Welcome back for the fourteenth episode of the Financial Advisor Success podcast!
This week’s guest is Carl Richards, a financial advisor who has successfully grown and sold his own advisory firm, but to most financial advisors is best known as the creator the famous “Behavior Gap” sketch (of the difference between investment and investor returns), and an industry writer and speaker on how to better communicate with clients about complex financial issues.
Carl has a career that many people would be envious of. He’s worked for top-notch financial planning firms, built his own RIA, written two books, publishes a column for The New York Times, and travels internationally to speak to financial advisors around the world about financial planning. Yet ultimately, like so many of us, Carl still faces his own self-doubts about whether the value he provides is really worth what he charges (despite all evidence to the contrary!), a phenomenon known as the “imposter syndrome” that can threaten anyone’s success.
In this episode, Carl shares his story, from accidentally falling into the securities industry, to building an advisory firm, starting his Behavior Gap platform and getting a regular column in the New York Times, how his speaking career built to the point that he’s now paid $10s of thousands of dollar to give a speech, and what he’s learned about the imposter syndrome, and why many great financial advisors constantly question whether or not they’re providing enough value for their clients given what they pay (despite the fact that our client retention rates suggests the overwhelming majority of clients are happy with what we deliver to them!).
And be certain to listen to the end, where Carl talks about how he sees the future of financial planning changing, to a world where technical competency is just the minimum tables stakes to be a financial advisor, why communication skills will be the real key to success going forward, and his number one tip on what any advisor can/should do to get better at this themselves.
So whether you’re struggling to achieve success because you doubt your own value to clients, or if you’re already successful but still nervous that you may not be providing enough value to keep your clients in the long run… or you’ve simply been curious to hear the story of Carl Richards himself, I hope you enjoy this latest episode of the Financial Advisor Success podcast!
What You’ll Learn In This Podcast Episode
- The reaction Carl received from fellow financial advisors about his one-page financial plan concept, and why he loves its simplicity. [4:54]
- Why we as financial planners often worry that if our plans are too simple, clients won’t want to pay for them, even when we say we try to make clients’ lives simpler. [4:54]
- How “real” financial advisors are defined by their ability to truly provide value (and not just pin prospects into their existing solutions). [7:06]
- Why “Trust isn’t a function of the quantity of time you spend with clients, but rather the quality of the experience.” [20:58]
- How Carl got into the financial planning industry completely by accident, but ran with the opportunity. [22:06]
- When and how Carl came up with his famous “behavior gap” concept. [27:58]
- How Carl’s Sharpie sketch of the behavior gap for a client grew into a business, newspaper column, and international speaking career. [33:34]
- How Carl seized opportunities when they came to him, rather than giving into fear and impostor syndrome, and why you should, too. [39:28]
- The definition of “impostor syndrome”, and why it’s so prevalent among high-achieving and dedicated financial advisors. [47:32]
- Carl’s advice for new advisors or advisors who feel stagnant in their careers. [1:16:41]
Resources Featured In This Episode:
- Carl Richards - Behavior Gap
- Carl’s column Sketch Guy for The New York Times
- The Society of Real Financial Advisors
- The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money by Carl Richards
- The One-Page Financial Plan: A Simple Way to Be Smart About Your Money by Carl Richards
- BAM Advisor Services
- “For the simplicity that lies this side of complexity, I would not give a fig, but for the simplicity that lies on the other side of complexity, I would give my life.” - Oliver Wendell Holmes
- Financial Advisor Success Ep 007: Building a Highly Profitable Lifestyle Practice by Age 35 with Matthew Jarvis
- Ron Lieber of The New York Times
- “Here, I made this” from Seth Godin
- Elizabeth Gilbert on fear and creativity from TED
- Financial Counseling degree from the University of Missouri’s School of Personal Financial Planning
Full Transcript: Validating Your Advisor Value Proposition And Overcoming Imposter Syndrome With Carl Richards
Michael: Welcome, everyone. Welcome to the 14th episode of the Financial Advisor Success Podcast. My guest on today's podcast is Carl Richards. Some of you may already be familiar with Carl's work. In addition to being a financial advisor, he's the creator of behaviorgap.com, the author of a book by the same name, and a columnist for The New York Times, all where he writes about the emotional behavioral challenges that investors struggle with and how investors, often with the help of a real financial advisor, can overcome them.
What's fascinating about Carl, though, is that despite his success where he's now paid tens of thousands of dollars to speak around the world about how to overcome the behavior gap and the value of financial planning, is that he still goes through the same internal struggles that all of us do in trying to internalize and get comfortable with our own value, despite all external evidence to the contrary that people really are willing to pay us for our expertise.
In fact, the phenomenon has a name. It's called "the impostor syndrome," and it's something, that I think, virtually all financial advisors experience as we follow the path to success, growing a larger business and working with more affluent clients that eventually takes almost all of us to a point of saying, "I can't believe how much some clients are willing to pay me for what I provide them." In some case, I think it even makes us feel guilty thinking, "I must be charging too much," and changing our own fee structure because we feel guilty about what we're getting paid.
And so, in this episode we talk in depth about the impostor syndrome, how many of us end up self-sabotaging our career and our business success driven by the fear that if we take chances someone might realize we're just an impostor, even if we're really not, and as a result, never experience the success that we could. We also talk about how the impostor syndrome even leads to many financial advisors continuing to provide those thick voluminous financial plans where, in many places, all clients really want to be told is what to do by someone they trust, but we create that big thick financial plan to validate our value to ourselves, because who can really believe that any client would pay thousands of dollars for a one-page financial plan, except, of course, that many do?
Be certain to listen to the end as well, where Carl talks about how he sees the future of financial planning as one where technical competency is just the minimum table stakes to be a financial advisor and why communication skills will be the key to success, going forward. He even provides a great tip about what any of you as financial advisors can do to get better at this ourselves.
And so, with that introduction, I hope you enjoy this episode of the Financial Advisor Success Podcast with Carl Richards.
Michael: Welcome, Carl Richards, to the Financial Advisor Success Podcast.
Carl: Michael, thank you. Well, first of all, let me tell you something. Thank you for doing what you're doing. It's a super-generous gift to all of us. I really appreciate the opportunity to be on.
Michael: My pleasure. You know, we've had great feedback so far. Email feedback has been great. The reviews on iTunes and such have been great. Note, for all of you out there, if you have a moment, please go to iTunes and leave a little review. I know it sounds campy to ask that, but the reality is, like, how iTunes works, the way it tells people about this show is based on reviews, so they make me ask you, please, do take a moment and go to iTunes and review the show, if you're listening to this on an Apple device.
Carl: And don't listen to anything Michael says. Just listen to me. Go review the show on iTunes for Michael because, as goofy as it sounds, it actually matters.
Michael: It actually matters. Well, thank you, Carl. I appreciate that plug.
So, I've been looking forward to this episode because you've had a career that I think, frankly, I know a lot of advisors would be jealous of, like, you built and sold an advisory firm, you became a speaker of...frankly...I'll say like, an international speaker on financial planning. Let me ask this, how many continents have you been on to speak about financial planning now?
Carl: Well, I haven't been to Antarctica and I haven't been to South America. I go to Shanghai next month, so that'll be the first time in China, but, yeah, all over, it's crazy. I don't even know...well, I'm sure we'll get into more of it. It's just...
Michael: And, you've got a regular column in New York Times talking about personal finance issues, and were Director of Investor Education for Buckingham Asset Management, BAM Advisor Services in St. Louis, and published two books on financial planning for consumers as well.
The Reaction Carl Received From Financial Advisors About His "One-Page Financial Plan" [4:54]
So, I actually want to start by talking a little bit about the book you did last year which was called "The One-Page Financial Plan." And, I know it was written primarily for consumers, but there were a lot of advisors that read it as well, and I did hear shock from a couple of advisors, frankly I think probably a few that didn't read the book in full but were just reacting to the title, like, "You're calling it 'One-Page Financial Plan.'" And a lot of us said, "Carl's one of us. Doesn't he know like, it takes a lot of analysis to do a good plan? You can't simplify it down to one page. You're undermining our value proposition as financial advisors."
Curiously, I think this is a good way to kind of capture the essence of how you view financial planning. So, when you talk about like, a one-page financial plan for someone, what does that mean?
Carl: Yeah. That's a good question. Let me start by telling you a quick little story. My daughter, who was probably nine at the time of the story when I was working on this book, and the way these books work for me...because I'm about to dive into the next book, and the way they work for me is it's like fruit...like, I don't want to write them, and it's like fruit on a tree. It's the only comparison I can make, like, it's so ripe it's going to fall off the tree and rot if I don't like...it's sort of...I don't know what the right word...a compulsion. I feel compelled to write it. This idea behind "The One-Page Financial Plan," ...so, they take a while.
Michael: It germinates for a long time.
Carl: Yeah, for like...and I already know almost...I can almost feel what's like, seven years out. This book, I'm working on it for a long time. My daughter who's, I think, about nine at the time, if I've got my math right, I hear her talking to one of her friends. And, one of her friends says, "What does your dad do for work?" or something along those lines like, "What is your dad always in that office working on?" or something like that. My daughter said, "He's writing a book." And, her friend said, "Oh, what's it called?" And, my daughter said, "The One-Page Financial Plan." And then there's this long pause and her friend goes, "Then why is it taking him so long?"
How "Real" Financial Advisors Are Defined By Their Ability To Truly Add Value [7:06]
Michael: Just write the whole...make your page. What's so...?
Carl: Yeah. So, listen, I understand where that concern...you know, obviously you're not the first person to say that about sort of maybe the concern around the value proposition of most advisors. I understand, and I want everybody to understand, your audience to understand like I understand it, I feel it, I know what you mean, but I totally, completely disagree. I just want to be clear, like, I'm...we should have had the little disclaimer section, I am often wrong but never in doubt.
Michael: The mark of a true entrepreneur.
Carl: Here's why I disagree. In terms of it affecting its value, I think, at least my experience with the consumer world is that it did the opposite. What we think our value is is not what the public thinks our value is, and what they want...and we're all so scared of this, what they want is their lives simplified, and what we do is we think...and we don't do this on purpose...look, I know most of you...in fact, I'm...fair to say, all of your audience, like, we don't have any concerns about ethics and morality, and all that stuff, like, this is the choir. And, I know that to be true, but what snuck into our industry, mainly because it wasn't...you know, there was no professional track when you and I started.
Like, we came up through the bank, or the insurance, or, in my case, the brokerage industry, and we thought, "Hey, there must be a better way," and we all sort of morphed into this thing called financial planning. But, what snuck in there was this thing, and it's a natural human tendency to feel like, as we get more sophisticated, and as our knowledge grows and our technical skill grows, there's this natural inclination to think everybody else cares.
And then, there's the other side of that, there's another version of that which is...
Michael: I'm sorry, I've just got to pause there for a moment. Like, there was a harshness about what you just said that I know wasn't meant that way, like, it's just sort of the truth. Like, we learn all this technical stuff and then we get stuck in the idea that someone else actually cares.
Carl: Yeah...well, no, people...and I mean that, like, thanks for pointing it... All I'm saying is they absolutely care that you're technically on point. I think a real financial advisor, a real financial planner has to be technically strong or of close partnership with somebody who is, but it's no longer enough. What people actually want...they don't care about your solutions, at all. They care about their problems. And, I don't think any place...
Now, listen. I understand what I'm saying is, "Well, yeah. Of course, you've got to have the technical stuff," but I don't know of any profession where it's more true that nobody cares about how much you know until they know how much you care. And so, all I'm suggesting is we have this little problem where it happens with attorneys, it happens with CPAs, it happens with doctors. We sort of get stuck inside...like, inside baseball talk. We think everybody else wants to know how smart we are. And then, the nefarious version of that is we were taught a sales technique...I know I was taught a sales technique of the old...like, dig a hole. Throw the client in it, stare down at the client and say, "Hey, I'm the only one with a rope."
Michael: Oh, that's so true. I'm flashing back to sales training days.
Carl: Yeah, and I know like, none of this audience would purposely do that. I know that, but I but I think it's a sneaky little thing that somehow we worry that if we make it too simple, people won't pay us anymore. They won't need us, anymore. And, I have found the opposite to be true. Under the assumption...I'm making one huge assumption which is completely fair to this audience, and that is that you're technically really solid.
So, here's what I like to compare it to. If you imagine me drawing something on a whiteboard, and on one side I labeled it "simplistic"...and this will sum this all up for me. On one side, I labeled it "simplistic," and then I drew a line from "simplistic." And then, as the line was going along, it got really, really, really like, a big ball of yarn.
Michael: Yep, which is like, that's real life, right?
Carl: Yeah, it's real life. it's like all of the stuff we deal with. Like, "Oh, how do we do this? They want to retire here," all the trade-offs we have to analyze, all the assumptions, all the capital market assumptions, standard deviation, correlation, and returns of every asset class, like, all of that stuff that we've got to dig into, and understand, and deal with.
And then, out the other side, once the line comes out the other side, if we label that big ball of yarn...we could label that "complexity," and we label the point at the other side...if we label that "elegant simplicity," and then we go back to Oliver Wendell Holmes quote, which was, "I wouldn't give a fig for the simplicity on this side of complexity, but I'd give my right arm for the simplicity on the other side."
And, all I'm saying is you, my friends, all of your audience live. They already, by default...because, look, fake financial advisors are simplistic, no technical skills. You just got to sell crap and hope that...and you got to throw people in a pit, stare down at them, you got to do all that stuff.
Real financial advisors, which is definitely your audience, are elegantly simple. And so, all I'm saying is what they want, what most of them want, metaphorically and stereotypically, engineers aside, what they want is not to go through that ball of yarn with you. They just want to know that you've been through it, and have you take them to the other side. And, I have found some of the best financial advisors I've ever met in my life do that on a piece of card stock or a yellow pad, and a pen, and a calculator. And now, behind the scenes, we know they've calculated it 15,000 times.
So, that's all I'm saying, is the output, the "One-Page Plan" was really...it was the picture on the front of the box. It wasn't the stuff inside.
Michael: So, I got to ask, like, playing...I know maybe this is playing devil's advocate. I mean, I think it's an interesting example to look at doctors and lawyers, and other professions where there's a lot of technical competency, there's a lot of complexity, they're both professions that are known for having people loaded up with jargon, and, you know, most people do not enjoy getting jargon thrown at them from lawyers and doctors, or...just like, "Tell me how I'm doing. Tell me what I need to do." When we're on the consumer side of expert services, I agree with you. I think we get right back to the same place, like, "I just want someone I trust who's going to tell me what to do."
But...and there's a...like, the big "but" to me is, but there are questions about technical competency with financial advisors that I don't have, or at least not in the same way with doctors and lawyers, like at least, for God's sakes, I know they went to med school or law school. They got a degree. They passed the bar exam or, you know, board exams. Like, there's been some vetting before it ever gets the point where I show up across from them and I'm trying to get advice for them. And, in the world of financial advisors, you highlighted it when you made the point, like, there might be some of us who are technically competent but we want to sell elegant simplicity.
Then, there's a subset of people who are not trained, who are not educated, who have only been taught to sell and deliver one simple thing, and you just throw everybody into a hole, and then dangle it out to them and see who grabs it. So, if I'm competent and I want to be in the business of elegant simplicity, how am I supposed to compete against the people who actually just are simple and don't have the depth? Like, do I still have to produce the 50-page plan because, like, it's not about the client reading it, it's just...this is the only way I can demonstrate that I actually did the work and know what I'm talking about? Is that still a valid reason to produce a 50-page financial plan?
Carl: Look, I think you're still producing it, like, you've got that stuff behind the scenes. We all know, for compliance purposes, that most likely you're going to have to set a two-inch thick book in front of them, anyway. I'm just saying that the cover...I want to get back to your point because it's really important. But, just to be clear, often I'm just talking about an executive summary and I'm telling you it's the only thing anybody reads, anyway. Ninety-five percent of our...I get these emails from readers all the time, "Will you please tell the advisors to stop? Please tell them to stop. Please tell them to stop." But, here's the thing I want to point out. You're not...I'm not talking to those fake financial advisors, and you and I aren't talking to them now. We both know that. I'm saying to your audience, "So, think of the doctors, and act like the doctor, like you are there."
I know we have a professional self-esteem issue in our industry because of all the things you just said like we're not...that we don't know what it means to be a professional. There's no typical standard of care. There's no single accepted mark, you know, other than certified financial planner getting really darn close, but there's still no single way...like, people who come to us, you know, you can't look in the yellow pages and come up with real financial planner vs fake one. So, we've got all those problems, but you the people listening this podcast, they don't have that problem. They are...
So, what I'm saying is, if you act that way, I have found people accept it. It's all in our head...look, I'm overstating this, but it's in our heads. And, if we act that way...I had a doctor friend of mine. The reason I started doing this is...I don't know, it's probably 12 or 13 years ago, early on in my career, I had a doctor buddy of mine. I was showing him a proposal, so he had referred me. He was a client and he had referred me to a big...it was a basic...it was a profit-sharing account and there was five doctors, and I was like, "Five or six million dollars," and it was a big deal for me then. It would still be a big deal for me now. And, I was going to propose, and I walked him through...my friend who'd referred to me, I walked him through the proposal, just not the confidential specifics but just the educational part that...well, let's call it what it is, the sales and marketing part of the proposal, and he was like, "Whoa! Stop, stop, stop. What do you...?"
He's like, "When you took..." I had recently taken my daughter to the emergency room and he was on duty, that's why I took her actually there. And he said, "When you brought your daughter in the other day and you left, what did you leave with?" And I said, "What do you mean? I left with my daughter, thankfully." He's like, "No, what else did you leave with?" I was like, "Um..." He said, "You left with a piece of paper, right?" And I was like, "Yeah. It was a prescription." He said, "Could you read it?" I was like, "No, I couldn't even read it."
He was like, "What did you do with it?" I said, "Well, I went to this scary place with a bunch of people with white coats on, and the pharmacy, and I handed him the piece of paper that I couldn't read, They made me sign something that, you know, like if my daughter grew a third arm or whatever. Like, I didn't even read that. I just signed it, and I went home." He was like, "And then you gave your daughter the medicine?" Like, "Yeah." "So, you didn't go home and do a second opinion? You didn't do any research? You didn't...?" I was like, "No." And he said, "Why?" I said, "Because I felt thoroughly diagnosed."
So, to me, if I had one whiff of not being thoroughly diagnosed, like, thoroughly diagnosed, you better believe I would have been at home doing second opinion research before I filled the prescription. So, what I'm suggesting is "The One-Page Plan" is possible if and only when we thoroughly, thoroughly diagnose.
Michael: I mean, it's an interesting point about it how much of this gets stuck in her head. We had an advisor a month or two ago. His name is Matthew Jarvis, and he's built this incredible lifestyle practice for himself, you know, like, a million dollars of revenue, like, a 50% profit margin. He has one and a half staff members. He takes 83 days of vacation a year.
Like, just this amazing business for himself, and one of the points that he made in it was, part of the reason he can serve his nearly 150 clients effectively is he's boiled down a lot of what he does to like, there's a little one-page retirement dashboard that tells them how they're doing and whether their spending's on track, he basically gives them like, a one-page financial plan output of what they need to be doing, and it just reinforces the point like, not only can you do it, you can do it and be wildly successful at it, you know...
For those who want to go back and listen to the whole episode, it's kitces.com/7 because it was Episode Seven. It just makes that point, to me, so saliently of how much of this probably really is in our heads, because there really are advisors out there that are producing just one-page summary documents from a position of trust with clients and, you know what, they just have wonderfully successful businesses, like, it didn't all fall apart because they stopped producing so much stuff for clients. It actually just got simpler for everybody.
Carl: I don't know if we want to wrap that conversation up but I just want to say like, "Please, I'm almost begging you." And, here's why I'm begging you. I care so much about the impact that real financial planners, advisors make in people's lives. I have traveled the world the last six or seven years, and all I hear about is the anxiety. That's the word. If I were to give you one word about how the public is feeling around money, the one word would be "anxious." There's only one solution, at least that I can find. I mean, there are other options, but for most people, there's one solution. It's to have a real advisor in their lives. And, what I'm telling you is what's standing between you and more of them is just, "Please, make it simple. Please, just test it. Try it. Like, Listen really carefully." You said something interesting, "From a position of trust."
"Trust Isn’t A Function Of The Quantity Of Time You Spend With Clients" [20:58]
Okay, we could spend a long time talking about that, but whatever it is you do to build trust, remember trust isn't a function of the quantity of time you spend together. It's a function of the quality of the experience. I would suggest trust is a function of asking really good questions and then listening very carefully, having somebody feel thoroughly diagnosed, so thoroughly diagnosed. Make sure there's nothing you don't understand. Then...like, in other words, care deeply about their problems, not your solutions. Forget your solutions for a minute. Spend a meeting or two just making sure you understand what it is they care about and their problems, then see how simple you can make the solution. Just test it, test it, because I...we need to make a larger dent, especially the group you and I are talking to right now, your audience needs to make a larger dent in the world because we're already making a massive impact, it just needs to be bigger.
Michael: I love what you said there as well. Trust is not a function of the quantity of time, but the quality of the experience. It's a powerful statement.
Carl: I found that to be true. I could give you example after example of like, seven minutes in, being like, "Wow! We're in this completely different place."
How Carl Got Into The Industry Completely On Accident [22:06]
Michael: So, share with us your story a little of like, how did you get started in the industry in the first place, and wind down this fascinating path where you get to talk about financial planning on most of the continents on the planet?
Carl: I feel bad telling the story again, but it's the old security guard story, so I'll make it short because I would assume at least a few of the people that are listening have heard it.
I was in college. I was an undeclared major at the University of Utah. I had no idea what I wanted to do with my life. My wife had a degree in finance. She had graduated. I came home one day. She had opened the newspaper, was looking in the "Help Wanted" section. And I said, "What are you doing?" Because she had a job. And she said, "Looking for a job." And I said, "You have one." And she said, "I know. I'm looking for you." I said, "All right, what have you found?" And she found what we both believe to this day...I don't have proof of this but, you know, she'll tell you the same story. She found what we both thought was a security guard job.
Michael: Oh, a job in security.
Carl: In security, a security job. So, I went to apply thinking it was like, you know, maybe one of those evening mall cops or something like, "This will be awesome because I can still go to work or...sorry, school full-time and work in the night, or whatever."
And I go to apply, and I get most of the way through the interview and they really haven't asked me anything about security, kung fu, self-defense, nothing. And it turns out what the ad said was securities, and I, at the time, had no clue about the difference.
Michael: Which, I suppose, right there is the ultimate statement about our inability to provide simplicity over complexity. We couldn't say it was a stockbroker job. We had to say it was securities as though anybody outside the industry knows what securities means, and thinks it's a security guard job.
Carl: Yeah, I know, and this was '95. Anyway, I ended up making it through the interview, which obviously tells you a bit about the applicant pool that day, and I got the job, and it was like, the first...it was actually through a temporary agency working for Fidelity Investments, their largest...I believe it was the largest. If it wasn't, it was like, one of two very large call centers in the United States, was in Salt Lake City where I was living at the time. And, I got a temporary job, and then they eventually hired their first part-time team out of that group, which was awesome.
So, I got in totally by mistake, and I remember thinking in the first two weeks in training, you know...we're trained to get our licenses so we could answer questions on the phone on the sort of trading line, and I remember thinking, "Okay, this isn't a security guard job, it's a math job." So I was like, "This is easy," like, spreadsheets, numbers, everything makes sense. It's all rational. And then, shortly after that...two months after that, Amazon...not Amazon, Netscape went public and the call volume was so high they pulled us out of training and threw us on the trading floor.
And, I remember that day. I remember walking out of the training room. They were like, "We need all of you on the phones. Everybody, come down here." I remember leaving that room where everything made sense: two plus two equals four, every single time, spreadsheets, calculators, the whole thing, and this is where the sort of behavioral piece started. I didn't make the connection at the time, but I remember walking onto the trading floor and being like, "Oh, my gosh!" Like, as we say in the States, "You're not in Kansas, anymore." Nothing made sense there.
Michael: Sorry. I mean, it was like, literally the transition from, you know, "First, we're going to teach you the theory of how securities markets work and the nature of the job, and then we're going to put you on a trading floor and you can see when things actually go haywire in the real world."
Carl: Totally, like, "We're going to teach you how it should work and then we're going to show you how none of it works." And, I remember being... So, I got in by accident and I stayed quite on purpose because of that experience. Actually, it was really sort of like, this fascination. I remember just sitting there going, "What is going on?" And of course, you can see the threads of that through my career since, just like, it's all of this behavior stuff fascinated me. It wasn't the....I could care less about that...I mean, I care, but, you know, it's like the spreadsheets don't interest me at all compared to the behavior.
So, that's how I got in the industry and I left there. Side story, they asked me...like, they didn't ask me. Without asking me, they changed my shift to a Sunday. I don't work on Sundays, so I said, "Can I please...I'll work graveyards. I'll do anything you want, but I can't do Sundays." They said, "Sorry, too bad." So, I left not knowing what I would do, ended up with a job with Prudential Securities back then, working for a big team there, really successful team in Salt Lake. I learned a ton from there. And then, of course, irony of all ironies, I had, you know, the professional self-esteem issue was like, my mom, my grandma wanted me to be an attorney. I'm letting them all down. "I know. I'll go work for the most prestigious firm in the world," which will go unnamed, but has a bull's eye symbol and it's owned by a bank.
Michael: Right. If you're going to be a financial advisor and you want to make your family proud, like go for a major household name that everybody knows.
Carl: That's exactly right. So, I went to work there and then, you know, one thing led to another and I started my own firm, and want to say 2004 without looking at the dates, but, yeah, I think it was 2004, left and started my own RIA firm about then. Ran that for a while 'til I sold it to Buckingham Asset Management. Worked for them for a couple of years, a couple of really good years actually. Recently, with my move to New Zealand, decided to part ways with them sort of mutually. Now, I...so I don't have a firm anymore, I'm doing, you know...keep my feet in the financial planning world because I'm helping a number of family and friends sort of translate what their planners are saying to them. And then, somewhere along the lines, about seven years ago, I started writing this column for The New York Times. That's been a weekly thing. So, that's kind of the snapshot version.
When And How Carl Came Up With The Behavior Gap Concept [27:58]
Carl: So, talk to me about just this whole Behavior Gap thing. You started at Fidelity, and you went to Prudential, and you went to the firm that shall not be named. Then ultimately, you went out to start your own RA, and you were starting to take in some of this perspective around our behavior, you know, starting on watching people on the trading floor when Netscape IPO'd. When did Behavior Gap begin? Like, when did Carl Richards the Behavior Gap guy begin? How did that come about?
Michael: So, officially...and I want to make something clear about this name just so it's on the record. Well, first of all, I'll tell you the story quickly. I kept having this repeated problem. I was at this big brokerage firm, I had the best training in the industry. And, I wanted to figure out what my job was, so I kept asking and everybody kept telling me it was to find the best investment, like, that was my job. "Go find the best investment." And so, back then, and still probably today, that meant finding like, the best manager. You know, the mutual fund, I was dealing with a lot of institutions back then, so it was like institutional separate accounts.
So, I went and got my CIMA designation, which I have since, regrettably, I should say, let lapse because I just didn't want to keep up with the continuing education, but I went and got my CIMA designation, and I learned all that sort of manager search and selection process. We built a really detailed spreadsheet, you know, to do manager search and selection, then I kept having this repeated problem which I know...and I've told this story all over the world and everybody sort of chuckles because we all have the same problem, because it's a human problem. Just about the time I would identify kind of the best investment, as soon as I would commit my money or clients' money to it, like, 12 to 18 months later, it would become the not-so-best investment and our methodology...
Michael: Geez, Carl, you just got to pick better, man.
Carl: I know. Long story short, after a couple cycles of that, I'd figured out I had created a very disciplined rigorous approach to buying high and selling low and trying to charge people money for it, and I got really frustrated with that. I was like, "Look, I have the best training. I'm not a dumb guy. And, if I can't do my job, then I got to get out of the industry." I was really like, at the point where I was going to leave. And then, I stumbled upon much of that research, and it was probably Dalbar's research which...let's not even go there in terms of talking about the numbers. I don't agree with the number, but, you know, they have this number on there of just comparing the average investment to the average investor. And, at that point, nobody had really labeled that gap, at least that I was aware of, and I was showing...I was drawing that on the whiteboard like finding that information changed my life.
Now, Morningstar, since...
Michael: Like, you were literally, as part of client conversations, drawing on a whiteboard even at the time, like, "Hey, my value here is...let me draw this for you. Here's what markets do and here's what investors do, and I'm going to help you...?"
Carl: Exactly right. Try explaining that without a whiteboard. I tried. Like, I would explain it, and I remember I was in a meeting and I had clients just sort of staring at me blankly, and I was like, "No, I'm really good at this. I'm a good communicator. I know how to make things simple," and they still weren't getting it. And, out of total pragmatic need or an act of desperation, I was like, "No, like this." And, I jumped up and drew...and I just drew a bar chart. One bar said "average investment," and then I drew a circle above the bar chart. I said, "I know you think that's my job to find that circle." We call it alpha. "I know you think that's my job," and it turns out, it's not my job, because...look, here's what actually happens.
We underperform, and I drew a smaller bar, and I wrote "average investor." I labeled the gap, and initially...this is kind of funny, I haven't really told this story in public, but initially, I wrote "emotional gap." We were messing around with that for a while. It was like, "This is the emotional gap. We do it because of emotions." And then, I realized, "No, it's actually because of behavior." Wrote "behavior gap." And then, this is the last thing I want to just mention about that, is that was the early iteration of Behavior Gap. And then, I got the name...and I'm only mentioning this because it's important. People know why. I trademarked the name "The Behavior Gap," but I want to be really clear to this audience. The only reason I trademarked it was so that nobody could tell me I couldn't use it. I don't care if anybody else use it. I don't care if you use it. I don't care if the people who are doing decent work at Betterment, Dan Egan uses it. You know, I don't care. I only did it so that nobody could tell us. I didn't want the big bad enemy trademarking it, telling us we couldn't use it.
Michael: So, truly...I mean, that label around The Behavior Gap, like, that was you? I mean, obviously, the Dalbar have been doing their research for a while, but calling it that, I mean, that that was you and you literally own the trademark on it.
Carl: That is correct. I mean, obviously, other people have written long before me.
Michael: About the phenomenon.
Carl: Yeah, or they called it like, "Poor investor results are due to behavior." None of that's new, and most of my work is, you know, like, what do people say? That plagiarism is when you steal from one source. When you steal from multiple sources, it's called research. To a large degree, I feel like we're all standing on the shoulders of giants that came before us. So, anyway, that's where it started. But now, I think of The Behavior Gap as any gap between behavior that we know we should be doing, and what we're actually doing, the knowing-doing gap.
Michael: I like that, the knowing-doing gap.
Carl: Yeah, and that's based on some academic work that's been done by somebody, and if I had the source here, I'd cite it, but the knowing-doing gap is how I think of it now.
How Carl's Sketches Grew Into A Business [33:34]
Michael: How did it evolve from...? I mean, it's one thing to say like, hey, in a moment of desperation of clients not getting The Behavior Gap, you're like, "Let me just draw it for you on a whiteboard," and made your famous bar chart and illustrated the point. So, when or how did this turn into a business, like, a thing? I mean, it's Behavior Gap as a label is out there in the general lexicon now, you've had a substantial business that you grew off of doing Behavior Gap things of speaking and writing, and artwork, and the rest. But like, how did it turn from just something you did with a client into a business and a thing that started hitting the industry more broadly?
Carl: Yeah. Can I just give some disclaimers first?
Carl: I want to make a point that I'm working really hard on right now with sort of a future project in mind. It's not doing it disservice to say it was an accident, but I think it's important for people to understand that there was no master plan. Like, how could you have made a master plan...?
Michael: ...a master plan for this?
Carl: Yeah, how could I have said, "Okay, I'm going to live in Park City, Utah..." And eventually, I'm going to move to New Zealand. But, when I'm in Park City, Utah or, at the time, Las Vegas, how could I have said, "While living in a small suburb of Las Vegas, Nevada, and drawing with a sharpie on card stock, and scanning it in using a Fujitsu scanner, I'm going to get these into The New York Times?" So, the only reason I mentioned that is because I think we all think, "I could never do that," and then we realize that "Neither could I," so playing in traffic.
So, it was quite by accident. Here's what happened. I drew it on the whiteboard and then, I had a client literally say to me, "Hey, could you put that on a piece of paper so I can take it home and show it to my spouse when I get home?" And I thought, "Yeah, sure," and I drew it on a piece of paper. I was embarrassed. I was like, "Really? Are you sure?" And they're like, "Yeah," and they like, sort of drug it out of me.
And then, a couple weeks later, I had a similar experience, but the client called afterwards and said, "Hey..." or emailed me, one of the two, and said, "Hey, that thing you drew, I've been trying to explain it to my spouse, and I can't. Could you just draw it real quickly, and scan it and email it to me?" And so, when I saw it in electronic form, I thought, "Hey, I guess I could just sort of write that experience up and share it." And, I did. I started this little website called behaviorgap.com, and I started doing that, and nobody was reading it, like, my mom, and my sister, and I'm pretty sure my sister was...
Michael: How every blog starts. Like, you just hang your digital shingle and hope someday someone shows up.
Carl: Yeah, and that went on for years, like, it was just crickets. I remember going home multiple times...like, The Behavior Gap as a kind of idea is something I tried to quit multiple times. Like, I was addicted to it. I couldn't not do it. It was a compulsion. I couldn't not do it. It was just not an option, but I tried because here I was growing a big business, or at least what could have been a very big business at a big brokerage firm. I could have had all the money I needed, you know, blah-blah-blah, and here I was doing the stupid thing with sharpies on the side.
And so, I kept doing it, and then, you know, pretty, you know, a couple years of just total silence, and then, you know, doing some of the social media stuff where you're like, emailing it to people, and whatever, and it caught the attention of...I think early on it was probably Marion Asnes when she was at Financial Planning Magazine...
Michael: I was going to say, "Shout-out to Marion Asnes." The first time I remember hearing about your stuff was through Marion. I don't remember when that was, like, 10 years ago or so, maybe '06, '07, something like that. I was doing some writing for Financial Planning Magazine back then with Marion, and I think it came down to something like, I had an article that I'd submitted and I think she said she's not going to run it because she came across this guy out west that's doing this cool thing about people's behavior gap and she's going to run a story about what he's doing, and I think my article got bumped for her writing about what you were working on. No offense taken, no ill will at all, but that was the first time it hit my radar screen that she was talking like, "Yeah, there's this cool guy out west that, he's writing about behavior gap and he does these sketches, and like, they're getting some attention, and I want to cover it." So, kudos, to Marion Asnes. She's now, I think, doing marketing consulting work for advisors and B2B businesses for advisors, but she was editor of Financial Planning Magazine at the time and was the early trend-spotter that saw you on the rise.
Carl: Well, yeah, I know...all I know is that even hearing her name makes me slightly...like, it's just so cool when certain people show up and, you know, for whatever reason. I'm so grateful for somebody like Marion. She changed my life, and...she actually changed my life, and to have somebody recognize something that you don't see is necessarily valuable, which, if we have time, we'll talk a little bit about that feeling, and to believe in you is so awesome.
And then, you know, I wrote something for Financial Planning Magazine, and it got a little attention. But, you know, the Financial Planning Magazine is big of an impact as it makes. We're still talking about a pretty specific niche trade journal, and so for it to go from there to this email that I got from Ron Lieber at The New York Times, which I actually show in the presentation when I talk about this because nobody believes me, but the email essentially is just like, "Hey, I love these. Will you do them for us?" And I was like, I knew enough from...I always joke that I knew enough from my security guard background to say yes and figure things out later. I said...
How Carl Seized Opportunities When They Came To Him [39:28]
Michael: When The New York Times calls and is like, "So, we'd like you to start writing for us about the stuff that you're doing," yeah, I guess that just one of those like, "I'm going to say yes and figure this out later." Like, that email doesn't come very often.
Carl: No, it was crazy. And, I remember saying like, "What does it look like?" So, we did this...it started out as just, he just wanted to do this week thing in the "Your Money" section. They had this thing called "Ask an Expert" and they wanted me to take like, a week of questions. And so, I did that and, at the end of the week, I was like, "Hey, should we keep doing this?" And, I remember Ron said...I can remember where I was parked actually in the car, Ron said, "How often would you like to do it?" And I said, "Well, why don't we just try once a week?" And, I remember he said, "Don't you think you'll run out of material?"
And, I said, "I don't know. Let's give it a shot." And so, seven years later, every week except for...I just recently missed a month with...anyway, my wife fell off a big mountain. She's fine now, but it was the first time I'd missed any time with...the time...so, seven years, and there's no sign of us, you know, running out of material because if I don't have anything from the public, I just use stuff from my own life. So, anyway, that's kind of how that all...and the book, the book's similar. I mean, it's embarrassing because I didn't have much to do with it. Again, there's a person that showed up in my life at a time...just sort of a perfect time. Ron Lieber changed my life, and then I had a similar experience with the book. You know, the right person, my agent actually...you know, Christy showed up and it's completely altered the course of my entire life. So, anyway, that's kind of how it all happened.
Michael: I think there's an interesting phenomenon there, though, that...like, from the sort of success building story. I mean, there are all these sayings out there like, "Luck favors the prepared," and, you know, "When opportunity knocks, do you answer the door?" But, I mean, I think there's something about those stories that you've told that really are instructive, that you were just doing a thing that you had a passion around. It wasn't built in the sense of like, "Okay, I'm going start doing my Behavior Gap drawings, then I'm going to pitch The New York Times, and then I'm going to pitch for a book deal, and then I'm going to try to become a speaker." There wasn't this master plan that you were executing towards. It was simply, "I'm doing something that I believe in and have a lot of passion about, that has some value for some other people." It's got to be valuable in the first place. But, you know, "I'm producing something of value, and I'm just making sure that when opportunity actually knocks, I do answer the door."
I know plenty of advisors out there that I think have maybe not had identical situations, but they have similar ones and they don't answer the door when opportunity knocks. You know, it's like, "Hey, could you do a weekly column for us?" Like, "Oh, well, I don't know if I'm going to be able to produce enough stuff. I guess maybe just, you know, have me once every couple of months because I think I can do that."
And it's like, "Great, you just talked yourself out of a weekly column in The New York Times by doubting yourself and not taking advantage of an opportunity when it came to you." Like, those kinds of phenomena where an opportunity knocks but we hear the work, and the fear, and the, "Well, I don't even know if I want to do this because it would suck if it didn't work out," that like, we fail to actually take advantage of the opportunities that present themselves, whereas you seem to have been much more effective at just making sure like, "Hey," when Marion called, like, you took the call and you did the thing, and then that led to Ron Lieber contacting you, and you took the email and you did the thing, and like, just parlaying the opportunities that can come actually can really propel a business incredibly far when you're open and ready for them in the first place.
Carl: Yeah, I have to tell you I'm having this really interesting feeling right now of just being...I don't know what the right word is. I want to say I'm terribly uncomfortable with...I actually, a year or two...probably more like three years ago, I wouldn't even talk about this because I didn't want anybody to ever be like, you know...I mean, I'm uncomfortable. We're all uncomfortable talking about ourselves.
And then, I had this experience. It was probably...that was actually a lot longer. I got asked to share this story in my hometown, Park City, Utah, like, I grew up there and we lived, but we had moved back home, and my friends and the place I got asked to share it was at an art center where I took my eighth grade...I took a pottery class there when I was eight. Like, there's all this connection, and my family was there. There was 120 people there, and all my friends from high school and they asked me to share this exact story I'm sharing with you. And, I remember thinking the comparison I can make it to...and I use this as the disclaimer before I talked about it because I was so uncomfortable with the idea of like, "Hey, look what I've done," because I don't know that I can take much credit for it, to be honest.
Like, I just don't feel like I can take the credit for much of what's going on, other than maybe what you just talked about, which was just sort of like, "Oh, when somebody hits you in the back of the head with a two-by-four, maybe you should go that direction," and it took almost that much. It wasn't like, "I'm not good at spotting a trend. I'm not good at..." But, anyway, I remember thinking of like...remember when we were little kids, I remember where I grew up we had little BMX bikes, and we would build like, you know, a little jump with like, a milk crate and a two-by-eight. And, I remember going off of it and then skidding. I'm talking about 12 years old, or whatever, skidding in front of your parents and being like, "Did you see that?"
Michael: Yeah, I still got a scar on my elbow because I was not very good at that, went over the handlebars.
Carl: They didn't make blue shirts to wear while you did it. That's the problem.
Michael: We needed a blue button-down shirt.
Carl: Yeah, and it wasn't blue. But, that's the context in which I'm comfortable talking about this. It's just like, "Hey, there's this kind of this interesting thing that's happened to me." I don't really know what to make of it, but I do know that when you were talking about answering the email, and that there's a lot of people who don't do it, I could feel how close I was to not doing it. And, I'm telling you the fear, the paralyzing fear behind this work, like, it's as close to like...so what Seth Godin likes to refer to it, I love his...when he says, "Here I made this thing...here I made this. I hope you like it." I'm just addicted to that feeling, "Here, I made this. I hope you like it."
Like, "I don't know if you will," and he also likes to say, "It might not work." And, almost everything I've ever done, there's a deep sense of that, like, "This may not work," and I've actually learned to recognize that as a good feeling. It used to be almost parallel...almost...and "almost" has an asterisk by it...almost paralyzing. And, for most of us, it is paralyzing, and all I'm suggesting that if there's any lesson in this story for anybody, it's just like, "Try the thing. That thing that you're scared of, just try it. Put it out there for the world. See if they like it. If they don't like it, try it again."
So, anyway, it's hard for me to talk about.
Michael: Is the fear...is it a fear of failure? I mean, is that what it comes back to? Like just, it's scary to produce this thing and put it out there, particularly and especially when you're doing things that are going to go out to the public domain, because, like, just the mortifying fear of, "What if this doesn't work out and everybody's going to see it not work out?"
Carl: Absolutely, like, that's a genetic trait. The worst thing that could have possibly happened to you is to be rejected by your tribe. Like, you're going to die and starve alone in the wilderness under a rock, right. So, yes, absolutely the fear of rejection, fear of failure, fear of laughter, like people are going to look at it and judge it. Like, "Dude, I write on a piece of card stock with a sharpie. What do you mean it's going to be in an art show?" So, that fear is super-duper-real.
"Imposter Syndrome" And Why It Is So Common Among High Achieving Financial Advisors [47:32]
Michael: And then, I guess, for you, and then it amplified, because, I mean, first it was the drawings in the early articles which went to Marion Asnes's Financial Planning, which went to New York Times in writing, and then you started getting asked to speak about it, right?
Carl: Yeah, and we should make a quick disclaimer about this, like, I've started talking about this feeling a lot lately. In fact, my next book is called "Do It Anyway," and it's on the impostor syndrome. And, what's really interesting is people come up after...it was by mistake. I was just doing it like, the last seven minutes of a keynote presentation, I would say like, "Hey, by the way, I'm going to warn you. You're going to start doing new things, you're going to feel this feeling. Let me tell you what it's called because it's coming, and just do it anyway." And people would come up afterwards and go, "Oh, man. If you feel that, then..."
It was really helpful to know that if you still feel that...and all I want, like, you don't start out...No,I had little...like, at first, it was the fear that like, the three people who are reading my blog. That fear is just as real as the fear I'm feeling now when, you know, today, the story goes up today in The New York Times about my wife's accident and the regrets I have about not spending more time with her. I mean, again, she's fine. Luckily, I get a second chance, another chance. But, a couple...I don't know what the numbers are, but a lot of people are going to read that. The fear feels no different than it did when there was three people reading my blog. So, luckily, we get a chance to grow incrementally with that fear.
So, yes, speaking, same thing. Twelve people to...I think the biggest group was in South Africa, and there was 2500 people.
Michael: Twenty-five hundred people. Can I ask, what are you paid to go to another continent to speak for 2500 people? Like, what do events pay for things like that?
Carl: I'm so excited that you asked that question so we can talk about this feeling we're both having right now. Did you really just ask me what I get paid to speak?
Michael: Yeah. People are always fascinated by numbers. I mean, money is the last great taboo.
Carl: Are you expecting an actual answer? Like, you want me to give it, or are you expecting me to go, "You know, I get paid pretty well?"
Michael: If you want to give an actual answer, I think people will be fascinated to know like, I mean, "What does a speaking career look like at that size and scale?"
Carl: Yeah, that's super-interesting, but what's more interesting is this experience right now. Isn't it fascinating that two people who get paid pretty well and are pretty well known...I mean, at least you're really well known among the financial advisor world, to talk about money? That's what our jobs are. Like, I play the guy in the newspaper that talks about money, you play the guy, all over the world, that talk...and there's this feeling right now of like, "Did you really just ask me?"
So, it's funny because I get asked after speaking engagements. People will come up and go, "Hey, we'd like to have you in our event. What's your fee?" And I'm like, "Email my agent." And I even, sometimes, for a period there, for like, six months, I actually told my agent I didn't want to know. I said, "I don't want to know," so I can honestly say I don't know.
So, let me tell you a story.
Michael: So like, literally, you wanted your agent to just book you for whatever number he could get and wire you the money, but don't tell you what it costs until...?
Carl: Unmarked bills under a bridge. Yeah, no, I didn't want to know because the pressure was so great when I knew.
So, let me tell you the story. I write a book, book comes out. You know, those early speaking engagements, it was like, "Whatever, anybody will pay." And, we know in the industry, that's just often. That's like...
Michael: Like, "Someone's going to pay my plane fare to fly somewhere and have me speak."
Carl: Yeah, "Free entrance to the conference?" So, all that stuff, and that's incredibly flattering and amazing, and you're like, "Whoa!" Actually, the fact that anybody would even want me to speak is still just amazing. So, anyway I write this book, I get my agent, my agent says to me...I said, "Well, what should I charge for speaking?" And, I really believe fee consistency is super-important in speaking because I don't think, just because one person asked for a discount, they deserve one because the nice person who didn't ask for one doesn't deserve one. So, we're just really consistent, and she said, "Let's start..." And, I'm going to tell the story only because I want to shock people into thinking maybe a little differently. It's had that impact on me. She said, "Let's start low so that people don't have to think much about it, so let's just start with $10,000 for a keynote."
Michael: So like, "As a low starting point, let's just set a threshold where you're going to get paid $10,000 an hour?"
Carl: Yeah, and I was like, "Uh...uh...uh." You know, it took me like, 30 seconds to say anything. She's like...yeah. Her belief was that 80% of the people should say no, that if we priced it right, you know, 80% of the inquiries you get. So now, that number...and this is how I normally say it. If somebody really wants the answer, I'm like, "If you were to email my agent, here's the reply you would get." And so, that number is...I'm trying to think carefully about how to say this. There is some variation based on the location, but that number is between $25,000 and $35,000. I don't even know, what do you do with that? Please, please, people don't...all the people that are listening, please don't hate me. I don't know. I don't know how...how do I...? And, this is an interesting thing, like, as an advisor...
Michael: How do you justify anyone paying you $30,000 to show up for an hour? I mean, the bad news is you have to show up, so there's some travel. It takes a little more than literally just the hour, but, you know, good old capitalism where like, people take...
Carl: Oh, it takes a month. I think it's okay.
Michael: But like, people pay this. It's a fascinating thing.
Carl: It's a fascinating thing, and I think you have to remember, one of the stories I tell myself, and I believe it to be true. I wouldn't tell myself, but I admit openly that it might be a story, is that it wasn't. It's not an hour. It's 20 years. And, having that experience and...whatever, but I do also... So, I don't know what to do with that, and I think...let's just compare it to a feeling I remember having. I remember...and I'm sure many of your listeners can relate. I remember thinking one day when...I'm not trying to distract you. I remember I had a big client who was a...it was an institutional client. And, based on the amount they had after a super-aggressive, competitive pricing on their account, you know, it was an asset under management. It was a percentage fee, but the percentage was really, really low because of the size, but the number was something like $100,000 a year because it was a huge account.
So, even after being...I was the lowest price. Like, I won because I was the lowest price, which is not a technique I suggest. But either way, I'm just trying to emphasize I wasn't ripping this person off.
Michael: Yeah, like, you were the dirt-cheap bargain price of, "I'll do this work for you. It's just $100,000."
Carl: Yeah, and I remember I went to four quarterly meetings. I remember doing the math one day, I was like, "Okay, it probably takes me an hour to prepare." Let's just say it's two hours, times four is eight hours, plus the four-hour-long meetings is 12 hours. And then I was like, "Yeah, and there's probably an hour of cleanup afterwards, like to-dos, and getting it to the staff, and all that stuff, so, you know, let's just throw in another eight. So, now we're at 16 hours. And then, I was like, "Okay, during the year, I may make a phone call or two," so, I mean, I got it up to like, 20 hours. That's $5,000 an hour.
Michael: Christ! So, we're down to five grand an hour, and you were the lowball deal?
Carl: Yeah. So, we've all worked through those numbers in our heads, like, "Why do we deserve that?" And, I have just decided like, it's not my job to...I mean, it's different in terms of pricing structure. We could talk about retainers, and hourly, and all that stuff, and...
Michael: I think much of it boils down to the same thing. I mean, just...there's a phenomenon that happens for all of us with advisors, I think, as the business grows. Like, early on, you're just working with anyone you can because, you know, if you can find me you're a prospect, while we're trying to get revenue going. And then, at some point, you get a critical mass and like, you're doing okay. And then, you know, at some point, you start getting your first couple of big clients, and I feel like almost every advisor I know has this pause moment.
At some point, you're like, "So, I've been doing all this work for all these people and they pay me a couple hundred dollars a year, or $1,000 a year, or $2,000 a year, $3,000 a year, because you got like, a $300,000 rollover at 1%." And then suddenly, someone shows up with $3 million and is really excited to work with you, and you're like, "Oh, my God! My fee schedule... Most of my clients pay me three grand a year. You're going to pay me $30,000 a year, and I'm not even sure you're that much more complex." Like, "You've got a larger portfolio. There's maybe a little more things going on, but I'm pretty sure you're not 10x complexity for 10x the assets, and I'm going to be charging you 10x the fee."
I mean, I almost feel like, for some of us, that's part of why we see people sort of like, we aggressively discount ourselves. We start introducing sharp breakpoints. I know advisors that cap their fees when...like, from any rational business perspective. Like, there's pretty much no good business case to cap your fees. People want to pay more, let them pay more. It's revenue for your business. I feel like this phenomenon goes on that when the dollars start getting bigger, there's some crossover point where like, you go from, "All right, I was going to get paid a couple thousand dollars from this client, but I'm going to work like, 20, 30 hours for this client."
So, I really break down my time, like, maybe I'm making $100 an hour, $150 an hour, which is a healthy, professional wage, but like, not outlandish relative to what professionals get paid in a lot of industries. But, at some point, the clients get bigger and the dollar amounts get bigger, and I think it starts creating this anxiety at some point, it's like, "Don't you know who I am?" Like, "I appreciate you think my services are valuable but, like, I'm not that special."
Carl: Yeah, look, it's really important we all build...and that's why I was very clear to point out the story I've told myself about this, and we all build these stories, but finally, I think the healthiest thing to do is simply to say, at least for me...I don't know that it applies directly...I think it applies the same as when I was an advisor, which is, "It's not your job."
Michael: It's not your job to rationalize your pricing or like, validate the person?
Carl: Yeah, you do...now, obviously, you have to deliver the goods. Like, I care where somebody pays me $1000. Actually, I don't even care if somebody pays me nothing, but, you know, 500 people are going to show up and spend an hour of their time to listen, like, that's amazing. That attention is enough pressure. You know what I mean? But, I do...like, we can circle back to, imagine all I'm trying to demonstrate is it's no different than this pressure that we all feel which, you walk into...so, I'm in Cape Town, South Africa, and I do like, three or four events, and there are, you know, a couple hundred people, and those are scary, and I get scared before them, and I still get scared before every single one, and I still...I've started actually recording it. I'm going to release these at some point, but I record in the green room, like, the room backstage that you sit in as a speaker, like, I can never sit in there. I always just walk around backstage. I make the staff nervous because I climb up ladders and...but, I started recording how I'm feeling, and it's always the same, just like, "I can't believe I'm about to do this. Do people know who I am?"
Like, "I'm just a little kid from Park City, Utah, man." I'm like, "I'm from the hills. I use a sharpie." You know, I was having the same feeling in South Africa, a couple hundred people, and then I show up at this event in Johannesburg and I asked if I could walk to the thing. They had this person that followed me around. She was really funny. Her name was Daniella. She was awesome. Anyway, that's a whole separate story, but she was always following me around apparently for safety reasons, but I was always like, sneaking off, like I'd try to sneak out the door and she'd get, "Ah, ah!" She'd chase me.
Michael: You're ditching your security? Excellent.
Carl: Yeah, exactly. So, I walk to this event, and I get close and I start to notice people out on the corners holding signs saying, "Carl Richards Event," with arrows, and I'm like, "Oh, what...?"
Michael: You have sign pointers.
Carl: Yeah, I'm like, "Oh, no, no. Something's not...no." And then, I get there and there's these escalators, and there's like...feels a little bit like the airport, like, there's people flowing in, and this isn't me, by the way. I'm in South Africa, they didn't know the name. Like, the firm that I did this for did a fantastic job of getting their clients there, and they have a deep sense of trust over there. They hold an event, people come. So, it wasn't me, but I had to deliver the goods, and I remember walking in to do the sound check and everybody was outside. They're like, cocktail, a huge thing, and there was nobody in the thing. And then, there's 2500 seats in this sort of stadium seating style, and I was down on the stage. And, I remember walking out from the backstage onto the stage, and just being like...I actually had to turn around and think, "Oh, my gosh! I'm getting paid something. In this case, for the series of events, I was getting paid more than I thought I'd ever make in a year when I was in high school. And then, there's going to be 2500 people there.
So that...we're going all the way back to your original question which was, like, that fear is paralyzing for most of us, and I'm just begging you because the reason we have to get over that fear is because people need so desperately what you do, and they don't know where to find you because you're like a secret, like a secret society. Nobody knows where to find you. And so, the only way for them to know where to find you is for you to start talking a bit, you start sharing your story. Say to the world, like Seth says, say to the world, "Here, I made this thing. I hope you like it."
Michael: So, this whole phenomenon of where we get some success in our business and start having anxiety of our own where...so you used a label for it a couple of minutes ago of "impostor syndrome?" Talk about it. Is that a researched thing or like, are you dubbing impostor syndrome the way that you dubbed behavior gap, and we're all going to say that in a couple of years as well?
Carl: No, I was...a job I got. When I went to work for BAM actually, in St. Louis, they put you through this kind of psychological, kind of series of tests, if you will. It's like executive coaching, is what it was. It was really...initially, you're like, "I don't want to do this," and then when you understand what it is, I was like, "Wow! This is awesome," like, "Somebody else will pay for my professional development like this." So, I was really grateful for it. I was talking to...I can't remember her name, I need to find her name. She was like, a Ph.D. executive coach, and I was telling her about that feeling. I was like, "I really struggle with this," and she goes...and I didn't know the name. She said, "You know, it has a name, Carl." And, I was like, "What?! What do you mean 'it' name? Like, what is 'it?'" First of all, she's like, "That feeling has a name." She told me, "It's called the impostor syndrome," and I was like, "Oh," you know, like really honestly, like, "Oh, my gosh! Really? That's perfect."
Michael: Is that like we feel like we're...? I mean just that you feel like you're an impostor, like, "Don't you know who I am, and why you really shouldn't be paying me $5,000 an hour to sit on your investment committee for a couple hours a year?"
Carl: That's exactly right, like, "Don't you know who I am? If you saw my own...I haven't balanced my own checkbook in two months, and you're asking me for financial advice?" Like, "Don't you know who I am?" Like, "I just argued with my wife about money and you're asking me to help you with your family?" So, all of those feelings. It's feelings of like, "Who gave you permission to do this?" Like, somebody's going to bust in the door. I feel like it may happen this morning even, like, somebody's going to bust in the door and look and go, "Where is your license? Who told you you..." I feel that way every week with The New York Times, every single week, like, "The gig is up, sorry." So, yeah, we're a fraud, and we all feel it, and it's a pretty well-researched feeling. There's some argument over whether it should be called a syndrome. I'm using that word because I think it's just best...it resonates. People call it impostorism, or impostor phenomenon.
Michael: No, no. I feel better when I've got a syndrome.
Carl: Yeah, yeah, for sure.
Michael: I want to call this a syndrome, like, my disease. I feel better when I name them.
Carl: Yeah, yeah, yeah. And, here's an example. It's anecdotal. I can find the first place that it was written, but I can't...I've got some editorial standards for the newspaper I write for, requires a little bit more than this, but I couldn't actually verify the source. But, the anecdotal story...and I believe this to be true. I mean, maybe not true, this specific example, but generally true, is that if you go into the incoming class of Stanford MBAs, like, most competitive business school in the world, and the incoming class, these are people who are accepted, they're all sitting in a room, and you say to them, "How many of you...? Close your eyes so you can't see anybody else's answers. How many of you feel like you're the only mistake that the admissions committee made?" Seventy percent of the hands will go up.
And, there is some good data.
Michael: That's like the bad version of everybody's above average, like, everybody's below average in hyper-competitive environments.
Carl: Yeah, and so what's interesting about the impostor syndrome is there are some pretty good evidence that shows that it's actually more common among high achievers, so it's not unusual for you to feel that way. If you feel that way, you know, it's actually normal.
Michael: When I almost feel like, if you have a certain level of success and the dollar amount start getting big, I feel like you hit a crossroads where, you know, the dollars for your time start getting so big that this impostor syndrome feeling starts looming up inside. And, when it does, I feel like you can go one of two directions. So, option A...like, it's this fork in the road. So, the fork to the left is kind of the self-deprecating, like, "I need to rationalize this and try to validate myself a little bit more, so like, it's not the hour. It's also the day that I travel, and it's not just the work for the client. It's the 20 years I spent learning to be an excellent financial advisor to validate how much I'm going to get paid incrementally for the next client," really like, we start trying to rationalize it and adjust the number.
And then, there are a few people that go the other fork in the road. So, if impostor syndrome sort of queues up this question, "Don't you know who I am? You're paying me this much money," there's the version that says, "Don't you know who I am?" Because it's the self-deprecating style, and then there's the one that I think we see most in celebrity status, like, there's the, "Don't you know who I am?" Like, I'm so uncomfortable with the impostor syndrome that I validated it by convincing myself that I really am worth this much money. And, if I'm worth five $5,000 an hour when I get up on like, an investment committee, I'm worth $5,000 an hour in everything that I do," and then you start being really mean and unpleasant to other people every one of whom you see is like, less valuable than yourself.
But, to me, it's the opposite end of the same spectrum, that when you get to that moment of starting to feel like, "I can't believe how much money they're paying me for this. Don't you know who I am?" Like, you can remain humble, or you can go to the other end of the extreme. It's actually really hard to remain in the middle.
Carl: Yeah, well, just so you know, there's a third option, and that's, you let it crush you and you end up with, you know...we think of artists this way, like, alcoholic, you know, the pressure just crushes you. But, there's another version of that crushing pressure, it's just, you do nothing. You just stay quiet, you don't do it, and that's what you referred to earlier, right?
Michael: Right, that's the, "I just don't want to open the door when the opportunity knocks.
Carl: Yeah, but, I mean, look, I don't know where I fit on that spectrum. I would hope that I fit on that end where I'm like, "Look, I'm just flattered to be in a position where somebody cares, and I hope, in some small way, I can make an impact." And I feel pretty confident...I mean, it's hard for me to say this, but, based on the response I get at speaking engagements, I'm not really worried about whether or not this is going to be valuable relative to the other speakers they have. I'm not really worried necessarily about that, like, I will deliver the goods. That doesn't make me any less scared right before I do it, and it doesn't make me any less scared 'til about five minutes in where I'm like, "Oh, yeah, that's right. I've felt this way before. I think I'm just going to do my thing."
Here's the reason the impostor syndrome shows up...look, and you can take us off the subject anytime you want, but one reason I think it shows up is because as we get more and more experience with something...so there's two things going on, you identified one. The air beneath you, it gets further and further from the ground. Like, as the consequences...as the amount you're getting paid and the impact you're having, the size of the audience, all of that stuff, as it grows, if you think of it as a graph, it's further from the ground, so you have further to fall. So, that increases the feeling of impostorism, which is why it's so common among high-achieving anybody. You know, you can think of a neurosurgeon. Like, the first time they go to operate on an eight-year-old, you know, and they're staring the parents in the eye saying, "Hey, it's going to be okay," and they shut the door and walk in the operating room and think, "Gosh, I hope I'm okay." I call that the self-aware superhero, which is just, you know, the distance from where you are, the fall would be really big.
But, there's another thing that's interesting that's going on, and that is, anything that we do repeatedly, sometimes it comes natural to us, and that's fine. Other times, it's just gotten easy because we've done it so often. And, when we do that, we make the mistake...and this is what financial planners do all the time. We make the mistake of thinking everybody does that. We make the mistake of thinking it's easy for everyone. "Why would anyone need us, because this is easy for everyone?" And what we really struggle for, again, is it's not easy for everyone. I'm like, "Look, you know, this is dumb, drawing a sharpie on a piece of card stock. I mean, anybody could do that. A kid..." I mean, believe me, I've had plenty of people say that to me, like, "My seven-year-old could do that." You know, they probably can. That's fine. But, all I'm saying is like, we tend to discount that which we're good... The impostor syndrome actual definition is, "Despite external evidence to the contrary, we have a hard time internalizing our own value."
Michael: That's powerful. All right, say that again. I want to make sure everybody lets that sink in.
Carl: I realized as I did it, I did it in the wrong order. The impostor syndrome is when you have a hard time internalizing your own value despite external evidence to the contrary. So, you've got people saying, "Hey, this is valuable to me," and you're like, "Really? Whatever." And, I think it's because of what I just said. It's become natural. It may have been natural from the beginning. You just may be naturally good at it. And, because you're naturally good at it, you discount it, because you think everybody else must be naturally good at it.
Michael: So, I'm curious what you're working on now. You said like, you're doing a book around just this impostor syndrome thing. What's it called, again?
Carl: It's called "Do It Anyway".
Michael: "Do It Anyway".
Carl: And, that's the message, by the way, just so you know. There is no solution. In fact, I don't think...this is where we make the mistake. We think we need to get rid of the impostor syndrome, and I'm telling you need to get more. Like, that feeling. We're just going to re-label it. Actually, it's okay if we still call it an impostor syndrome. We're just going to start thinking of it as a friend like that's what started happening. I was like, "Hey, every time that guy shows up, something cool is about to happen." And, it may not work, but it's going to be cool. I started noticing like, "Hey, this is the same feeling I have at the start line of a big mountain bike race. This is the same feeling I have at the top of a ski run where there may or may not be some avalanche danger. This is the same feeling I have climbing." Like, "I've been seeking this feeling my whole life." Like, "Every time you show up, my friend," maybe I'm about to hit Send or I'm about to hit Post on the blog.
So, now if I can say to it like...and I borrowed this from Elizabeth Gilbert's conversation around fear, is, you can say to it like, "Hey, welcome back. Let's get to work. I'm glad you're here." And, Elizabeth Gilbert points out like, you can say to it, like, "Hey, Mr. Impostor Syndrome. I know you've been my friend, you've kept me safe, you're a close relative of Fear who's kept me alive. Last thing I want to do is punch Fear in the face. It's kept me alive, but right now, I'm just hitting Publish. No one's going to die over here. You sit over there on the couch and hang out so that when we go outside you can be with me," like that kind of feeling.
So, the book, "Do It Anyway"...
Michael: The book, "Do It Anyway"...
Carl: Yeah, which is "Feel the Feeling and Do It Anyway". In fact, if you go to behaviorgap.com right now, the homepage is, I recorded videos of the 10 chapters of what I think will be the book, and I'm giving them away and seeing what the feedback is, and...
Michael: We'll make sure there's a link in the show notes as well, so folks want to check out Carl's website, Behavior Gap website, the course you can get with the first 10 lessons of the book, as well as we'll make sure there's a link to "One-Page Financial Plan" as well. So, this is Episode 14. So just go to kitces.com/14, and we'll have links for all that in the show notes for everyone.
So, what else are you working on, because I know you've gone through some change lately? You moved from the U.S. to New Zealand, you dialed down your time with Buckingham and BAM Advisor alliance, so like, are you just...? Is this a big chunk of time off to write the book, and refresh and pause, or are you working on...? Like, are there other pokers in the fire as well for you?
Carl: It's definitely not time off. There is a bunch of like, trying to get clear about my own...like, I really wanted to get clear about my use of time, you know, my use of money, like, what is it that I really value? And, I got to be clear about the New Zealand thing. I'm going to write a big piece about this soon, which is, I'm not independently wealthy, like, we made this...everybody...I keep getting emails from people saying, "I've always wanted to do that. I've always wanted to do that." I'm like, "Well, then, why don't you do it?" "Money." I'm like, "Well, look, all I'm saying is I don't have a bazillion dollars sitting in the bank that allows me to...we decided it was really important for our family," but one of these I'm working on is called The Society of Real Financial Advisors, and I know I'm going to cause another, you know, little commotion. It's not meant to replace anything. It's kind of tongue-in-cheek, it's going to be the house...
Michael: The Society of Real Financial Advisors.
Carl: Yeah, so if you go to realfinancialadvisors.com, you'll see the cool logo that...we're going to make t-shirts.
Michael: We'll make sure that's in the show notes. So, realfinancialadvisors.com, so you can either type in directly or go to kitces.com/14. We'll include a link out for it. I'll look at that. That's a lovely logo you've got there, Carl.
Carl: Yeah, it's pretty fun, like, we're going to make patches out of it to put on hats and t-shirts. But, it's not meant...by the way, it's not meant. In fact, I was just toying around with an idea earlier. Well, it's not meant to replace the fantastic work that the Financial Planning Association does, or the CFP, or the CIMA, or IMCA, any of those amazing organizations, not meant to replace it. It's just going to be the house for all of my work on financial advice. If I have anything of value to say about it, it's going to be there. So, my work for financial advisors is moving from Behavior Gap to realfinancialadvisors.com.
That's where the podcast will be. We're going to release a couple of courses on, you know...again, these courses will be like, look...my job, I feel like, marketing...I've figured this out the last couple of weeks, is not to convince anybody, not to trick anybody that doing any of the stuff I do, or reading a book, or taking a course. My job is solely...I have a really smart audience. You have a really smart audience. My job solely is to give people enough information to make a decision as to whether or not this will be valuable at this point in their lives. If it's not valuable, it doesn't make you a bad person. I got so sick of that, Michael, the marketing like, "Hey, who's this course for? Who's this course not for? Well, this course is not for you if you don't believe in perpetual growth."
So anyway, we'll be doing some work there on financial advice. I'm trying to put my life's work there on that site.
Carl's Advice For New Advisors And Advisors Who Feel Stagnated In Their Careers [1:16:41]
Michael: So, as we wrap up here into the end, I guess I have two questions for you. Number one, you've watched the industry evolve over 20 plus years that you've been in the business, you know, from selling mutual funds and managers into evolving our value proposition beyond. So, I'm curious like, for newer advisors who are coming into the industry today, or maybe even an experienced advisor who feels like they've kind of hit the wall and stagnated, and is looking to refresh and for something new, what advice would you give advisors that are trying to grow today, going forward, over the next 10 years? Like, where do you see the focus in a world where it's not about the fund managers, and it's not about producing the 50-page financial plan, anymore. How do you succeed in this financial advisor environment of the future that you're painting a picture of?
Carl: I think it's...I mean, to use a relatively academic term, I think it's about emotional intelligence, which is really interesting to me because our industry...which is why I said earlier, like, you don't necessarily have to have all the spreadsheet knowledge. It may be that you have a technical person on your team that does that work that's really involved. But, I do think, for the most part, you've got to have the technical chops that used to be enough, and it's not anymore, but you still have to have them. So, it's a requirement but it's not sufficient.
So, I think now, on top of that, so you could also think about it as the art and the science. You've got to know the science of financial planning, you got to have the technical skills, but now I really feel like...because I get asked this question all the time, like, "What degree should I get if I want to be in this industry?" And I don't know that the answer...outside of the financial planning programs that are now, you know, starting to pop up all over the place, which is awesome, but I don't know, you know...like, is the answer Finance? I think it's more closer to Marriage Counseling, or Psychology.
Michael: Financial Therapy Association is starting to grow and emerge with this focus on kind of, "How do we help people with more of the psychological issues around money?"
Carl: Totally. I spoke there once and I decided to use it as a giant therapy session. It was so fun. I said, "Here, look. I'll walk you through all the mistakes I've made."
Michael: "And you guys can help me and we'll call it a learning cycle."
Carl: Yeah, it was amazing, and they wanted to keep me afterwards, and like, they wanted to put me in like, a lab, like, you know what I mean, you've got some...
Michael: You have to be careful because there's a lot of academics in the Financial Therapy Association. They will put you in a lab if you give them an opportunity.
Carl: This was at a beautiful university in Missouri.
Michael: Kansas State University?
Carl: No, in Missouri, up in...gosh, so beautiful. Oh, where am I headed? Yeah, Mizzou, so Missouri University. It was...anyway, yeah, it was amazing. It was really fun, but...yes, I think, closer to that. I don't know exactly what it's called, but I do think if you wanted to get really specific, it'd be communication skills, like, learn. Stop focusing on how to sell, and learn how to listen, how to ask really great questions. And I'll give you even more specific answer. If I were going out, if I was in the industry and I wanted to get coaching in the industry, what I would do as I get coaching around the first meeting that you have with the prospect. And, maybe not even coaching.
Let me give you more specific. Go take your iPhone, get something that will record your meetings. Sit down with the client and say to the client, "I'd like to record today's meeting. Have you ever watched a movie twice?" "Yes, I have." "The second time you watched the movie, did you hear things you didn't...or see things you didn't see the first time?" "Yes, I have." "What you're going to say to me is so important to me that we're going to review it internally. Do you mind if I record it?" I've never had anyone say no. Then you say, "Okay, great. Let's get started." You hit Record, you put the recorder...since you've asked for permission, put the recorder behind a coffee mug or something so it just doesn't...
Michael: Out of line of sight, so people aren't obsessing about it.
Carl: Of course. Ask for permission first, let's get that clear. I think we did, but once you do, you put it on the line and then start listening to those. I can tell you, no one listening...actually, your audience is far more proactive than most audiences, so there will be people who do this.
Michael: There will be people that do this, yes. I hope so.
Carl: I'm telling you nothing will change your sort of improvement slope faster than listening to that with one member of your staff. Do 10 of those and I think you'll be in a completely different world. You'll be shocked by how much you talk.
Michael: So, maybe first, review it privately because otherwise, we're just going to amplify our impostor syndrome even more.
Carl: Yeah, I think you just pretend like it's like you've signed up for self-improvement, you know, like, whatever...what would that be called? The Navy SEALs Boot Camp like you just got a shock therapy.
So, anyway, I think that's where it's headed, is getting better at listening, better at communicating, emotional intelligence is where I think it's headed, after, of course, you have the technical chops to even get in the game.
Michael: So, as we wrap up here, you know, this is a show about success, and one of the things I've long observed about success is that it actually means very different things to different people, and even evolves for us, over time, as we grow. And so, as someone who's built what, I think, objectively most people would call a very successful business and career, notwithstanding your own impostor syndrome doubts about yourself, I'm curious for you, like, at this point, how do you define success?
Carl: Yeah, so let me give you two. So, one...I was going to say, setting aside like my life. I mean, so, the personal definition vs the professional definitional. I'll give you two. The personal would be, you know, success obviously...there's a great saying actually in the church I belong to, somebody said once, "No success outside can compensate for failure within the walls of your own home." Clearly, success for me is all about my family and the time I get to spend with them. And for us, that means mainly outside, which is why we spend so much time, you know, river-rafting, and I'm learning to kitesurf with the kids, and we're taking sailing lessons. So that, clearly like...the freedom to do that stuff is the definition of success for me.
But, professionally, success for me is I just...gosh, I just want permission. I just want permission to keep trying things and saying, "Here, I hope you like this." So, if I can build...like, to me, success is having a little platform that allows me to keep nudging people in a direction...like, actually here's how I define it: change at scale.
Michael: Change at scale, so the ability to bring about change at scale, ability to build a platform where you can drive change at scale?
Carl: Yeah, just permission for...you know, I'm trying to get away from all these words like platforms, but, yeah, that's exactly the word I use. But, I'm just thinking, is there a large enough group of people that appreciate the work I'm doing that I can keep doing it? That, to me, is success. Like, can I do one more project? Can I do it anyway? And can "Do It Anyway" be commercially successfully enough to allow me to do it again? And I'd really like to do this 'til the day I die. So, I'm talking, you know, 40 more years, so I can't jeopardize that trust that I've built over the long haul from one single commercially viable product. Like, I can't eat the seed corn, as they would say.
So, yeah, success, for me, is, "Can I make change at scale?" And, all I mean by that is, "Can I just have permission to do it again?"
Michael: I think that's an awesome place to wrap up right there. I'm excited to see how you tried to build it again with the new realfinancialadvisors.com platform that we're not going to call a platform.
Well, thank you, Carl. Thank you for joining us on Financial Advisor Success Podcast.
Carl: Michael, thank you. And again, please...I'm sure you hear this a lot. People like you and I can never hear it enough. Thank you for the generous work you're doing. Like, you don't have to do this, and we all really, really appreciate it. So, thank you.
Michael: Well, thank you. I appreciate that.