The most successful advisor-client relationships are built on trust. But that doesn't stop clients who lie from telling an occasional fib.
They often reveal intimate aspects of their life. Their upbringing and history with money affects how they save and spend.
Opening up to their advisor about these personal matters may make them uncomfortable. Confessing that they failed to stick to a budget or got snared in a money-losing scam can prove embarrassing.
It gets trickier when clients ignore — or actively go against — their advisor's recommendations. They may feel they've let down their advisor — or that their planner will react with anger or frustration.
Advisors tend to empathize with clients who hide the truth, at least at first. Rather than take it personally and berate individuals who mislead them, advisors will typically try to dip deeper to understand what's going on.
"I don't want to be adversarial or make the client feel ashamed," said Kevin Barr, a Philadelphia-based certified financial planner at Facet Wealth. "It's better to focus on the impact of the lie" and take steps to regroup and reset the client's financial plan and priorities.
After catching a client in a lie about their spending, for example, Barr might ask in a gentle tone, "What goals are we now impacting?" Together, they explore disruptions or ripple effects of the lie — and how to fix the situation and move forward.
"Spending and budgeting are squishy topics so there's more room to lie about them," Barr said.
Use Questions To Dig Deeper With Clients Who Lie
Rather than express concern about a client's fib — or accuse them of outright fabrication — it's usually safer to ask questions. Earnest inquiries allow clients to save face as they admit the truth.
For instance, Barr might suspect that a client who claimed to spend $500 on year-end holiday gift shopping wound up exceeding that amount. Rather than say, "In reviewing your credit card statement, it looks like you spent closer to $1,500 on Christmas gifts," he will ask, "We got through the holiday season. How did your spending go?"
Using neutrally worded questions helps Barr learn how the client perceives the situation. If he encounters terse or evasive answers, he might follow up with questions such as, "I'm seeing your credit card statement ran higher. Did you run into something unexpected?"
From his experience, Barr has found that more detail-oriented, highly organized clients are less likely to lie about their budgeting and spending.
"But those who are less on top of their situation can get embarrassed about it," he said. "They might have mountains of credit card debt or they took out a large personal loan," and don't want to talk about it.
When catching clients who lie, withhold judgment. They may be confronting stressful money issues that lurk under the surface.
Robert Persichitte, a certified financial planner at Delagify Financial in Arvada, Colo., knows that clients lie for many reasons, ranging from pain avoidance to preserving their sense of self.
"Everyone wants to view themselves in their own mind as a good person," Persichitte said. "Before they engage in dishonest behavior, they need to rationalize it so that they see themselves as a good person."
When Couples Clash, It Gets Dicey For Advisors
Like Barr, Persichitte finds that clients who lie might struggle with their spending. They may fall behind on their savings goal and not know how to cope.
Sometimes, a client doesn't lie. But their spouse does — and Persichitte is caught in the middle.
He recalls helping a married couple determine when they could retire. The husband, a burned-out attorney, was counting down the years.
"Your retirement goal is realistic," Persichitte told the couple. "You just have to get your lifestyle expenses to $8,000 a month."
"That seems reasonable," the husband replied.
"Well, your current expenses are $10,000 a month," Persichitte said. The stunned husband turned to his wife in disbelief. "He had no idea she was spending so much," Persichitte said. "It was very awkward."
Persichitte has experience as a fraud examiner, so he's attuned to people who lie. He has learned that in addition to asking nonjudgmental questions, it helps to identify discrepancies and ask the client to help resolve them.
If the numbers don't add up, for example, he might say, "There's a mathematical error that I'm having trouble solving" and enlist the clients' input.
"Clients are more apt to help me solve a problem than admit they're lying," he said. "Then it's not like I'm trying to blame them."
