It's been said people wear manydifferent masks, depending on who is looking at them. When clientsbecome friends, you have one less mask in your wardrobe. You mustalways be the consummate professional. (Photo:Shutterstock)

Friends into clients: I often write about the logicconcerning why advisors should transform friends into clients andthe difficulties encountered along the way.

But it often works the other way as well: Two strangers hit itoff, a person becomes a client, then a friend. The personalbenefits are obvious, and the business benefits can besubstantial.

What it is and isn't

Often the client and the advisor discover a shared commoninterest. They graduated from the same school. They volunteer sideby side. They are wine fans. They visit wine bars and go wineshopping together. The spouses enter the picture. Lots of trustdevelops. You travel together. Life is good.

This is not about dating, where a stranger becomes a client, andthe advisor asks them out or vice versa. That is a high-wire act.Yes, there's the possibility you've found your mate for life, butif you break up, your personal problems will likely spill into yourprofessional life. There could be unlimited downside.

When clients become friends – the good stuff

Your friend trusts you implicitly. You realize trust is a greatresponsibility and treat them with respect. Respect includes notbringing up business while watching the Superbowl in their house.The smart advisor lets the client know they aren't bound by thesame rule. Clients usually show reciprocal respect of your freetime.

Here are three major benefits that come the advisor's way:

1. Perspective. The friend realizes there aretimes when the advisor's life can be tough. They see life from theadvisor's point of view. Years ago, the day the market crashed, myoffice phone rang constantly. When I got home, the phone rang. Itwas my best client. I immediately started to address what Iperceived were their concerns. They stopped me: “That's not why Icalled. I know when I invest I'm taking a risk. I wanted to be sureyou are all right today.”

2. Volatility. It doesn't bother them as muchas it does other clients. They feel you have their best interestsat heart and know what you are doing. They see the big picture.This includes underperformance, although they won't be patientgetting substandard returns forever. Also, they must get the samereviews you give other clients. You can't skip them because you arefriends.

3. Fee tolerance. When you have dinner out, youmight split the check. You don't itemize who had what. Theyunderstand the advisor is a professional and their advice has avalue. They usually don't push back on fees or expect adiscount.

When clients become friends – the bad stuff

It's been said people wear many different masks, depending onwho is looking at them. When clients become friends, you have oneless mask in your wardrobe. You must always be the consummateprofessional.

1. Client confidentiality. You know the samepeople. You help manage money for some of them. Your friend knowsit because those friends said so. Yes, they talk about you! You cannever say anything about their finances or investments, even ifthey push and it sounds trivial. “What was that stock you boughtFred last week? I want to get some of that too. He toldme, but I forgot the name.” Your lips are sealed. Fred may neverhave mentioned the name.

2. Inside information. You know where they workand what they do. You know their investment temperament. They are amanaged money client. Suddenly they want to buy short dated optionson their own firm. You ask why. They look away and say, “Oh, it'sjust a hunch…” This might be the time to remind them the SEC looksat abnormal trading in stocks shortly before a big move. You mustput ethics first.

3. Bending the rules. You can't let them signtheir spouse's name or place trades in their account without aPower of Attorney on file. There's no guarantee your friendshipwill last, but the scanned document with the forged signature willlive in the Cloud forever.

4. Speaking out of turn. They may notpush back on fees, but that can change if you say: “That's why youpay me the big bucks.” You can't make disparaging comments aboutother clients, even anonymously. They will assume you talk aboutthem the same way.

5 outcomes that are good for business

Having a client as a friend often means you have an advocatetoo.

1. Enter the next generation. They introduceyou to their children. They explain how you do great things forthem. They encourage their adult children to open accounts withyou.

2. Consolidating assets. They like and trustyou. They see no reason for having more than one advisor. Althoughthey realize some friendships end, they know the firm name is onthe door. They are comfortable bringing over almost all theirmoney.

3. Referrals. They are a referral machine. Youget the parents, the neighbors — you even get the dog's account.Oops. I forgot. The dog doesn't have an account.

4. Introduction to social circles. You getinvited to their parties. You buy tickets to attend the same galas.They ask for you to be seated at their table. When I was an advisorand we visited clients who were friends at their country house,they introduced me to one of their friends. Their friend turnedaround, handed me a stack of statements and said: “You are now mynew advisor.”

5. Office presentations. Sometimes they figureout a way to introduce you into their work environment through theopportunity to deliver a presentation in their conference room. Itmight be educational, but it gets you in front of new people.

Some people strictly separate their personal and business livesto the point where they become secretive. That shouldn't be you. Wecan all use a few more really good friends.

Bryce Sanders is president of PerceptiveBusiness Solutions Inc. He provides HNW client acquisition trainingfor the financial services industry.His book, “Captivating the Wealthy Investor” can be foundon Amazon.