Kitces & Carl Ep 167: Are Financial Advisors Less Happy When Working With HNW Clients?

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Show Notes:

• Kitces Report On What Actually Contributes To Advisor Wellbeing

Kitces & Carl Transcript

Carl: Michael Kitces.

Michael: Greetings, Carl. How are you?

Carl: Things are really, really good. Yeah, spring. Spring is always good.

Michael: Spring season's well underway. It's probably going to be close to summer by the time this comes out. It's, I guess, early spring for you, late spring for us in May here. We record these episodes in advance. So we'll probably be well into summer season by the time everyone hears this.

Carl: Which is a great time for this episode because I have a question for you.

Michael: Oh, okay. You have a summer-related question or you have a spring...?

Carl: Yeah, just a new beginnings, open mind.

Michael: Okay, so spring question. Spring question.

“What Does Money Mean To You?” [00:52]

Carl: Exactly, a spring question. Okay. And it's basically I just...maybe I could take a few minutes and walk you through an experience I've been having and it's been going on for a couple of years. I'm just sort of getting my head around it and I want to see what you make of it. So would it be okay? Let me just kind of take you through the exercise.

Michael: Okay. There's an exercise. Okay.

Carl: Yeah, yeah. And we're going to try...for everybody who's listening to this, we're going to try to use a little technology here. I'm actually going to share my screen and draw...I've done lots of this. With NPR, we used to do art on the radio, with Tess Vigeland. I'd have to describe the drawing. So I'll describe it, but know that if you want the added multimedia experience, you can go watch this on YouTube.

Michael: I was going to say, we actually video broadcast this as well. I think right now we're something like 80% listeners and 20% viewers. So more people hear us through Apple podcasts and the like than YouTube. But I guess fair point, you can watch along because "Kitces & Carl" is also on YouTube.

Carl: Perfect. But we love our listeners, so we'll describe it for them. So imagine I'm in a room...and I've done this in groups. I've been doing this for probably three or four years and I've done it as groups as large as 1200 and as small as one. So imagine we're in a room, there's big screens or there's a whiteboard up and here's the setup, and in a minute I'm going to actually share my screen and put a whiteboard up. But if you're in a place where you can do this, I want you to all...I actually want you to take out a piece of paper. And this is not just you, Michael, everybody listening, take out a piece of paper. If you're listening to this while riding your bike or driving or whatever, just we'll make a mental note here. I'm going to draw something on the screen in a minute. And I want you just to pay attention to the first thought you have. So you're going to pay attention to two things. Number one, the first thought you have. And the second is the first associated feeling. What's the feeling? So the first thought and the first feeling is what you're going to do.

Michael: First thought, first feeling.

Carl: Yeah. And if we were in a room together, I'd actually have you...If it was a small group, and again, I've done this with huge groups, I'd have you write it down on a piece of paper without your name and then I'd have you hand those in if we were in a group of maybe 100 or less. And we would use these as a discussion that would follow, which has sometimes gone as long as 90 minutes, where I've literally not done anything else for the presentation but work through things on these pieces of paper. So make a note. So here we go. So I'm going to hit share now and we're going to...for those of you watching, just it's a little clumsy because we want to get the iPad up on the screen.

Michael: So I guess for anybody who hasn't yet, if you haven't hit pause to get your piece of paper to write something down, this is also your moment to hit pause and pull it up. So listeners, there's now a screen share of a blank white page.

Carl: Yeah. So imagine if we were together, this would just be a blank whiteboard, a blank screen, whatever it is, 1200 people with two giant screens. And now you're just paying attention. I know this is a long setup. This is about how long I even take when I do it in real life. So you're paying attention, first thought, first feeling. Okay, here we go. We'll even do this in Kitces blue just for fun.

Michael: I appreciate that.

Carl: So for listeners, I just drew a dollar symbol on the screen in blue. It's just a dollar symbol. And interestingly, there's some debate over whether dollar symbol has two lines or one line through it. I've always drawn it with two, but a lot of people say it's just one.

Michael: I've only ever learned it is two.

Carl: It's fascinating. I spent a bunch of time trying to understand the origins of that problem. But so...

Michael: So the S with the vertical line or two vertical lines.

Carl: Literally a U.S. dollar symbol. First thought, first feeling. Okay, so let's assume that you have that. Let me give you some example. This is actually a real-life example of about, I think it was 18 to 20 people and afterwards I took them all and I put them into lists. So I'm going to now show those lists on the screen. We'll all read some of them out when we...I'll read some of them out for the listeners. So I go to the next screen. So here's some of the words, the first thought or word that came into mind, freedom opportunity, opportunity twice, freedom to choose. This is literally of the 20 people that were there. This is the spreadsheet they gave me. Bank accounts, inadequate. The first thought, inadequate. Now, here's what's interesting. I'm going to match these up. Actually, I'm going to tell you the first thought and the first feeling for a couple people.

So the first one on the list, the first thought they had was freedom. The second, the first feeling that I had was peace of mind. We go down to that one. I'm super interested. This first thought was inadequate and the first feeling was desperate. And then I did actually pick this one out to talk...that one, I talked to that person. I asked them, would it be okay if we had...I didn't have their names. So I just said, "Hey, whoever wrote this, would you be comfortable talking?" And they raised their hand. And then this other one I want to pick out is down near the...right in the middle, and we could just read through all these, security, cha-ching, success, worried. But this one right in the middle was, "yaaaaas!!!" with with five As – “yaaaaas”, I guess – yes, and three exclamation marks. And then their first feeling was love. And I flipped through these cards that they handed in. I saw this one. I was like, "Whoa, who is this? Would you be willing to talk about it?" And she raised her hand and we can get into what we talked about. But that one around inadequate and desperate, and this yes and love, two fascinating things to me. But look down, money, optimism – spelled incorrectly – money, greed, money. I like it.

Michael: Security, stress.

Carl: Security, stress, cha-ching, excited, worried.

Michael: Well, there's two different cha-chings. There's a cha-ching, desire and there's a cha-ching, excited and worried.

Carl: Fascinating. So here's the deal, Michael. This is why I wanted to talk to you about...I've been doing this for two or three years now. At this point definitely over a hundred reps on it. This, and in some cases, like I said, in the...There was a group recently in Florida with 800 people. I spent my full 60 minutes just with this. I had a whole presentation but I just threw it away because I was like... and I found somebody in the audience...800 people there, I found somebody in the audience that looked they had something to say. And this is, again, something we could talk about. Looking for and paying attention to crunchy bits is what I call it, looking for emotional resonance. I found somebody, and then I just pretended no one else was there, and we had this amazing conversation, and she cried, and afterwards people came and gave high fives, and all I want to talk about is... this is just a dollar symbol. Well, I thought this was...We could have written zeros and ones. It's a piece of paper. Who let all these feelings in, Michael, and what do we do about it?

How (Personal) Financial History Shapes Money Values [8:44]

Michael: I'm curious to hear a few of these stories.

Carl: Yeah, let me tell you...

Michael: ...inadequate, desperate, and the yaaaaas, love.

Carl: Okay, let's talk about this. So let's do...I'll do them in order of the way they happened. The very first one I saw was this yaaaaas one and I was , wow, that's so much enthusiasm. So I'm going to unshare my screen just so you and I can talk, but I've still got the list here in front of me. So that was the very first one. As I was flipping through the cards after they handed them in, I was like... and I said, "If the person who wrote this is willing, could we talk for a minute?" And she was like , "Yeah." And I was like...what I asked her was, "Are you allowed? Are you allowed to be open about money’s first feeling is love?" And so we had a whole dialogue. She was like , "Well, look, I was raised in a family where that's just what I was taught. It's a tool. It's an opportunity to make a difference and, therefore, I love it. And yes..."

Michael: So explain this to me – money equals love because you give money and gifts to people you love, that angle or something else?

Carl: That's a great question. I didn't ask that question. To me, what she said was, "I love money because of the difference it can make in my life and the people around me." And she had she had been raised with that idea. But just think of the fruitful...because that led to...honestly, that was probably...it was at least 10 minutes. I want to say 15 minutes. It was probably at least 10 minutes of like, "Wait, who else feels this way and is scared to say it?" And there was a whole group of people that were kind of raising their hands, and I was like, "Well, what's that about?" "Well, we were taught not to love money." The love of money is the root of all evil, that came up.

Michael: I read that once in a book. Yeah.

Carl: Yeah. Yeah. Yeah. Amazing. So again, this is one thing we have to be very careful about financial planners. The work that we do with clients, keep your values off other people's plans. There's no judgment on this person because she said she loved money. And you should have seen her, she lit up, and it was clear, it was good. It wasn't like, " I love money” or greedy like that. Okay, that one. Now let me tell you the story about, what did he say, “inadequate and desperate”. This was...yeah, it was really...to me, really an emotional experience that I was...I was flipping through the cards and I hit that one was just like , "Oh, I wonder," and I didn't want to be unfair. So I just said, "There's one in here that is..." and I put some other words together. I was like , "It's kind of there's some in here that point to scary and anxious and words like desperate."

And so I tried to soften a little bit to give this person permission to not say anything. I said, "If you put down words like... in fact, there's one in here that says inadequate and desperate. Anybody who put anything like that, would you be willing to talk?" And that guy raised his hand and said that, "Inadequate and desperate is actually me." The exact words. I was like, "Oh, okay." Big guy, big beard, hat, clearly kind of out here in the West, you would recognize this person as somebody who probably spends lots of time in the outdoors. I want to say hunting even, probably has a truck, that kind of thing. Not a soft, feely person. And I said, "Tell me the story. What's that about?" And in front of 19 other people, he said, "Yeah, my dad was a fishing and hunting guide. So things were really, really slim in the off-season."

He said, "In fact, I even remember, whenever he would harvest anything more than we needed, he would always bring some back to the neighbors. That's just the kind of place we lived in. But in the off-season, occasionally we didn't have enough. And I remember at age six or seven..." He didn't say that. He said, "I remember being very young." And I asked him later. I said, "How old were you?" And he said, "I think six or seven." He said, I remember going to the...digging through the dumpster with a plastic bag with my dad trying to find food.

Michael: Wow.

Carl: Yeah, you could feel...and it was really interesting because there were people in that room that I know probably had the opposite experience of so much money they never even...because of where we were, it probably hadn't even dawned on some of those people. That would never be a thing. They never...So hearing the stories was amazing. And I just am so fascinated again. So last story. The lady in the room of 800, she was about in the center just to my right side of the middle aisle, dark hair, and I could see she was feeling something. It wasn't super obvious. It wasn't tears, but I could...I'm always on the lookout for crunchy bits and sometimes I can just see them in the air. And I was like, "Hey, anybody want to share?" And she raised her hand. And so she yelled out at me and she yelled something like anxious or nervous. And then I said, "Tell me more about it". And she said, "Oh, just power dynamics. "And I was like, "Whoa..." And I told her...I went like this, I put my hands up as blinders and said, "Look, it's just you and me. There's nobody else here. Nobody else is listening. Just can you tell me the story?"

And she told the story about how she never knew...she never knew about 5:00 or 6:00 when the front door opened and her dad was going to come through, she never knew who was going to come through the front door because of what had happened at work that day. Was it going to be the nice, jovial guy who landed...Her dad was a salesman...to be the nice, jovial, friendly guy who landed a sale that day? Was it going to be the really mean, grumpy guy that didn't? And it was always related to sales, which in her mind was always related to how much money he made. So there was this direct correlation between who was going to come through the door and the amount of money that was made that day, in her young mind. Come on. You know what I mean?

And so my question is always...it turns out the dollar symbol is a provocative symbol. It provokes and the thing it provokes are feelings, stories, trauma in some cases, happiness, joy, all those things. So one of the things I love about financial planning as a job is that if you want to be a better financial planner, be a better human. And all this work we do on ourselves helps us in our job with the clients and all the work we do with clients helps us with ourselves.

The Impact Of Client Net Worth On Advisors’ Wellbeing [16:21]

Carl: So it is kind of an interesting exercise to first, what do you make of all these feelings? And second, let's talk a little about what came to mind for you? And maybe even listeners, what came to mind for them? What do you make of all this, Mr. Spreadsheet?

Michael: Mr. Spreadsheet. What strikes me about it, I think particularly relative to some of the stories that you're sharing, is I don't know how that can't influence the work that we do with clients. Because I don't know how it can't, right? If it's that ingrained for whatever those money stories are for us that just gets evoked when you see a dollar symbol, just when you literally see the S with the lines through it. If that what gets evoked when you just see that image on a screen, what's it like when it's your client's balance sheet and there's a bunch of numbers after it? Or when it's your client's balance sheet and there's a bunch of numbers after it?

Carl: Are you saying, what's the impact on you, the planner, when you see a client's balance sheet with a bunch of numbers? Tell me more about that. That's super fascinating.

Michael: So there was a version of this that showed up way...So one of the research studies that we do on the platform is what I call [the] advisor well-being study. Actually, we use some measures of well-being, happiness and satisfaction in life. And we asked that of a zillion advisors who participate in the studies. And then we ask them a lot about their practices, and what they do, and where they work, and the size of their firm because we're trying to understand, what are the things that drive advisor well-being or makes us less happy in our practices? And one of the fascinating things that came up mfrom when we did this in the last cycle, because I love just hunting for interesting points in our data, there is a relationship between happiness of advisors and the wealth of their clients, and it's negative.

Carl: Come on.

Michael: The higher the average wealth of your clients, the lower advisor's own sense of well-being. Not massive. It's not it fell off a cliff or anything. But every single increment of greater client wealth was a downtick in advisor's own sense of well-being. It was a very...

Carl: Of course. Right?

Michael: Yeah, right. The whole “comparison is the thief of joy”. All of those, it shows up. Now, here is the other fascinating part. It didn't show up with the client income, only wealth. Higher the client income, happier advisors tended to be, which I couldn't help but reflect back to folks I've worked with over the years. Working with high net worth, very high dollar clients, I think there's all sorts of stuff that crops up of, I wish I could afford some of the things that they do. Comparisons is the thief of joy. You get that cropping up. But you get to high-income clients, wow, I have seen a lot of clients with really high incomes spend money on really stupid stuff they couldn't afford. And some of them had really embarrassingly small balance sheets compared to how much they had in income.

And at least, as we interpreted the results, there seems to be a tendency, when I'm working with really high income folks, I can look and say, "I'm more responsible than they are. I'm making more progress on my goals and I'll earn a fraction of the crazy dollars they're earning and the things they're doing. Look at how responsible I am with my money compared to some of these people that I'm working with." But you get folks that are really, really high dollar net worth and it's hard not to have some comparisons kick in that, I think, don't feel good to us in the same way it doesn't feel good to almost any human. That's why there's a lot of keeping up with the Joneses stuff out there.

Carl: That's amazing. That's amazing. That's like our version of the psychological problems that happen when you're a first responder. And all by that is, it turns out...I was just reading the other day that the average career span of a paramedic is something four years. And then I was even reading this...

Michael: It's very high burnout and anyone who stays a long time, they are incredibly cynical people that come up with some really morbid senses of humor because that's the only way you can cope.

Carl: Totally. I was actually reading this the other day about high alpine mountain guides and avalanche professionals, it's only recently where there started to be this recognition that you need to be able to talk about your own experience when there's a...especially when there's a fatality or any injury or any...even if you didn't do anything wrong, because of the just systemic risk in those environments. But it's only recently. It used to be you'd get together in the locker room afterwards and drink. So I guess the reason I'm pointing to those is it's so interesting that we probably need to spend more time as a profession thinking about that. And I had never thought about the net worth well-being problem. We've been talking about the idea that scary markets, you're the release valve for other people's anxiety, take care of yourself. But now you've got something that's just built into the system of comparison, feeling less than. We need help.

Michael: Yes, but getting back to your list of words, to me, just there is something more fundamental to me of just how we show up to our clients, how we would have to show up to our clients. I don't want to over-project someone else's difficult background. If we're going to the person who used “inadequate/desperate” as his language because of the difficult times that he had growing up, my experience at least for a lot of folks that come from that environment is money can then become security, like I'm trying to get enough to never have to go back to that, to never have to face that, that I faced my past or that was so challenging for me growing up. Okay, if that's the lens of money, I'm going to bet that influences how you show up to clients. Do you focus very heavily on safety of money, and security of money, and making sure we have enough, and guaranteed streams of income, and other things that you might pursue if you have a very significant fear of not having enough or that it could go away? And I'll contrast that with folks I know on some of the words you had there were, what was it, the dollar sign, that meant freedom, that meant independence.

Carl: There was one...even Monopoly, like playful.

Michael: Yeah. So if money is like Monopoly money and you just have fun with it is probably quite different than how you give advice. If money represents freedom and independence, that something that seems pretty great to pursue. You don't pursue Monopoly money, but you sure pursue independence and freedom. And that probably shows up differently than when money stokes inadequacy and desperation and fear.

Carl: Yeah, yeah.

How Do Advisors' (Personal) Money Values Fit Into Client Conversations? [25:32]

Carl: What did you write down?

Michael: What did I write down? The dollar sign outright to me just...my word was wealth. Dollars are wealth. And so the first feeling I wrote down was safety. But not safety in a security sense, safety in a flexibility sense. If I have enough that this is my foundation, then I can choose what I want. I guess sort of like an independence vein, but I don't...for me, I guess just independence or freedom wasn't the word that came to mind. Safe foundation was the mental image for me and how it cropped up. And then I look at that and then I reflect back on things I do and I'm like , oh, yeah, that checks out. That checks out. I like to do lots of creative things. I pursued a lot in various businesses, but I have to have the firm foundation for me, so I run around crazy doing lots of businesses, and I live in the same neighborhood I've lived basically all my life, a mile and a half up the street from my folks who live still in the house that I grew up in for the past 48 years.

Carl: Right, right. Yeah, that's amazing. Tell me what, and we could...I have so many questions about that, but that would take us an hour. What are you pointing to when you say if you're... because these words I showed you were financial planners, that was a group of financial planners.

Michael: And what a fascinating range for us to acknowledge. It turns out we're humans with a wide range of experiences of all humans on Earth.

Carl: Yeah, the one we didn't bring up, which is pretty close to the yes one, but the very bottom one says, "Let's go," and then the feeling is excitement, and then you all the way there from inadequate to desperate, tool, caution, intimidating. So what are you pointing to in terms of what you just talked about if you're a planner where it's around safety that's going to show up, how do we...What are you pointing to? What does that mean? What's the takeaway from that?

Michael: I don't know, because I can look at this through a bunch of different lenses. One, kind of getting your comment earlier, be careful not to put your values onto other people's financial plans. So maybe there's a...be aware we're not projecting our own values around money instead of what clients really, really actually want to do. Can you accidentally become blind or deaf to what they're saying because we have to see it through our own lens or can't help but see it through our own lens? I can tell a story from the other end though that...at the end of the day, a lot of the most successful advisors I know, I mean this in a positive way, they don't really adapt that much to their clients' style and preferences. They say, "This is a good thing you should pursue, and I'm going to show you how to get there." Right, like, whatever it is, having safety and stability in your retirement is absolutely essential, and I'm going to show you how to get to it.

Carl: Almost like they have an opinion about how this...a theory of value and opinion, which I'm a huge fan, and then they find other people who match.

Michael: Safety-first retirement or money equals freedom and growth and doing amazing things once you have the autonomy to fire whatever it is, and they attract clients to them that share those same values and don't with the ones that don't.

Carl: Love that.

Carl: Do you think there's any other way?

Michael: We're on a journey to take you to your realm of financial independence. If someone's like, "Yeah, money's really more the safety security things. I had some really difficult challenges growing up. I don't think independence when I think about my money. It's like, cool, then I'm just going to really not resonate with you as a financial advisor. I'm going to go find a different one that does. So on the one hand, I can tell the story of be careful that we don't over project our values and experiences onto the client. And another version that says, look, clients are also fully-formed adults and human beings into themselves. Maybe it's okay to just show up with what we believe in the way that we believe. And if clients feel aligned to that and want to go on that journey with us, I'm so happy to work with you as a client. And if you don't, we're just probably not going to get along well and we're going to do our...right, in modern times. You're going to see my website that's going to turn you off or we're going to do an intro meeting and it's going to feel we're not clicking. It's like, cool, we'll part ways, do our thing as long as I'm not overly belligerent about it. Maybe that's fine.

Michael: It strikes me that I know that maybe we're more different about this than we realize for something that's nominally...we collect the data from the client and craft a customized individuals financials plan specific to the client. It's always about them and their data and their recommendations. I'm like , yeah, and there's a little bit more of us and some of these image of dollar sign reactions than we give it credit for.

Michael: I don't know that that's necessarily a bad thing if people are still finding their way to the advisors that believe the things they believe and what help for the journey that they want help with. So I don't know that's necessarily a bad thing. But I know just in this idealized world where everything is only ever the client's input to craft the recommendation. I look at some of the words on there and I'm like , I don't see how that can't be influencing the way our recommendations are showing up.

Carl: I love that. Yeah, just hearing you repeat it back. Even as I was saying it, I was like, I'm not sure it's possible to keep my values off your plan. But it is an interesting...

Michael: It's who I am. You hired me. This is me, all of me, and how I show up.

Carl: And I'm not...I know planners who work really hard at keeping their value...and I think that's another...I often think of these just a spiritual practices. It's another Zen teacher showing up like, "Oh..." Look at me, I'm projecting again. Let me ask a better question. Let me be really careful. I think I heard this. I know planners who do an almost unbelievable job at that. And that's a real, real skill and amazing. Also, I just never really thought of...it's almost a... this is the way I see the world. It's an opinion of how...because money is so subjective, I even wrote down...you said, as you look, that there would be this tendency maybe to look at an advisor's...sorry, an advisor look at clients' balance sheets are high income. And you used the words, and they had an embarrassingly small net worth relative to their income, even that, what do you what do you mean embarrassing? So it's so subjective. There's no real rule of thumb. So in a subjective world, maybe there is something to the idea like , wait, this is my theory of...this is my opinion of how money should operate as an operating system in your life.

And then it's almost that becomes a values-based...We're not going to use it. We're just not going to say that, we're not going to say niche. But it's almost you...right? You attract. It's another version of that. Right. Where you and we've tried to put words on these before, like accumulators or, I don't know what the word would be for somebody who really values adventure and excitement. So, I love that. I think that's really, really good. And I want to make clear and maybe we'll talk about this in the next episode. I'm not suggesting this is an exercise in a first meeting. I'm not suggesting this as...

Michael: I think for us, you're not saying, "Let's do this with clients and..."

Carl: I'm not suggesting it.

Michael: Put it down on a piece of paper and say, tell me, Mr./Mrs. Client or Mr./Mrs. Prospect, what does this mean to you? Yeah,

Carl: I think, in fact, maybe we will talk about this in the next recording, just what does that mean? I just want to make sure we disclaimer that, that feel free to do it. Feel free to use this in presentations. Feel free to take this through group settings or workshops if it resonates with you and you feel...But know that it's tricky territory and it might involve some practice. I've been practicing for a very long time around these subjects. So I'm not making it as a suggestion. I just wanted to use it as the as the jumping off point for who let all the feelings in, you know what I mean?

Michael: All right. Fair enough.

Carl: Cheers, Michael. That was super fun.

Michael: Thank you, Carl.