help them bring it all together. They’re looking for that support. You just can’t predict what people do have, and if they don’t have something, I will say they don’t understand what they have. So, we’ve got to do our role well, explain things simply for them and untangle a lot of the confusion that’s been put in place by other people or look at plans that have been there a number of years and haven’t been reviewed.