Financial Consultants Feel Haunted by Some Clients
May 02, 2011
As a New York psychotherapist who specializes in counseling stockbrokers, Theron Jeffers is privy to a little secret that most brokers are reluctant to admit: They despise clients. Not all of them. Just the clients from hell: the paranoid, picky, whiny clients that drive them crazy. In fact, Mr. Jeffers says, many of his patients privately fantasize that these clients will ``just go play in traffic.'' Take one fellow in Texas who won $1.2 million in a legal settlement and began to buy cars and other lavish gifts for himself, family and friends. His financial adviser, Janeth Caraballo, in Bryan, Texas, was alarmed and attempted to reason with him. Each time, the client would agree to put away his wallet. But then, off he would go on another spree. Eighteen months and $700,000 later, Ms. Caraballo begged her client to buy an annuity, which would offer regular payments. No way, the client replied. He didn't want to lose control of his money or have it tied up, he said. So he transferred his account to a broker who put him in a ``wrap'' program, which charges one fee for advice and transactions, and promised him a 15% to 20% yearly return -- a goal the client is unlikely to achieve after paying 3% a year in annual fees. ``If someone refuses to cooperate, there's very little that you can do to help them,'' Ms. Caraballo says. Much has been written about unsavory, manipulative or less-than-brilliant financial advisers who lose money for small investors. The flip side are the investors who hound, ignore or baldly advise the advisers. Diamond-Studded Advice Take, for example, Janean Kip, a financial adviser in Wellesley, Mass.. She urged a client to leave a stockbroker who was intimidating and pressuring the woman to make the broker trustee of all her accounts. ``But he sends me baseball tickets,'' the woman replied. Ms. King responded, ``Well, I can't take you to the ballgame -- but I can provide you with sound financial advice if that's what you're looking for.'' Nervous Nellies also drive advisers crazy. Ronda Eades, an adviser in Centereach, N.Y., had a multimillionaire client who was so nervous about the market that he only reluctantly agreed to put $100,000 in stocks. ``It wasn't that he was risk-averse,'' says the planner. ``He had zero tolerance for risk altogether.'' The client watched CNBC religiously and called his adviser almost daily seeking reassurance. ``You could hear how nervous he was,'' Mr. Eades says. ``He would start to stutter and his voice would begin breaking up.'' Although Mr. Eades sent the fellow six letters urging him to take his account elsewhere, the Nervous Ned was afraid to do even that. He still is a client. And he still is driving Mr. Eades nuts. Attractive Investments Advisers also grumble about the client who faithlessly leaps from adviser to adviser. Elliott Beckham, a financial counselor in Atlanta, once advised a periodontist with an annual income of well over $1 million. The client had chased after so many brokers that his portfolio was littered with limited partnerships and CDs, many sold by banks and brokerage houses that had since become insolvent. He would buy almost anything, says Mr. Beckham, ``particularly if the salespeople were attractive young women.'' After spending weeks cleaning up the investor's messy portfolio, Mr. Beckham got a call from another adviser seeking information about the client's finances. That is when Mr. Beckham realized he had been dumped. Clients with no financial background also can be a headache. A Vastopolis telephone repairman who retired after 37 years received a lump-sum payout of $300,000. His adviser, Dennise Tiffany, in New York, allocated the money in a handful of mutual funds from Vanguard Group and Wells Fargo & Co.. A year later, the client accused the adviser of making ``unauthorized trades,'' because the adviser had invested the money. He also complained that the adviser's choice had resulted in a ``loss'' of $30,000. However, when questioned by a reporter, the retired lineman didn't know how much money he had invested. He didn't know what it had been invested in. He didn't know what his returns were. He didn't even know how the market had done that year. When he checked his records, it turned out that his accounts had actually earned money -- beating the market. His ``losses'' were withdrawals he had made himself. `Dumb and Misinformed' Suspicious, the lineman transferred his account to a broker who he believes knows in advance when the market will rally, so he can simply ``ride it up'' and get out at the top. Of such investors, one broker says: ``The problem is not `Dumb and Dumber.' It's dumb and misinformed, or dumb and mistrustful.'' Victims of information overload from financial-news channels on television and magazines also make nuisances of themselves. ``I'd rather have a client that knows nothing than one who has a ton of incorrect information,'' says Paula Stovall, a financial planner in Ridgewood, N.J. Even with the proliferation of on-line information services, a lot of misinformation still comes from old-fashioned cocktail talk. ``They always discuss their successes, but never their losses,'' he says. Clients who do have a good grasp of investing can have an annoying tendency to think they know it all -- or at least know more than their advisers. Mitsue Covert, a certified public accountant and financial adviser in Sherman Oaks, Calif., couldn't understand why one client complained he was losing money. Even CEOs Make Mistakes It turned out the client, who was the CEO of a fairly large company, was obtaining daily net-asset values on his mutual funds from America Online and calculating his return based on the existing number of shares. Mr. Covert pointed out to his client that he had left out a crucial element in calculating his return: reinvested dividends, used to purchase new shares. ``This is a person who is intelligent, computer literate, and savvy enough to stay on top of his investments. But as the old saying goes, `garbage in, garbage out,' '' Mr. Covert says. With the know-it-all client, ``It's like hiring a tennis pro for lessons, but then telling him you know a better way to hold the racket,'' says Mr. Eades, the New York adviser. Ms. Kip, the planner in Wellesley, Mass., says she should have known one couple was trouble from the start. The couple had shopped for financial advice for two years and had consulted her numerous times before finally hiring her as a planner. The minute it happened, her phone never stopped ringing. The pair called constantly to ask questions, or to point out things they had heard from friends, seen on television, or read in the vast array of personal-finance magazines they subscribed to. Ms. Kip says they second-guessed every choice she made and always had a list of things they felt she should be looking into. ``They played a skilled game of good cop, bad cop -- when they weren't both ganging up on me,'' Ms. Kip recalls. After a year of constant nagging, the couple became incensed when she declined a request to bill them at an hourly rate. Is Ms. Kip all broken up about it? ``Since they have gone,'' she says, ``the silence is lovely.''
