Toxic Clients That Financial Advisors Should Avoid – Part 2

By Dr. Jack Singer

In my last blog post, I brought up the topic of “toxic” clients in the financial advisor profession, with an overview of some of the toxic personalities that you should consider keeping out of your practice. Today I will continue on, discussing four additional toxic personalities to avoid.

As I noted in the article, because many advisors are hesitant to send any business away, they will put up with unbearable, demanding, self-centered clients, dependent clients, whose behaviors can add exponentially to an advisor’s career-related stress.  The key question to ask yourself is whether the AUM that such clients represent is worth the inevitable stress and aggravation you must endure from retaining them as clients.

Many advisors have told me that they were so relieved once they transferred these clients to other advisors within their firms or to advisors in other practices that they were actually free to develop new clients, culminating in even more AUM.

In my book, The Financial Advisor’s Ultimate Stress Mastery Guide, I describe 10 toxic personality types you are likely to encounter, and whom you should consider avoiding or eliminating from your practice. In the first larticle, I discussed The “Abusive, or Abrasive Alan” and “The Controlling Connie.”  Here are the next four toxic personality types:

The “Eddie Haskell” Passive-Aggressive Client

If you are in your late 50’s or older, you undoubtedly remember this fictional character from Leave It To Beaver, the popular 1950s TV show.  Eddie was a classic example of a passive-aggressive, toxic personality. This type of person tries to curry favor with you by slyly complimenting you, hiding his shallow, sneaky character and hostility behind a veneer of “charm.”  His main agenda is manipulation, while trying not to be obvious about it. If he slips and lets his hostility out, he covers himself by exclaiming,  “I was just kidding.”

These people are phony, kissing up to anyone whom they believe can do them any good. Their needs always take priority over yours.

You obviously can’t trust such an individual and what he says. How will you ever be able to get an accurate feel for this client’s needs and concerns if he is a phony with you, while maintaining his hidden agenda?

The Gloom-And-Doom Debbie

We all know people who constantly bemoan their bad luck and predict that bad things will continue to happen to them and their money.  These pessimistic, negative people always feel like victims. If there are two ways to look at a situation, they always choose the negative way. In their catastrophic thinking patterns, they are filled with “what if’s.”

Any good news you give them about their financial situation will be quickly shut out by the first negative thought that comes into their mind. You show them how well an investment turned out and they respond with a “Yes, but…” In spite of your positive outlook, they believe that it’s inevitable that something terrible will happen to their portfolio.

Is it worth it to be dragged down by the heavy, negative energy of such clients?

The High-Maintenance Marty

This type of client needs to be hand-held through every decision for him to feel safe and secure.  Sadly, he maintains a serious lack of self-esteem and rarely feels secure.

This client will become very dependent on you for constant reassurance and he will call regularly to see what decisions you have made in managing his accounts.

Warning: This dependency on you can bleed over into much more than your role as his financial advisor. Once he sees that you care and are responding to him, he may depend on you to help him make everyday decisions. He will look at you as his mentor, confidante or counselor.

Can you afford to spend the time and the emotionally draining outcomes necessary to manage such a needy client?

The Histrionic Harriet

This client has been rewarded in life because of the attention she gets with her dramatic, emotional, over-reactive behavior. Often exhibiting narcissistic qualities as well (see the Narcissistic Ned, in Part 3 of this series), you will exhaust yourself trying to accommodate her.

If you have clients who are actors, on-camera personalities, politicians or celebrities, you know this type. In their profession, they are praised and rewarded for exhibiting this behavior, but if this becomes part of their persona, these behaviors can weave into all of their interactions. You never know if you are dealing with the real person or the showman.

While they are often viewed as charismatic, charming, fun, lively and interesting, they become “over the top” when they don’t feel as if they are getting the attention they demand. They often get frustrated or irritated with situations that involve delayed gratification. Because they are used to immediate gratification, they demand to speak with you immediately. This makes them very difficult to deal with during down markets, for example, when they want explanations now!

Can you afford to have this type of demanding, dramatic client in your practice?

In Part 3 of this series, I will describe the remaining 4 toxic personality types to consider eliminating, along with suggestions about how to eliminate them.