Over the past decade or so, the financial planning profession has continued to shift away from its transactional business model roots – where a client is a “client” simply because you’ve done business with them at some point in the past – to a model driven by long-term planning relationships (where a client is a client because they’re actually in an ongoing client relationship). As such, many advisors are making that same transition themselves, as they expand their expertise and introduce additional services for their long-standing clients to round out an ongoing service model. Along the way, though (and often due to the performance-centric nature of the transactional relationship), advisors may not have formed a full and complete understanding of all of their clients’ circumstances (beyond what was necessary to know to implement the original product recommendation). In turn, those same clients may themselves be accustomed to a certain cadence and routine of annual meetings. The net result is that advisors may sometimes struggle when trying to figure out the best way to introduce those clients to a more holistic planning-centric relationship, and gain a clearer picture of what’s most important to them beyond the original product need (that the advisor may not have really delved deeply into in the past).
In our 46th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards explore best practices for transitioning longer-term transactional clients to a more planning-centric relationship, how to introduce the concept during regular meetings (particularly when the advisor may need to gather additional information that they hadn’t asked for along the way), and why a gradual (and possibly interactive) transition may be better than making any big “now we’re doing financial planning!” announcements.
As a starting point, it’s important to understand that there’s no shame in needing to learn more about long-term clients. One approach to introducing the conversation is simply to include some initial discovery questions as part of a ‘normal’ agenda, which in turn would provide the advisor a reason to start spending more time on deeper questions in subsequent meetings, as a means of going beyond the ‘traditional’ client review meeting that’s so often just focused on portfolio performance reviews.
From there, advisors can start filling in information gaps that may have opened up over the year, not by shoving a thick intake questionnaire in front of the client (which could prompt clients to wonder if their advisor shouldn’t already have asked for that information years ago), but by using modern interactive planning software where the pertinent information can be populated live (and collaboratively) in the meetings themselves. The important thing again, though, is that these things don’t have to happen all at once, and instead can happen iteratively over time.
Ultimately, the key takeaway is that advisors don’t need to make any drastic changes in the way they interact with their clients to introduce a more planning-based approach. Rather, by making the process more conversational, interactive, and gradual, advisors can start by asking deeper questions to find out more about their clients’ long-term goals, gather any missing data by using interactive planning tools available in various planning software applications, build more financial planning depth from there in subsequent meetings, and foster a deeper relationship with a more engaging process of real financial planning.
***Editor's Note: Can't get enough of Kitces & Carl? Neither can we, which is why we've released it as a podcast as well! Check it out on all the usual podcast platforms, including Apple Podcasts (iTunes), Spotify, and Stitcher.
- Kitces & Carl Ep 45: (Re-)Structuring Client Review Meetings In Order To Focus On What Really Matters To Clients
- Simon Sinek's "Start with Why: How Great Leaders Inspire Everyone to Take Action "
- Dan Sullivan's Multiplier Mindset Blog: "If You Want People To Trust You, Ask Them This Question"
- Bill Bachrach
- George Kinder
- HP 12C Platinum Calculator
- Kitces & Carl Ep 11: What Do You Call Yourself? Planner, Advisor, Industry, Profession
- Is Financial Planning An Industry Or A Profession?
Kitces & Carl Podcast Transcript
Michael: Welcome, Carl.
Carl: Hello, Michael. What's your middle name?
Carl: Michael Earnest Kitces. Let's go. Let's go.
Michael: Wow, I feel like I'm in trouble now. All three names is never good.
Carl: Hey, man, Carl Richards the III. That's my mom.
Michael: Oh, boy. You'd be in real trouble if you got the III on there.
Carl: For sure, for sure.
Michael: Carl III, I'll just call you 'C3' now. Last episode, we were talking about this, transitioning from: I have these review meetings, they've been mostly portfolio-based for a long time. Now, I'm trying to talk more about planning stuff. We start talking about how you do that transition and what you say in that meeting. We mostly really talked about just what you say in that meeting, how you create an agenda, what kind of stuff you would cover on the agenda, what are the core issues that clients really want answered and want to talk about.
But, I wanted to come back to the part that we had kind of touched on early in the last episode, but I feel like we never really fully dug into, which is just this awkward phenomenon of how you start introducing planning conversations to long-term existing clients, where we're in our routine, they come in there once a year, we pull out the statement or the report. We talk about performance portfolio stuff. It wraps up. I wish them on their way and plan to see them next year.
I want to make this a more planning-centric meeting. I want to engage them further. But I find, particularly with existing clients, there are two challenges here. One is just, what does this meeting look like and what do we talk about? We covered that last time. And the other is, how do you actually introduce this to a client who you may now have been working with for 3, 5, 7, 10 years, where you can't start off the conversation, "Let's see how you're doing on your goals," because we haven't really talked about them much – or at all – because I didn't really do that stuff nine years ago when they first came onboard. But now we've been working together for nine years. I feel bad if I'm in a conversation for eight seconds, and I realize I don't know their name because we're eight seconds into the conversation. Now it's really awkward. I'd be like, "Oh, by the way. What's your name? I forgot your name." We can't do that once you get past a certain moment in a conversation. We're like nine years into a client relationship. It's like, "Oh, by the way, what were your goals?"
The Gradual Approach To Transitioning Clients From Performance-Focused To Planning-Centric Review Meetings [03:41]
Carl: What are your goals?
Michael: How old are your kids? How do you reopen this conversation without basically demonstrating that sometimes we don't always know everything about all of our clients? To be fair, sometimes that's...I'm not saying we were bad advisors. Sometimes clients weren't that open, sometimes it's a client from a long time ago, and we weren't as advice- and planning-centric back then. Lots of reasons. I'm not necessarily trying to say you were a bad advisor. But, this is a real-world challenge of, if you haven't been that deep with clients, how do you suddenly start having this conversation in a real relationship so that you don't just get clients, like, "Why are you asking me and for that matter, why don't you already know this about me?"
Carl: Right. This is such a good question. It comes up all the time so I'm really, really glad that we get a chance to talk about it because there's a really simple way to do this. Because everything you've said is totally true.
Michael: I like simple. I'm good with simple.
Carl: Yeah, everything you said is totally true. It's a big thing. It feels like a huge, big thing, and I think there's a very simple way to solve it. But let's just acknowledge the idea. First of all, there is no judgment in your question. There are a million reasons this could have happened this way. The entire industry was built around performance reporting. We've trained people that that's what they want, and suddenly we're trying to...what can feel suddenly – to a client, even if we've been thinking about it for eight years, it can feel sudden. I think there's a reasonable way to detox people off of that. It's a little bit like the financial pornography detox that we've talked about. Here's the simple way to do it. Next time they come in for a meeting, if you've got a client that was primarily performance-based, maybe even product-based, a legacy client, or you're just trying to shift your whole business in this direction. Next time they come in for a meeting, prepare your normal agenda, and just leave 15 minutes at the end. You're going to set the stage for...I don't think you do it in this meeting. You set the stage for the next meeting in this meeting.
Michael: Okay, that's an important context. Fifteen minutes at the end of this meeting to make the next one more planning-centric.
Carl: Yeah, and it might need to be even more like half an hour, and what you're going to do is, you're going to go through what you normally go through. You might say, like we talked about earlier, setting out the agenda, you say, "Look, here's this, this and this." It might even just say, "Agenda item number four, important conversation," or "discussion of goals." Might say something simple like that. When you get there, you just say, "Listen, Michael, I know we've been working together for seven years. I want to have a conversation about the work we do together," and you don't need to make this too heavy. "Look, we've been working together for seven years, and I wanted to ask you a question. Because I know you really well, I think I know the answer. But I would never...this is so important I didn't want to make any assumptions about it."
By the way, you can only say that if that's true. Right? And I immediately thought, "Okay, what if they said, 'Oh, that's interesting. Tell me what you think the answer is.'" You better be prepared. We have a real rule here: think through these questions. We only say things that are true. We can't say things that are lies and call it 'marketing'. I know other people can do that, but we can't. Only say that if it's true, but I bet if you've been working with somebody for seven years, even if you've never explicitly had the conversation about goals, you know them well enough to know what's important to them, right? You probably have some sense, so you say that. "Michael, I know we've been working together for seven years now, and I just wanted to ask you a question, and I think I know the answers. But, this is so important I didn't want to make any assumptions." Then, dive into whatever question you've decided is your discovery question.
It could be – the one I use is the smashup of Bill Bachrach and Simon Sinek's work. Why is money important to you? If you want, if you're familiar with George Kinder's amazing work, you can use Kinder's questions. Or Dan Sullivan's. We've had a whole episode on these questions. Dan Sullivan's question about "if we're meeting three years from now". Right? Whatever it is you're using as your discovery question, just dive in. "Michael, we've been working together for seven years. Just want to have a quick conversation with you. I think I know what you're going to say because we've been working together. But it's so important I didn't want to make any assumptions. Let me just ask you – we're asking all of our clients this – if we were meeting three years from today on September 3rd, 2023, what would need to happen in order for you to feel like this relationship's been a success?" And you take notes, take notes. And at the end of that, you just go, "Cool, thank you very much. I'll probably be using this information, that's really helpful because it gives me a lens," that's my favorite way to say it is, "it gives me a lens through which to view our work together. We'll make sure we review this again when we meet next time. Thanks for coming in today." We didn't make any...what we normally want to do is, "I'm changing the way we're doing..." We want to make a big announcement, put a banner up, have some logos, design a thing.
Michael: We're planning-focused now.
Carl: We're a planning firm. We talk about goals. We have pictures of lighthouses and compasses on our brochures. We don't do that. We just start making the transition. That's the best way I know to do it.
Michael: Then what happens at the next meeting when they come in?
How To Gather Information From Existing Clients To Create Their Financial Plans [09:46]
Carl: Then it's moved to the top of the agenda. We can still do some of the other stuff we're doing. I think if this takes you two or three reviews to wean them off of the old thing and get them to your ideal client review, fine.
Michael: Am I trying to cue them up to say, "Hey, we've never really done an in-depth comprehensive plan for you, so next meeting we're going to dive in and do a full plan for you that we've never done before?" Are you building up in that direction or are you just trying to have some planning-y conversations and then maybe in the next meeting, they'll say, "Hey, I have more questions, and I would like to delve into this further." And you're like, "That's awesome because we totally do comprehensive financial planning here."
Carl: Yeah, that's a really good point and let's clarify it. I think that if you think about – at least my thoughts on planning – what I like to term, and you guys can all throw things at me, but 'real financial planning', is this idea of, look, we don't have to get super specific 40-page intake forms filled out. Initially, we can just make sure...I would be surprised if somebody you're working with for seven years, and you said, "We do financial planning now," I would be surprised if the answer in their heads, maybe even out of their mouths was, "I thought we were doing..." They don't know what that means. I think you just say...in that first-time – the conversion meeting – you could leave a half an hour, 20 minutes, "If we were going to meet three years from now, why is money important to you?" Or George Kinder’s questions, whatever. Then, you ask some questions, like, "Hey..." you just keep going. "If you were to give me...based on what you just said, if we met three years from now, these things would need to happen. Gosh, would you...I think what I heard was this, this, and this. I want to have this much money saved. If I listed those out, would you call those goals? Are those your top goals?" Instead of saying, "What are your goals?" You use the conversation you just had to help them frame up some goals.
Now they walk out, you've had a little bit of a statement of financial purpose conversation. You framed up some goals. In the next meeting, you can say, "Look, based on what you said last time, remember you told me that if we met three years from now, you wanted this, this, this and this to happen. Look, I put together a little bit of work to just give you a sense of where we are in that progress, where we are in terms of progress..."
Michael: And that means you plugged some data into some planning software and you're bringing a projection in? When you say, "I've done a little work," what am I going to be bringing into the client?
Carl: What is it, the 17 2b, or whatever that calculator was we used to use?
Carl: That's the reverse Polish one, right?
Carl: Not that one, the other one that goes the other direction.
Michael: Oh, the 10b. No, you got to learn 12c.
Carl: Seventeen? 17c?
Michael: You're just throwing numbers out now.
Carl: I'll take your 10b and match you with a 17c. No, I know that this is really hard for a lot of us to – you can use that same financial planning software to produce what you would think of as a ballpark idea of where we are, right? Look, you could do this differently. You could sit down with a client and go, "We've been working with you for seven years. It's been amazing and guess what we're doing? We just found some amazing new software. We are doing financial plans now. Let's start." I don't think that works as well as just slowly introducing them to this idea of, "Let's get really clear about your values and your goals. I can take those goals based on what I know about you," and you can say in that next meeting, "Hey, I assumed some things about your income. Let me just double-check that real quick. Is it 250? I'm sorry, it's 170, okay." You know what I mean? You can use that as an opportunity to just get more clarification from them, rather than sit down with a 40-page intake form and say, "Fill this out. This is how we do things now." That's the way I've always approached it. I hope that's helpful.
Michael: Yeah. It reminds me; I had talked to a firm last year that was going through a version of this transition, and I think was kind of struggling with this same thing. They wanted to start doing full plans for clients and the part they actually got stuck on was, how do I give a data intake form for a client who's already been onboard for a bunch of years? Because they're going to be like, "Don't you already know all this stuff?" The truth is, no, not all of it. And I can certainly explain why I wouldn't know all of it. Then they'd be like, "Cool. Fill out the parts you know, and then I'll fill in the rest." It's like, "I don't actually want to show you how many lines will be on this form." They got stuck on the – again – how do I get the data for the plan? I want to start doing a plan, but it's just actually socially awkward to reflect how many gaps there could be in a long-time client that we weren't doing planning for in the past.
Carl: You've now gone into a place that we may not be able to cover in this, so you can just tell me because I don't believe in giving clients data intake forms.
Michael: We don't have to go there. We can go there next time. This is in the context of how we are getting through this with an existing client. What they ended up doing was, they were MoneyGuidePro users, so they started pulling MoneyGuidePro into the meetings to do...they have got a quick start – take the client through a guided process, a couple of questions, really basic information. Click out some goals and enter them in. What they actually did was they turned the controls over to the client. They're like, "I'd love to go through this process with you. You just enter a couple of things. I'm going to guide you through this. I think you'll learn some interesting stuff about your planning and how you're progressing towards your goals." They gave the keyboard and the mouse to the client and let them start plugging things into the little MoneyGuide intake form.
They put their information in – most people can punch their information in relatively quickly – and it was.. by making it interactive, they didn't have to do this whole, "Give me the data so I can put it into the software," except I didn't want to ask about all the data because that was an awkward moment. They just put the planning software in the conference room, started doing it more collaboratively and interactively with the client, and let the client steer. Because it also meant they started plugging in a bunch of their details in the process. Of course, once it's in the planning software, you have it now for future reference. When the client types in an income of 250...it's like, "Oh, you got a raise. That's awesome. I didn't realize you were up to 250 now. Never mind that I wasn't actually sure how much you made before, but that looks awesome." It made it easier for him to have the conversation.
Carl: I love that, and I think this just points to something I think is important for us to just...I think it's important in the context of this conversation. Look, financial planning is an iterative process, right? We can let go of the false sense of precision. I would say, especially as you pointed to the MoneyGuidePro quick version. Let's just see if you're in the ballpark. Guess. Have the client guess. It's okay. This is just the start of this ongoing relationship called financial planning. That's how I would handle that.
Creating A Mindset Of Financial Planning As An Ongoing Relationship With Continual Iterations [17:52]
Michael: That's the biggest takeaway of this whole discussion. When we start talking about, "I haven't been doing planning, now I'm going to start doing more planning. I got a license to eMoney or MoneyGuidePro or RightCapital or whatever it is. We're going to start doing this for all of our clients now." I think the thing we start building up in our heads is, I've got to start gathering comprehensive data and doing comprehensive plans with the whole printout and everything for all my clients now going forward. What I think you're highlighting at the core of the conversation of how you set this up is that you don't have to treat this as though we go from – we weren't doing planning, and now we do full printed plan outputs for every client when they come in for their annual review. Just take the next annual review and put a little bit of time at the end to start asking some of these probing questions. Take the next review and follow up on those questions. Do a really lightweight planning projection because you're not going to have the data and detail for more, but do something because it's still more than what the client's ever seen from you, so it's actually a big step forward. Have a conversation about that. If you do it with the software up on the screen in the conference room, if they say, "Oh no, actually that's not right. My number's this." "Cool, let's enter that right now and we'll get that updated now." Now, we're doing planning, live interactively and what you may end out with is you will get there. It might take a bunch of meetings.
I think it's anti-climactic for a lot of us. I'm going to do planning now, folks, I’m planning now. Carl's like, "Yeah, so start doing it, and then maybe over the next three years of meetings, you'll be doing a lot of planning work for the client." It goes in more gradually. I think just recognizing when the client hasn't...when you haven't been doing that, anything more is actually a change and a positive step forward for the advisor-client relationship. Don't make it bigger than it needs to be. You can get there much more gradually.
Carl: Yeah, and it's okay too to say, "Hey, you know what. Some interesting things came up today. I think it might be useful" or a follow-up email afterward. "Hey, some interesting things came up at our meeting today. It might be useful for us to get together next month." If you want to, you can speed that process up a little bit. But I love the distinction here between, don't create a plan. Do planning. Right? You just start engaging them in this process called planning. Don't create a plan. Do planning. And I think that, to me, is what we've described.
Michael: I like that.
Carl: It's amazing and so fun to hear this stuff making its way through the industry. Maybe just a quick note to everybody. You are doing such good work, right? If you're thinking about this, please give yourself a little bit of a break to just realize, you're among a small select group, doing really amazing work. And the people need you more than ever and they need you for this, this is iterative, their lives are changing, their plans should be changing. You can feel comfortable adapting and progressing and making changes. Just do it like you would as a human. It's okay. The people trust you. You're doing amazing work and frankly, thanks, right? It gives me hope in our industry, our profession, excuse me.
Michael: Profession within an industry.
Michael: Conversation for another day. Go back and listen to our prior episode about industry versus profession.
Carl: Yes, for sure. What episode's that?
Michael: That one, I don't remember off-hand.
Carl: Okay, perfect.
Michael: I would have to Google that. But if you Google "financial planning industry versus profession," you will get answers from us.
Carl: Perfect. Thanks, Michael.
Michael: Awesome. Thank you, Carl.