In my March column I advised you to paint your risk warnings with a four-inch brush. Adam Samuel’s superb Better Business article in recent weeks warned of the dangers rich clients pose, which brought to mind a rich former client of mine with whom, thank goodness, I followed my own mantra to the letter.
In 2008 I was asked by my friend Arthur if we would take on one of his firm’s clients to deal with all the stuff they do not deal with. We have taken several others on the same basis – it is a relationship that normally works equally well for us, them and the clients concerned.
This client however – Brian – came with a health warning. Brian had fallen out with a number of previous advisers. He had also had some expensive fights with HMRC. He was a millionaire with his own medium-sized company, so looked superficially attractive, but his track record of disputes was an obvious red flag. I told Arthur: “Thanks but no thanks.”
A few months later, Arthur asked again if I would take on Brian on. As a favour for an old friend I said yes. No good deed goes unpunished.
In a year, Brian sent us nearly 300 emails. Most concerned complex tax queries that should more properly have been asked of his accountant or lawyer. I duly batted them back.
Shortly after, Arthur relayed Brian’s grumble that “Neil won’t commit himself.” Too right. I don’t commit myself when it is a question that an accountancy or law firm with its own PI is better paid and qualified to answer.
It then transpired Brian was asking Arthur precisely the same questions he was asking me.
His obvious aim was to cherry-pick an answer, right or wrong, that involved him paying the least possible tax while at the same time providing him with a mug to whom the buck could be passed when HMRC took umbrage at his latest chicanery.
Then came the day when Brian wanted a meeting about Isas. Arthur told me his firm were happy for us to do his Isa that year. Brian had told Arthur he wanted to give us some worthwhile business for a change.
On arrival at his office, he sat me in the centre of his office before excusing himself. Returning after a short time he took up position behind his desk some 10 feet away. All that was missing was the Mastermind theme.
Brian’s first question on my specialist subject of Isas 2008/9 was “Neil, if I invest in an Isa, how much can you guarantee I’ll make?”
I explained I never guaranteed any client any such thing and nor would any honest and responsible adviser.
More questions followed in the same vein. I gave all the usual risk warnings and explicitly told him that in a 1987-style crash he could easily lose 30 per cent overnight.
Finally he demanded, “Never mind all the standard stuff you have to tell people. This is Neil and Brian talking. I want you to say how much money I will make.”
“You will get what the market gives you” was my final reply.
Driving home, I phoned Arthur, relating the sequence of events. “Oh God!” he replied. “I should have warned you. He sits people like that because he covertly records them – audio and video. He leaves the room to turn on the recorder.”
As Adam Samuel wrote last week, people often become rich by not taking prisoners. They do, however, make hostages of advisers who are foolish or greedy enough to let them.
Neil Liversidge is managing director of West Riding Personal Financial Solutions