Client Loyalty: An Anecdote
Client loyalty can be difficult— on at least one occasion, I’ve had to write a client to share discovery of an investment manager’s malpractice. In my litigation past, I have had to sue lawyers, accountants, bankers, and investment advisers for fraud, elder financial abuse, unsuitable advice, mistakes, and breaches of fiduciary duty and loyalty. It is never pleasant to be in such a lawsuit, and there are no winners.
So how the heck do we deal with this while trying to build a referral network? Who wants to refer a client to a lawyer who might sue them?
In one recent situation the client’s advisor approached me with a difficult situation involving a business. That business has its own world of problems—tax, creditors, portfolio composition, management dysfunction, and so on. After my client left the state, the advisor stopped doing the work. The beneficial owners of the company then accused the absent client of “taking their money.” I could not provide a detailed accounting of the money, but I was able to send a basic analysis that seemed to satisfy their concerns. However, because the advisor had not done his job, it was impossible to do a full analysis; in short, some of the tax returns were simply not done.
I made the adviser amend the returns—but he did just half the work and then disappeared to Vegas (during which time the statute of limitations ran out for refunds). I had to write the client to inform him that the advisor had blown a six-figure claim for refund. This uncomfortable incident illustrates our dilemma. To practice what we preach, our loyalty is always and only to the client, and not to the client’s other advisors. This can make some advisers uncomfortable, but we’ve found that the best advisers do not have any problem being held to this standard of accountability, and, in fact, enjoy working with us.
The forgoing story illustrates a significant challenge when developing a referral-based business:
How do we ease the fears of advisors when our firm becomes the client’s attorney and relationship manager?
The Myers Law Firm’s win-win, proactive approach
Who benefits, and why:
• The investment advisor (sometimes but not always a financial planner) benefits because he gets our unqualified deference to his or her role as the client’s expert on investment advice. In addition, (s)he gets a continuing relationship with the client that (s)he knows will be sustained, because I will protect the relationship they have established and ward off the many charlatans that plague his or her business. As the lead attorney, the client might ask what I think. It is interesting because some of these charlatans will actively prevent me from being in the room when a deal is proposed or made. But if I do find out about it (and good clients have a way of including me on these communications), I can actively do some turf-protection or observance for the investment/financial advisor.
Further, and this is often a result of the adviser’s own lack of succession planning, our firm supports the adviser’s continuity between generations of wealth. Because most wealth-holders are elderly and will lose capacity or die sooner than their younger counterparts, the advisor must have a good relationship with the survivors; hence, having a reliable, consistent, long-term lead attorney on the team is a direct benefit in those wealth transitions. I also co-market by mentioning these advisors in my writing, public speaking, teaching, and personal referrals. (Hello Norm, Ann, Craig, David, Arika, Kathryn and Patricia!)
• Tax prep specialists like to save income tax for their clients. They don’t want to get the client audited, nor do they wish to be audited. They don’t like to be the bearer of bad news. They like our firm, because we find ways to mitigate tax exposure through responsible planning. Sometimes the complexity of the strategy we might set up, such as LLCs and other tax-protection entities, does not hurt the accountants. In fact, it actually helps them to better execute their job by providing them with a sound infrastructure. Hence, tax specialists have the assurance that they are not engaged in anything that is less than legally pristine. If necessary, we can cover them with a Circular 230 opinion, which our firm is qualified to write.
• The insurance professional benefits from our association most directly. This is because the sophisticated estate attorney prescribes the policy and helps to find, if necessary, a capable insurance agent. The insurance agent fills the prescription. They are not relegated to the “sleazy salesperson” role. They are selling permanent estate-planning policies that fit into a larger structure of the client’s entire portfolio and wealth transition platform. The attorney’s role is to lay out the insurance strategy and confirm or ratify the client’s choices.
So yes, there can be a conflict between what the insurance agent or financial adviser wants and what the client actually needs. Good advisers are used to this conflict and they welcome their role as a fiduciary to the client. They then, in turn, welcome a firm that is going to have the integrity to call it as we see it - ball, strike, fair and foul. Good advisers know they pitch an honest game and are in it for the long haul.
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