(Who lies with dogs, rises with fleas.)
I know a little something about dishonest and manipulative clients. I worked in a psychiatric hospital ward in western New York populated entirely from prison transfers. If they were considered too mentally ill for Attica... they came to me.
Presumably your clients are not housed in psychiatric wards. (Which is good. Because they typically don't allow electronics.) But here is a piece of wisdom that applies to deeply crooked people of all stripes.
It is useless to try to convince fundamentally dishonest people that you are being honest with them. Their self-acceptance hinges on the belief that other people are no better than they are.
Self-image is a fascinating psychological construct. It is also a highly underappreciated driver of behavior in relationships and investing. People need to feel good about themselves - or at the very least, okay. They will go to extreme lengths to ensure that they do, contorting reality beyond recognition in the process.
Trust is the bedrock of all financial advising relationships. When you take on clients who are far enough down the honesty spectrum to set off warning bells, *you will either never have that trust or its just a matter of time before it disappears. * They will misbelieve you, blame you, attempt to co-opt you, and sometimes sue you.
Some warning bells:
They are strangely evasive about their past.
They seem to think that the world is "out to screw them".
They are convinced that everybody cheats.
They have a history of criminality/litigation.
(Note: The MarketPsych Investor Personality Test actually has a scale that quantifies this risk factor. Email us for more information at email@example.com)
Risk management - e.g., not blowing up - is a vital component for investing. It is every bit as vital for your practice.
Whatever AUM bump they bring to your book is not worth it.
*Avoid these people. Entirely. *
"And hey... let's be careful out there."
Frank Murtha, Ph.D.
Co-founder of MarketPsych