How would you respond to this client?

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Oct 15, 2008 2:57 pm

A client asks for his portfolio to be liquidated despite my advice staying the course because he says, "I don't mind missing a 10 to 15% increase should the market go up, but I just can't stand losing 30 to 35% should the market go down further, which I think it will."  Of course, he's not down that much, but what do you say?  Had to liquidate it anyways since he ordered it.

Oct 15, 2008 3:22 pm

Adios.

Oct 15, 2008 3:39 pm

setup a systematic plan of getting back in the market - over the next 12-15 months. if its a taxable account you can do some tax harvisting. opportunity to evaluate asset allocation.


good luck1
Oct 15, 2008 3:49 pm

Right, DCA back in over 12 months, after dumping all in panic. How about a fixed annuity, if you can stand the smell? In this case, not because you want the business, but to "punish" the client. No, that would be greedy. Sayonara, oyasuminasai.

Oct 15, 2008 4:03 pm

Thank you for your business. If I can assist you in the future. The client is working on emotion you have to be detached ( not always easy ). Keep in touch.

Oct 15, 2008 4:07 pm

Variable Annuity, if he's primarily concerned about the income he can generate.  Put him back in the market with a safety net. 


Oct 15, 2008 4:12 pm

Yeah, I know that he's scared.  Went to a trip to Europe and he texted me a couple of times about selling, remaining in the market, selling again.  I found out that he had a talk with some investment banker there who was giving him economic advice about how banks around the world now are in unstable condition.  And he pays me for advice.

He's down 10% now, and to me that's not bad considering how the market did.  Maybe it's time to say goodbye.  Or, a fixed or even a variable annuity may be something.  He's basically going to use the money for income when he retires FIFTEEN years from now.

Oct 15, 2008 4:16 pm

Good suggestion Ferris. Can you just imagine the groaning as he/she collects that super interest rate of what 3 to 3.5 % and if in Canada the higher taxation rate on Interest versus Dividend Income. I can just see that Train Wreck coming but as to your point just right for the putz.

Let me see my good friend/client ...." you have a net negative return on your investment" . Next.
Oct 15, 2008 4:19 pm

So Gregoron....he met " some banker " in Europe and had a couple of drinks and they discussed economic theory and he decided his new best friend had all the answers. Geezus H. ask him how much they were drinking.

Oct 15, 2008 4:23 pm

Exactly.  Fear and paranoia is a bad combination.

Oct 15, 2008 4:31 pm

Add B.S. to the formula and this is the result. Hell the " Banker " could have been a Clerk in the Counting Room ..... " I used to see lots of currency , now I see less". You get my point.

Oct 15, 2008 4:58 pm

Yeah.  The thing is that this client is one of those impossible ones too.  Should have seen it earlier when he's fine with your recommendation one day, then he throws you a curve ball another.  Worst kind.  He only wants huge gains and no losses.  Should have just stuck him in Treasuries or long-term notes.  Maybe a VA wouldn't be so bad actually if he wants "guarantees".

Oct 15, 2008 5:08 pm

AAHHH!! Only wants the Gains? I'll almost bet he tells you what is the latest stock pick ( from Crazy Cramer ) and thinks he is pretty sharp when it comes to investing? You can also " fire " a client.

Oct 15, 2008 5:29 pm

... the " Banker " could have been a Clerk in the Counting Room ..... " I used to see lots of currency , now I see less". You get my point.

 
Got me rolling.
Oct 15, 2008 8:20 pm

Yeah.  The thing is that this client is one of those impossible ones too.  Should have seen it earlier when he's fine with your recommendation one day, then he throws you a curve ball another.  Worst kind.  He only wants huge gains and no losses.  Should have just stuck him in Treasuries or long-term notes.  Maybe a VA wouldn't be so bad actually if he wants "guarantees".

 
He's not impossible.  You have him in the wrong investments.  There are plenty of people who want huge gains and no losses.  You can't put him in Treasuries or long-term notes because you'd make his huge gains desire an impossibility.
 
This guy is the perfect VA candidate.  If you use a GMAB, he has no chance of loss and the possibility of huge gains.   More importantly, for you, the surrender charges will stop him from being a pain in the ass because he'll be stuck in the product.  Being stuck will ultimatel probably give him higher returns despite the fees.
Oct 15, 2008 9:40 pm

Sell him out. You are in a lose lose situation. In a market like this, if someone says i cant take it anymore, AND you know he is a pain in the ass client, just follow his instructions, send him a check, and spend the time you wouldhave spent convincing him that you are right, looking for new clients. Believe me, there will be plenty of qualified prospects looking for new brokers over the next year.
You put a guy like this in a VA with a surrender, he'll end up suing you, saying that you never told him its locked up, even tho you told him 10 times.
In an environment like this, asshole clients dont deserve any of our valuable time, or energy

Oct 15, 2008 9:48 pm

There are plenty of 4-5 year products out there. This sounded like a young guy, so really, the VA is not a bad choice at all.  Like anon said, he might want a GMAB, or heck, for income just use a GMWB.  Just be sure to have him sign a disclosure of all the fees and penalties and you're fine.

I have had quite a few of these "difficult" clients in the last week.  My pending VA stack is getting pretty big after today. 

Edit: if he's more than 10 yrs away from retirement, you might have to improvise.  The VAs i'm using only give 10 years of guaranteed growth on the withdrawal benefit.  Your mileage may vary.  

Oct 15, 2008 9:55 pm
Sportsfreakbob:

Sell him out. You are in a lose lose situation. In a market like this, if someone says i cant take it anymore, AND you know he is a pain in the ass client, just follow his instructions, send him a check, and spend the time you wouldhave spent convincing him that you are right, looking for new clients. Believe me, there will be plenty of qualified prospects looking for new brokers over the next year.
You put a guy like this in a VA with a surrender, he'll end up suing you, saying that you never told him its locked up, even tho you told him 10 times.
In an environment like this, asshole clients dont deserve any of our valuable time, or energy



I do think you're being a little harsh.  in the last 8 trading sessions, we're down what, 18-20%?  Stocks AND bonds are losing.  McCain and Obama are still bickering, global markets didn't help, and there are still many negative nancy's on the news.  Everyone is still experiencing the shock & awe of the media.  That said, I'm telling clients that we don't want to take unneccessary risks to meet their objectives, and if some sort of gaurantee can help them meet that objective, give them the option! 

If you don't, someone else will, and they'll make the comission and trail. 

Oct 15, 2008 10:03 pm
gvf:



I do think you're being a little harsh.  in the last 8 trading sessions, we're down what, 18-20%?  Stocks AND bonds are losing.  McCain and Obama are still bickering, global markets didn't help, and there are still many negative nancy's on the news.  Everyone is still experiencing the shock & awe of the media.  That said, I'm telling clients that we don't want to take unneccessary risks to meet their objectives, and if some sort of gaurantee can help them meet that objective, give them the option! 

If you don't, someone else will, and they'll make the comission and trail. 



Your point is well taken. But this quote from the original poster is what prompted my response...Yeah.  The thing is that this client is one of those impossible
ones too.  Should have seen it earlier when he's fine with your
recommendation one day, then he throws you a curve ball another.  Worst
kind.  He only wants huge gains and no losses. 

Oct 15, 2008 10:07 pm

Sportsfreak, he's not going to sue.  It's not that we verbally told him 10 times about the surrender charges.  It's that he has signed documentation talking about the surrender charges, fees, etc.


I've been doing this for a long time and have plenty of pain in the butt clients.  Nobody has ever sued me.  Nobody has ever complained about me.    For the $5,000, $10,000, $15,000 or whatever I'd make, I'll gladly have a VA conversation with him before firing him.