Sep 01 2023 / Round the Table Magazine
The time I failed with a client
By Matt Pais
Yakov Baylis, CLU, ChFC, a six-year MDRT member from Downers Grove, Illinois, USA
Edward M. Burnett, RICP, a nine-year MDRT member from Kenosha, Wisconsin, USA
Russell L. Clousing, CLU, ChFC, a 30-year MDRT member from Chicago, Illinois, USA
Many advisors have had clients who wanted to cancel insurance policies or dump their investments during a down market. Some clients died tragically after going against their recommendation, leaving nothing for the family or putting a business in peril. During an MDRT Podcast episode, members discussed client situations that did not turn out as well as they hoped and how they adjusted to move forward.
Clousing: I don’t know if you would classify it as a mistake, but there have been several times where I’ve done work for clients and potential clients, and they have elected not to implement my suggestions. Or they did so in a different manner, which caused significant financial harm to their families. I’ve got several cases where I’ve had people in for underwriting and approved them at — pick a number: $1 million, $2 million, $3 million of coverage — all on a needs-based analysis. It’s not just a number we were picking out of the blue. I had one couple where the wife looked at her husband and said, “We don’t need coverage.” This was after six months of meetings and reviews, and everything was mathematically sound. “This is what you told me you want to have happen,” I said. “This is the amount of capital you need to accomplish your objectives if you’re not here.” He asked what he was approved for, and I said the full amount. “Well, half a million will be just fine,” he said.
At that point, you take the order. Half a million is better than what they had. He passed away six weeks after the policy was issued. You deliver the check and work with the family as best you can. Thankfully I documented everything in my file. The family are still clients, but what we do for people with the stroke of a pen is pretty dramatic. Until you’ve gone through that, you really don’t understand that as an advisor.
I’ve had people drop coverage and die shortly after. I had a co-owner of a family business with $20 million of coverage in underwriting. I had the meeting with him and his brothers, and one brother said, “We’ve got each other’s back. We started this business from scratch. We don’t need the insurance.” Two years later, my client dies, and now the brothers are liquidating pieces of the business during a tough economic time, so they can raise the capital to buy the widow out of their company. We’re in a noble profession, and unfortunately sometimes you have to see those things play out before you’re fully aware of what you can do for people as an advisor.
Do you do anything differently now as a result?
Clousing: I document like crazy. I document to the point where, hey, I called, I left a message. That goes right into my client’s CRM: “Called Bob, underwriting is approved. Left a message. Ten days later: Called Bob, left a message. He has not responded. Called Bob, we’re going to meet on ...” It’s in the file. I don’t ever want to be questioned on whether I did my job. You’re dealing with people who don’t always fully understand or want to understand what they’re saying no or saying yes to. You can’t control that, but for their benefit as well as yours, you need to document the process and protect both parties.
Baylis: I had a young client from a tough neighborhood on the South Side of Chicago. He was a teacher and the only person in his family who was successful. I got a nice life insurance policy for him, but he let it go. I met him later and suggested that he should have life insurance, but he wanted to talk about investing. We talked, and he was like, “This world, it’s not going well. There’s not much left,” and he didn’t do anything that day. I learned a couple of months later that he was shot and killed in his car. There were no benefits that I could have paid. He was the one person in the family who was doing well, and insurance could have helped them dramatically.
Before this event, I did not have the courage to ask my wife to buy a life insurance policy where I would be the beneficiary. That day, I went home and told my wife that she needs a life insurance policy. It’s one thing to say you need it. As an advisor, you know it. At the same time, writing the policy where you’re the primary beneficiary is still something that causes a little shaking inside you. We knew we would be planning to have a family in the future and would need to protect them. She’s my whole support for my business. If something happened, who’s going to take care of the family?
Burnett: I had a client who was really freaking out about the slumping market. She sent an email and wanted me to know that she thought I didn’t think she was that important of a client, that I’m not watching her money, and she even used the word Ponzi. I went through this once before and I’m thinking, Wait a minute, I’m none of those things. Allow me a moment to rebut. I crafted an email, proofed it and sent it. Later, I brought this to the attention of my mentor. One mistake I made is when I received an email that was accusatory, I should not have replied right away from a compliance perspective.
I didn’t do anything wrong, but my natural reaction is, I’m an Eagle Scout for crying out loud. I’m ethical. I know who I am, and I felt like this person was blaming me. The reality is I didn’t appropriately manage her expectations. That was my shortcoming. So, rather than taking offense to her emails, I should have picked up the phone and said, “Hey, I read your email. Let’s have a discussion. Let’s remedy the circumstance.” She’s still a client. As the market bounced back, we repositioned her portfolio toward a little more conservative. It was never aggressive, but it was more aggressive than she liked to sleep with.