How Much Should You Reveal to Clients About Your Own Finances?

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As an advisor, you come to know everything about a client’s financial picture, but what happens when the client or prospect asks you the tough questions about your own financial situation?

Talking about your own finances or the investment performance on your own accounts can be a tricky subject. You want to be frank and open with clients while also making sure that you don’t overshare, says  Dr. Tim Ursiny, the founder of Advantage Coaching and Training.

“Few things are more powerful than genuineness, and clients appreciate that from their advisors,” Ursiny wrote in an email. But, he cautioned, “the sharing should ALWAYS be in the best interest of the client. If it is not required to be shared in order to comply with regulations then there must be a good and helpful reason to share your personal information.”

Advisors differ on where to draw the line. Offering details about your own finances and investments can be a good marketing tool, says Christopher Krell, a principal with Cassaday & Co., a registered investment adviser in Tyson’s Corner, Va. Krell, whose firm manages $2.2 billion in client assets, said he shares financial details down to his credit score and his own investment portfolio because it helps a prospect evaluate him and understand he practices what he preaches.

“There is no way for a consumer to rate financial advisors the way they would rate mutual funds,” said Krell, who has been in the industry for two decades, in an interview. “I will turn the screen around and show them my portfolio.”

Krell said he’s also not afraid to talk about more sensitive personal financial experiences, including his divorce, to show clients he understands the challenges that go along with major life events.

Other advisors are less comfortable turning the screen around and opening up their own accounts to client scrutiny.

Advisors should also be careful about disclosing every financial or investment move they make with clients, said Dr. Dean McDermott, the chief executive of McDermott Investment Advisors of Bethlehem, Pa., which has almost $200 million in client assets. A good long-term investment will have ups and downs, but clients be too quick to judge if an investment they saw their advisor make stumbles in the short term.

“The investment markets are always subject to risks on a daily basis and those risks many times can be a blessing in disguise,” McDermott wrote in an email. “When lawyers are forced to disclose their win-loss records and physicians are forced to disclose their diagnosis accuracy and malpractice suits in a public forum then we can revisit my thinking.”

Brokers do, however, have to disclose relevant financial setbacks such as tax liens and bankruptcies from the past 10 years according to Financial Industry Regulatory Authority rules, and it’s generally not a good idea to try and dodge the subject, consultants say.

To address touchy financial topics, advisors should build a narrative around the event to help the client understand what happened and how it has transformed their business for the better, according to Ursiny. You are the protagonist of the story going up against a challenge, or antagonist. It should lead to an “aha” moment where you can describe what you learned.

“The information is most impactful when shared using the true elements of a story,” Ursiny wrote. ““What is the moral of the story? What is the outcome and how is it positive?”

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