Confidence is a critical component of success for financial advisors, as those who lack confidence about their knowledge and abilities will struggle to persuade clients to listen to their advice, or even to find and persuasively convince clients to hire them in the first place. But how do financial advisors develop more and better self-confidence to begin with? And is it really necessary to build self-confidence first in order to take action with clients… or is the reality that taking action and having some success is actually what it takes to best builds self-confidence at all? In other words, is it better to just try to go get clients and service them until you feel confident that you do it well? Or to first study and gain the knowledge necessary to feel confident enough to go get clients and service them instead?
In our 21st episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards explore these ideas as they talk about the results of a recent Twitter poll conducted by Carl, which posed the compelling question, “Which one of these is true for you? Having confidence leads to action; or taking action leads to confidence.” Surprisingly, respondents were equally divided, with 51% identifying themselves as “confidence first” individuals, and 49% as “action first” individuals.
Each of these ‘camps’ faces its own set of unique obstacles, where “confidence first” people must first study and invest in themselves but might then struggle with getting to a stage where they are ever comfortable taking action, as the hurdle for them is finding enough confidence to get going in the first place (in essence, having a very high “self-permission” threshold to ever take the leap and try). On the other hand, “action first” individuals have a lower permission threshold, realizing that they need to practice the action first using more of a trial-and-error approach, and perhaps even relying on ‘fake-it-‘til-you-make-it’ strategies before they can build the confidence they need to flourish… but might then struggle with undesirable outcomes arising from impulsive behavior, or at worst, undermine their confidence with the failures that result as impulsively gained clients turn around and fire them.
Furthermore, while it might be true that some individuals are hardwired with an affinity for either one side or the other, it’s also possible that some individuals may identify with both sides in a chicken-and-egg circular manner of thinking, where that person may not feel confident without taking some action and having some success, but cannot take that initial action without the upfront confidence that they can even do the action successfully!
Ultimately, the key point is that both paths to confidence work – whether a person needs to build confidence in order to take action, or if they need to take action in order to build confidence – and that both paths depend on individual style and arguably on one’s own self-granted permission threshold.
Regardless of which side a person may identify with (or even if they identify with both), though, a universal strategy to effectively develop confidence involves identifying the smallest doable next step that helps them on the path they are trying to follow (whether that be to take a particular action that will eventually lead to some level of confidence, or to figure out what it would take to build up confidence in the first place, which would facilitate carrying out some particular action), followed by a frequent reassessment of one’s situation to discover any new information or opportunities leading to a new smallest doable next step.
***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 Podcast Transcript
Michael: Welcome, Carl.
Carl: Hello, Michael. How are you?
Michael: I’m doing well. How are you?
Carl: Good. Yeah, things are good. Super-good.
Does Confidence Drive Action, Or Does Action Drive Confidence? [00:56]
Michael: Fantastic. Fantastic. Well, these “Kitces & Carl” podcasts seem to have now evolved in this interesting direction of, “Let’s talk about what Carl’s tweeted lately.” In a positive way!
You have this gift of setting out these interesting ideas, these interesting nuggets, these interesting tidbits. Like, “Hey, I was just thinking about this thing. I’m just going to put this down for everyone and walk away for a few minutes.” Then explosions and fireworks happen, and everybody’s taking in this concept that you’ve just laid down and dropped the bomb with.
And so, the one that struck me that you had sent around recently, is where you asked what I would have thought was a rather innocuous question, “Which one of these is true for you? Having confidence leads to action or taking action leads to confidence.” Right?
So, does confidence drive the action, or does the action drive confidence? You put this out there in a like Twitter-style poll, and hundreds of people responded. And it was almost a perfect 50/50 split. 49% said confidence leads to action, and 51% said action leads to confidence.
And I’ll admit, my initial reaction to this – because this is, I think, how our brains always work; I would have answered this one way, and I can’t believe almost 50% of people answered the other way – was, “What’s going on with everyone else out there?” Because I am very much a “confidence leads to action” person. I have to analyze and study the bejesus out of something before I’m possibly willing to take a step. I have to get to that level of confidence.
I’m looking at this poll, it’s like, but 51% of people are in the, I guess I colloquially say the “fake it till you make it” camp. Like, just take the action, drive out there, do what you’re going to do, and find the confidence as you do it. And it works. It’s so alien to me that I’m kind of blown away by that, but I understand other people operate this way.
And I thought it would be an interesting thing to delve into for one of the discussions here, because the fundamental thing I find for so many advisors is that, by whatever means we get there, if you can’t get the confidence in the end, the business doesn’t work. If you’re not confident with clients, they don’t hire you, they don’t take your advice. The lack of confidence shows through.
So some people have to get their confidence first, and for some people, action leads to confidence. Confidence is clearly this necessary ingredient, and we seem to get to it in very different ways.
Michael: So where were you going with this when you lobbed this out there? I know there’s usually something whirring around in your head when you ask these questions. Where were you going with this question of whether confidence leads to action, or if action leads to confidence?
The “Knowing-Doing” Gap Is Similar To The “Behavior Gap” [04:26]
Carl: I’m really fascinated with this idea, and I don’t know who first named it. I think Bob Sutton at Stanford introduced me to it first, and I believe that he even wrote a book about it – I may have this wrong, but there’s what I believe is called this knowing-doing gap. It’s the gap between knowing something and doing it. And I think I’ve just been fascinated by that for 20 years.
Michael: Well, I get it. The knowing-doing gap is essentially like a version of the “behavior gap” itself, right? Like, I know I’m supposed to do this with my investments and not screw it up. And then when I actually get to the doing part, I don’t do what in theory I know I’m supposed to do.
Carl: Yeah. And certainly, as I’ve gotten less interested in just purely investing and more interested in creating stuff and putting it into the world, I think about that gap – the gap in our own behavior – this knowing-doing gap. And I think, “Why do some people do things and other people don’t, given the exact same set of opportunities and information?” And I know it’s never exactly the same, but it’s close enough.
Michael: I think it’s what we live with our clients, right?
Carl: For sure.
Michael: Like, “I gave them the financial plan and they left my office and they didn’t do it.” Argh.
Carl: Yeah, and that’s where my interest in this came from in the first place. But I’ve noticed, even more specifically, that with some of the workshops we’ve taught for advisors where they come and pay a lot of money, and say, “I want to learn to do this thing that you’re teaching.”
I designed these workshops intentionally so that there was literally no place left to hide. There would be word-for-word scripts and it would be very tactical. Like for instance, writing a book, it would be like we’d be giving you the exact tactics on how to write a book. Over the years of doing these, I just realized there’s no mystery, there’s no secret sauce, there’s nothing.
I would say that 10% of the people who have attended a workshop like that (we called those workshops “scaling influence”) actually apply what we teach. And I kept wondering, “What am I doing wrong? How do we change it?” And it pointed me down this path where I’m still trying to understand that fear shows up, and that the antidote to fear has to be, at some level, the ability to act confidently.
I just think confidence may be one of the most valuable assets we have as creative business owners. I know advisors aren’t used to that idea, but you’re a creative entrepreneur if you run your own financial planning firm, right? And mainly because the medium is people’s lives; while you’re not sculpting, it doesn’t get more dynamic than that.
So, I wondered, “Okay, is it mindset? Do I get my head straight first, and then will I have the confidence to act? Or do I dive in and act a bit, and with each little micro-action I take, will I gain a little confidence like sort of a flywheel?”
That’s where I was headed with it. And I was totally shocked, because at first, I think it was more skewed towards “action first”, then comes confidence. But it was never more than 56%. At one time, maybe 20 minutes before the poll closed, it was exactly 50/50, and I thought, “That’s amazing. That’s amazing.”
Michael: So where are you on this spectrum?
How “Action First” And “Confidence First” Individuals Have Different Styles of Learning and Working With Clients [08:48]
Carl: I thought that I was an “act first” person – just jump into the deep end; I don’t know what I’m doing, but along the way I’m going to figure it out how to do it. I think that’s pointing to something slightly different, though, which is how you learn. For example, I would need 20 minutes of classroom instruction on how to paddle a kayak, and beyond that, I’m like, “Get me in the boat, get me in the kayak.” Right?
There’s probably some relationship there, with how you learn, but now I’m curious. Where does the confidence to just jump in the boat come from? If I’m not feeling confident that day, I won’t go to class, right? I’m pretty sure, especially after reading a bunch of the replies and the conversations that went on, that it’s a chicken-and-egg debate; it’s circular. It’s a flywheel for sure. And the trick would be figuring out how to get the flywheel in motion.
Michael: No, I have to admit, I think that’s an “action leads to confidence” framework and point of view – action is what starts the flywheel for you. I come at it from the opposite perspective; I’m very much a “confidence leads to action” person. I have to analyze and study the bejesus out of something before I do it. That doesn’t necessarily stop me from taking action, right? I’ve been involved in a lot of businesses. I’ve created a lot of stuff, but I’ve had to study the hell out of it before I go anywhere.
For me, it’s part of why I ended out with an alphabet soup of designations. For me, truly, I could not take action in advising clients until I had enough confidence that I knew my stuff, and that I knew I knew my stuff cold before I could even be able to sit across from a client and not just be hopeless. The confidence – complete confidence – had to come first.
Carl: You’re using a word there that’s really causing me trouble, “Complete.” Right? “Complete.” Because when is that, complete? Where is that, complete?
Michael: Well, for me, it was somewhere after like 10 years and 24 letters. I eventually got there.
Carl: Yeah. But that, again, would be some arbitrary line called “complete,” which is, “Why wasn’t it 7 years?” or, “Why wasn’t it 12 years?”
Let’s think of an example outside of advice. Give me an example from your life. I don’t think a ton of people know that you do some Improv stuff?
Michael: Yes. I’ve been involved with an organization called Washington Improv Theater now for almost 20 years actually.
Carl: Can you think back to like that first moment where you were doing your own improv in front of somebody else?
Michael: See, I’m just going to damage your point here further. Twenty years as a volunteer, not one on stage. I’m not confident on stage in improv. I’m fine for giving a speech – I’m essentially a professional speaker for a big part of what I do, because I study the heck out of what I’m going to speak about before I get on the stage. I know that I know my stuff before I get up there. Twenty years being involved in Improv, I’ve never once been on the stage as an improviser. I don’t even have an interest in doing so.
Carl: You don’t have interest in doing so. It’s not like, “I would really like to, but I can’t.” You actually don’t have any interest?
Michael: Yeah. It’s just not a situation that’s even appealing to go and try. To me, it’s the antithesis of the “confidence first” framework.
Carl: Why have you been hanging out there for 20 years?
Michael: They’re really cool people. Improvisers are very, very fun to hang out with.
Michael: They’re really cool people, it’s an amazing organization, and there are areas where I think I can help, in part because it helps to have a grounded person. When you have a bunch of improvisers running an arts organization, it’s very helpful to have a finance nerd that helps keep certain things grounded in the process.
Carl: Nobody around here would relate to anything you’re saying right now. None of my friends would be saying anything.
Michael: But again, and I understand, people sort of exist on a spectrum. I am pretty far out there in the “confidence leads to action” end. Although I know I’m not alone; I’ve met plenty of other advisors over the years that I think, in essence, have a version of the “imposter syndrome” that you’ve talked about in the past. That idea that “I don’t know why clients are paying me all this money. I don’t feel deep down like I actually really know that much.”
And if we’re not confident in ourselves because of that, then eventually, we may self-sabotage. So the way they get over that was the same way that I got over that. I have to go study things first. I have to go learn. I have to prove to myself that I know these things so that I’m confident enough then to take action in trying to help others.
But we’re not all wired that way, right? So I’m kind of fascinated by you, by the folks on the other side. Maybe this is an unfair label, but for “confidence first” people like me, the other side essentially uses the “fake it ‘til you make it” approach, right? Like, “Hell, I don’t know what I’m doing yet. I’m just going to start doing it and I’ll figure it out as I go.”
Maybe that’s not a fair characterization, so you can reframe that if you want. But that, from my end, is kind of what the other side looks like. And again, I’m just fascinated that your poll basically came up 50/50 on these options. People are very evenly split about how they get there.
Carl: Yeah, I think different framing around that would be like hunting for “good enough”. If I had waited until I felt confident to write a book, I would have never written a book, or I still wouldn’t have written the book. So I don’t know where the line is there.
Carl: But my point is that there’s some real danger to anything close to “fake it till you make it,” right? There’s some real danger there, especially when you’re dealing with people’s lives; we’ve got to know what we’re doing.
So the question I have for you is, if you’re a new advisor…actually, it doesn’t even matter if you’re new. I can’t believe how many emails I get from 20-year veterans who are crying in their email saying, “I don’t know what I’m doing anymore.” And if you want to know, like, in Australia, it’s crazy; 40% of the advisors will be dislocated in the next 2 years, probably. I was talking yesterday to the CEO of a huge advisory company who said six advisors in the past two weeks have come to him with serious concerns about their mental health, like suicidal concerns. And who cares whether you’re brand new or if you’re feeling a lack of confidence – you need to take action. What do you do? What do you do?
Michael: So, I’ll answer this coming from the “confidence first” framework. What do I do? I’m sort of joking, but it’s true: I study the heck out of it. I evaluate something until I get to the point where, in essence, I can convince myself that I know what the hell I’m talking about. And I’m a tough critic of myself. So that bar is pretty high before I feel like I’ve evaluated and analyzed and looked at it from enough angles that I can say, “I think I really actually know what the hell I’m talking about here. Okay, I’m ready to put this thing forth. I’m ready to make this recommendation. I’m ready to start working with clients.”
And to be fair, I accumulated the alphabet soup over a long period of time. It was literally 10 years before I was not afraid to get in front of a client. But to be fair, it was probably four or five years of self-education, getting designations, learning, trying to really get comfortable that I knew my stuff behind the scenes before I wasn’t freaking out, at least in my head, sitting across from clients.
Carl: Yeah. Well, I can feel something we talked about a few podcasts ago, and that’s this idea, though I believe it’s a mistaken idea, that our job is to provide solutions. So if I’m an advisor and I’m not feeling confident – maybe I’m new in the industry or I’m changing the way I do the business – I think I can let go of the idea that because I am in that meeting I’ve got to be ready to have answers. My experience has been that clients love and are totally okay with somebody saying, “I don’t know.”
Michael: And I think that’s because you’re an “action first” person, that you’re comfortable in that realm.
Carl: “But I will get you an answer.” And so if I understand my job in the first client meeting is to thoroughly diagnose, but not prescribe yet, then I can go away and study like crazy the advice I’m going to give when they come back.
But in that first meeting, I can be okay with somebody saying, “Well, what would you do here and here and here” and me saying, “Okay. First of all, I don’t know that I have enough information to give you. What you’re asking for is a prescription. And I want one, too. But first of all, I don’t know that I have enough information. And second, I don’t really know the answer yet, but don’t worry, we’ll get there.” Right?
What I’m talking about is if I’m an advisor listening to this now, would I have the confidence to ask good questions? Do I have the confidence to go research the answer? And do I have the confidence to present the answer that I find?
Michael: Yeah, but I’m more curious about how you got the confidence to show up in the meeting in the first place. And I’m serious, because I wouldn’t have. I didn’t, literally for years.
Carl: I didn’t know there was an option to not do that for years. When I signed up for the job, I got thrown in front of clients.
Michael: Well, I did, too, and it was a colossal failure. So then I went and found a different job where I could work behind the scenes for a couple of years before I went back in front of clients again.
Carl: That’s really fascinating, actually, that you purposely made that decision and said, “Hey, I’m going to go put myself behind the scenes.”
Michael: Probably because I was just too stubborn. I didn’t want to leave, and prospecting clearly wasn’t happening for me, so I had to find a plan B at that point.
The Importance Of Granting Oneself Permission To Take Action [22:20]
Carl: Yeah. This points back to a super interesting concept of permission. Like, “Who gave you permission to be in that meeting? Who gave you permission to do that thing?” And I realized that you can’t show up and perform brain surgery and say, “I gave myself permission.” There are technical skills involved in the work that we do that take study, effort, and time; you’ve got to be on top of it, or they take a partner who has those technical skills, right?
We’re seeing more and more of that, where somebody is sort of almost like a financial therapist, really good at asking questions, and there’s somebody else with good technical skills.
I’m not pretending that you can show up and go, “Hey, I gave myself permission to do brain surgery.” But you can show up, have a meeting with a client, and ask really good questions. You can look them in the eyes and say, “You know what? I don’t know. I actually have never been asked that question, but I can find an answer for you.”
That confidence – when you asked what was behind this tweet – that’s the whole thing I’m super curious about. Who gave you permission to do the thing you’re doing? And if you gave it to yourself… Because for most of the work we do, for most of the work that all humans do, there’s no certifying, permission-giving body. I realize there are some exceptions, like you’re an MD who performs surgery.
Michael: Yep, few of these professions have licenses, but that aside.
Car: But for even those people who have earned those licenses still struggle with imposter syndrome and feelings of permission. So permission seems to be separate. Like, no reassurance is enough.
Michael: Well, so for me, again, who gives me permission? The answer was me. And I’m not giving myself permission until I’m willing to certify me to actually be in front of other human beings, which was a matter of saying, “Go learn your stuff so you know what you’re doing. You’re not going to hurt someone.” Because that was my fear – to hurt a client, if only out of ignorance. But I really didn’t want to hurt any client, so I needed to learn my stuff first. The permission giver was me.
Would you answer that differently for yourself? If you’re an “action to confidence” person, where does the permission come from?
Carl: The only person that’s ever given me permission is me. Yeah.
Michael: I just have a different self-permission threshold?
Carl: Yeah. I think sometimes we’re talking about slightly different things, too. Like, I felt comfortable diving straight in with clients trying to understand their problems. Not offering them solutions, but trying to understand their problems. “Tell me what brought you in today. What’s going on here?”
Well, no; early on, in the days of the brokerage firm with a bull as its symbol, owned by a bank, it was just purely, “Here, take this. This is how we do this. You take a questionnaire. Great, here are 17 questions.” Okay, cool. We’re going to bill, explain the portfolio, and plug them into the portfolio. And then as you go along, you realize, “Hey, that’s not solving the problem. What is the problem?”
I just learned by doing. Does that lead to making some mistakes? Absolutely. We absolutely make mistakes. Is there sometimes collateral damage from those mistakes? Unfortunately, yes. I think that’s the case for anybody who does work of any type. It’s a reason why they call medical offices ‘practices’. And it’s also a reason why so many of us have called our own financial planning firms ‘practices’, right? Because we’re learning, we’re learning.
But I’m fascinated by “confidence first” people like you, because I would just be like, “Dude, come on. You can do it. Get in there!” I have a son that’s similar in some areas. He really likes to understand things and go through the motions and figure everything out. I also have an older daughter who’s that way. And sometimes I had to understand that that’s not a character flaw, it’s just a different way of looking at the world.
Success Is Attainable By Both “Confidence First” and “Action First” Individuals [27:12]
Michael: So I think as we wrap up, for me, if there’s one thing that I take away from this is just truly recognizing that you can get there by either path. We seem to be pretty hardwired for one or the other. It’s basically a coin-flip about which one you are.
I think to me, at a minimum, what that means for anybody who’s listening and thinking through this is just to reflect to yourself, which one are you? Are you an “I have to find the confidence first before I go to action” person? And then I think the natural question, as you framed it is, “When is enough enough”?
Because I certainly know some advisors out there who believe that confidence leads to action, but they never get to confidence. And that becomes the blocking point. They just literally never get there and don’t launch their firms or don’t launch their careers.
And if you’re in the “action leads to confidence” side, if you come at it from the other end… Well, Carl, how would you frame someone in that worldview? Like, what would be their blocking point? What’s the thing you have to be self-aware of, if you realize this is how you operate, to make sure that you get to where you need to go?
Carl: I think I would clarify that I’m not nearly as sure that there are two ways. I just find this interesting. I don’t know that I can make any conclusions. I certainly don’t know that I can make any conclusions that you’re hardwired for one or the other, or that everyone is hardwired for one or the other. All I know is that it’s really interesting. I think it’s much more of a circular sort of function, chicken-egg, egg-chicken sort of discussion.
So what I think is that if you’re prone to starting things quickly without thinking, you’re relatively impulsive. These are words that I have been labeled absolutely for my whole life. But it’s important to check, and distinguish between the impact of the decisions you’re making. How do you get started if you’re a “jump in first” person? The way I like to think of it is you find the smallest next step.
And I would do the same thing if you’re a “confidence first” person. Like, “I can’t act, I can’t act!” The same thing would be like, can you find the smallest next step? Take that action, reset, because information will become available to you, and repeat that over and over and over and over.
In complexity theory, it’s about solving for the next local optimum. So make a guess, solve for the next local optimum, take a step, gather new information, reset, and do it over and over and over. That’s what I learned from this experience.
Michael: Okay. Well, I hope that’s helpful food for thought for people. I’m going to guess that by your poll results and how different we are, I’m still in the camp that people are kind of wired for one or the other, which means half the people listening to this episode think you’re crazy and the other half think I’m crazy.
Carl: But that’s generally true anyway!
Michael: All right, fair enough.
Carl: Yeah, yeah.
Michael: But hopefully, it gives people something good to think about.
Carl: Amen. Amen. Thanks, Michael.
Michael: Thank you, Carl.