Every business transaction (whether for a good or a service) moves both parties involved towards a desired state. A prospective customer or client needs something, and they also need someone to help them get it. Along the way, the person providing the good or service may or may not be successful in helping the customer or client reach their desired outcomes (whatever those may be), and one of the biggest determinants of their success is good questions.
In our 35th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards explore their favorite questions to ask in a first meeting with a prospective client in order to get to know them better, start to establish trust, and take the initial steps towards building what will hopefully develop into a long-term, mutually beneficial relationship.
As a starting point, it’s important to keep in mind the path that the prospective client took in order to book their initial meeting in the first place (e.g., were they referred by an existing client or did they come in ‘cold’?) because that will help frame the initial conversation and give the advisor a confidence boost as the prospective client and advisor get to know each other.
Because asking good questions is about far more than checking off each box from a 17-point intake form or formulaically reciting from a predetermined script. In fact, the best questions are often ones that people have never been asked before, or are, at least, asked in such a way that offers someone a different perspective. While such questions can often create some discomfort (the best questions usually do!), they can also pave the way for some meaningful insights.
From there, perennial favorites include such questions as, “What’s important about money to you?” (which helps lay the groundwork for establishing what really matters to the client and what might help keep them on track later on down the line), Dan Sullivan’s “What would need to happen in the next three years for you to deem this relationship a success?” (which provides a more concrete time frame around figuring out what their ‘desired future state’ is), and George Kinder’s famous three questions about what someone would do given increasingly narrow time frames on their longevity.
Perhaps one of the most useful questions, however, is simply, “What brought you in to see me today?” Because the disappointing reality of this business of financial advice and planning is that people don’t spontaneously come to the realization that they really need to get a comprehensive financial plan as soon as possible. Rather, there has usually been some sort of triggering event that brought them in and there’s some immediate and pressing need that they have at the moment, and understanding the triggering event accompanying their pain point can be very powerful when building trust.
Ultimately, the key point is that, no matter which questions an advisor uses in their first meeting with a prospective client, building trust is about being open to having a conversation, being comfortable and confident, and being empathetic to whatever a prospect’s pain point may be. Because, at the end of the day, the real beauty of this business is helping clients get from what they want to what we all know they need.
- Self-Care And Self-Compassion In Times Of Financial Stress And Anxiety
- Markets Plunge. Economies Stall. Panic Spreads. It All Feels Very 2008.
- 20 Years Later, the Y2K Bug Seems Like a Joke—Because Those Behind the Scenes Took It Seriously
- Kitces & Carl Ep 18: Talking Clients Off The Ledge From ‘Scary’ Markets
- Kitces & Carl Ep 26: Talking Clients Out Of The Bunker Portfolio
- Nick Murray
Kitces & Carl Podcast Transcript
Michael: All right. Welcome, Carl.
Carl: Greetings, Michael. How are you?
Michael: Well, doing mostly okay. It’s been a little bit of a stressful few weeks. The world is in a global pandemic and it’s a little freaky right now.
Carl: Yeah. It’s super-interesting, yeah, and really crazy, really crazy. So yeah, it’s going to be interesting for us to chat a little bit about how we handle this. I’m assuming that’s where you’d like to go.
How Advisors Face Their Own Anxiety As They Reassure Their Clients During Times Of Uncertainty [00:01:27]
Michael: Yeah. We separately did a webinar recently on calming client anxiety of coronavirus. So I thought an interesting discussion today would be calming our own anxiety, right? It’s one of those things I don’t think we talk about much, this realm where markets are going crazy, the world is going crazy, I suppose like, “These are the times we make all our money. These are when we add our value, keeping clients on board, talking them off the ledge when they’re scared, when they’re anxious, when they’re freaking out.”
And nobody ever talks about what happens when we’re freaking out maybe on the inside because you can’t say that to clients because then you just freak them out even more.
I remember going through this in the tech crash, because I started my career before 9/11, and then probably even more so I remember it in the financial crisis. There were these moments of trying to keep clients invested to stay the course while the financial system was melting down, and it was hard not to have this nagging thought in the back of your head of like, “What if it is actually coming down?”
I was telling people to stay on board because we were going to get through, the system is resilient, then we’ll recover, and the economy will grow back again. But it’s hard not to have that nagging thing somewhere in the back of your head of like, “Well, unless it doesn’t.”
And these are never the same, right? History never repeats, but it always rhymes. So last time it was, “I wonder if the financial system is going to survive.” This time it’s, “I wonder what happens to all of our economies as the pandemic rolls through.”
So let me start there, because you’ve been through this journey as well. Let’s maybe start in 2008. As you were going through this with clients, did you have doubts yourself? And how do you handle them, or think about them, or process them, or just deal with them? Because we don’t get to talk about it with clients because we’re supposed to be their anchor.
Carl: Yeah, yeah. So first I think there are a couple of quick stories and then I think we can get to some really practical things we can do. So the answer is yes, I had massive doubts, which I’m sure we’ll have a chance to talk about in another episode, but I was really sort of a crushed human after I got through it.
Part of that was just my own anxiety and fear, and doubts around things, but I think we’re now starting to remember what that felt like. If you’ve been through it maybe… I didn’t know of any people actually that were saying it. Now we look back at Y2K and we’re like, “Oh, wasn’t that cute?” Right?
Michael: Yes. At the time where it was like, “Oh, my God. What if all elevators stop working because the clocks and the floor timers were tied to the wrong number of digits?” I remember this queuing up to Y2K.
Carl: Totally. Yeah. I was trying to explain this to somebody who wasn’t even born yet and they couldn’t even process it. My point is that I don’t think we’ve gotten to the point yet where we are saying 2009, 2008, 2009 were cute. People who’ve been through that still have that in their memory.
Here’s a story. I remember I had a friend; his name is Brad. Brad had built this business and he had an offer to sell it. Somebody was going to buy it from him and Brad was one of my best friends. I consider him my brother. I had seen him build this business and I had known what it did.
Just those of us who built businesses; sometimes it’s pretty intense, right? I’d seen the sacrifices he had made and he had an offer to sell it. And this was in the middle of all this going on. And he called me and said, “Carl, hey, if I sell this, how are we going to invest the money?” And I remember saying, “Man, I don’t know.” Right? I don’t know.
Michael: It was supposed to be the big moment, clients having liquidity events!
Carl: Yeah. And let me be clear. Brad was not a client. So this is a friend who I could say, “I don’t know.”
Michael: We didn’t say “advisor friend” having their own liquidity event?
Carl: No. This is a friend who wasn’t an advisor, right? He was building a different business and he was coming to me saying, “Hey, I’m… Obviously, whenever I have money, I’m going to trust you to invest it.” And I was saying, “I don’t know.”
I remember telling my wife that and my wife was like, “Well, wait. How should we invest our money?” And I was like, “I don’t know.” So where do we go from, “I don’t know?”
So this is the other story that I think is really valuable. Dan and Barbara were two clients of mine, and to make a long story short, Dan was laid off because of his age. They were downsizing and he got a buyout. That’s what we’ll call it, a buyout package. 95% percent of his net worth was in the stock of the company that he worked for when he came to me. It was a substantial amount. It was close to $2 million in the early 2000s and the stock was at $40 without getting into the details of which stock it was, but it was at like $40.
And I said, “Dan, if you’re going to become a client of mine, we’re going to sell all of that.” And Dan said, “Well, why? Because you think the stocks are going to go down.” And I said, “No, no, no. Because I don’t know. In fact, I would prepare; if we sell, it will double the day after we sell it and if we don’t sell it, it will get cut in half the day after we decide not to sell it. But that’s not why we’re doing it. We’re doing it because of our principles, right?” This is all important to the story. Dan, I said, “You can’t become a client unless we sell this and we’re going to diversify using correct portfolio design principles, not because I know about the stock.”
We sell it, and six months later that stock has gone from $40 to $3. Right? And so Dan starts calling me Santa Claus because of that. And I keep telling him like, “Dan, I didn’t know. I would have never even wished that to happen. It was just a principle, right?”
Okay. So fast forward, Dan who calls me Santa Claus through every single scary market we’ve had and he would just be like, “Carl, I don’t even care…whatever.” Scary markets. He was like Teflon from that point on. It was just like, “Whatever.” So anything we had happen between Y2K and September 11, as crazy as that was, and all that stuff just didn’t faze him.
And then he goes on a cruise in late 2008, early 2009. They leave from LA (which apparently means there were more retired folks?). They get to the first port and Dan calls me. This was with Lehman, AIG – that week. He was on a cruise that week with a bunch of other retired people and he was like, “What’s going on? Should I come home?” And I said, “No. Listen, things are pretty serious. When you get home, come meet with me. But just finish… You’re on a boat. You don’t need to jump in the water.” And he’s like, “Well, half the people are flying home from the first port.” So Dan comes home.
So the reason that all this context matters is because Dan was calling me Santa Claus, right? So this was a big deal. Dan comes home. Dan and Barbara come into my office and I took them through the scary markets conversation that you and I have talked about before. This is the point for the conversation.
I remember looking them in the face and saying, “Dan, look, we’re in a lifeboat. It makes no sense. We’ve kind of prepared for this, but remember, risk is an arbitrary concept until you experience it, right? So all the lifeboat drills in the world – they’re good, but they’re not the same as actually getting punched in the face, right? So you’re in a lifeboat. The only thing…” After taking them into the whole scary markets conversation like, “Look, it makes no sense to jump in the water. We just need to stay the course.” You guys can go review the scary markets conversation.
This is the point for this thing. I remember closing the conference room door and thinking to myself, “Oh, my gosh. I hope I’m right.” Right? So there’s an internal conversation that we need to be having that we probably do need to keep separate from clients. And in the internal conversation, we need to acknowledge that when we say that cute little phrase where we say the last four words of any great investor, “This time it’s different,” what we mean is the end is never different, meaning they always end. So far they’ve always ended.
And so we need to acknowledge two things. One, the beginning is always different. Right? The stimulus for these things is always different, enough that you feel like…
Critical Events Precipitating Client Anxiety May Always Start Differently, But They Have Always Ended The Same [00:11:05]
Michael: Right. This time it’s coronavirus pandemic. Last time it was a financial system meltdown from the mortgages. The time before that it was 9/11 and the tech boom and crash, then it was algorithm trading in ’87. It was an oil crisis in ’73. They are always different.
Carl: They’re always different.
Michael: The precipitating thing that at least sets off the chain reaction is always different and, right or wrong, the presumption is always, well, it’s going to end the same and the ending is, “We get through this, things get growing again, scary stuff eventually ends, and then we move on.”
But as you said, there’s this lingering thing, right? Clients have this lingering doubt, “Okay. But what if it actually is different?” And right or wrong, true or false, we’ll see. That seed gets planted in our own heads as advisors, like, ”Oh, my gosh. What if it is different this time?”
Carl: Yeah, yeah. And I think there are a couple things that are super important. One is that the beginning is always different enough to make you feel like it’s unprecedented. We’ve never seen anything like this before. That’s always true.
So it feels like, yeah, in the middle of 2008 and 2009, we weren’t just talking about, “Oh, it’s scary.” We were talking about things we never heard of before, the credit default swaps and who knows? And people didn’t even know how to explain it. It’s always different. So first, we need to feel that, “Okay. This is different. It’s okay for me to be scared because this is unprecedented. We’ve never seen this before.”
Number two is the idea that it will always end. We just need to acknowledge that that little creeping doubt… We weren’t basing this off 95 years of stock market data. Right? And then you want to go back a little bit further and say, ”Oh, no. I’m not. I’m betting on the concept of capitalism.” Okay. That’s fine too, but the concept of capitalism…when we talk about the window of human history, we’re still talking about a relatively short time period.
Michael: Okay. You’re ratcheting up my fear here, Carl.
Carl: I know, I know. It’s on purpose. We need to at least acknowledge that that is uncertain, but what do we do? So here’s the solution my head. The way I go through it is believing that this time, the ending is going to be different. Even though it’s a possibility, I think acknowledging the possibility is important. Not externally, internally between us advisors, it’s important for us to go, “That feeling I’m having, I need to acknowledge that, right? I need to find a safe space to talk about it.”
But just because something is possible doesn’t mean it’s likely. Right? So the only thing left to do is live in this uncertainty and say, “Okay. How do I make a decision? I’ve got to rely on the weighty evidence of history.” It would be unreasonable to assume that this time is going to end differently because the only precedence we have that we’re making all these decisions on is that you know what? We get through these, we figure it out, and we get through them. Right?
Michael: Well, it strikes me as well. I remember particularly going through this in 2008. It was different to me when the tech crash happened and 9/11 happened. The actual stock meltdown, well, for the tech crash was fairly confined to tech. Granted, everyone was obsessed with tech and they wanted to put all their money into the Nasdaq cubes instead of broad-based portfolios.
So people got to concentrate and portfolios got hammered a lot harder. But broad-based portfolios held up quite well. Heck, small cap value even went up while all the rest of the market was melting down because it had been so neglected in the late ’90s.
Even when 9/11 happened, I felt there was this reaction in the country of, “We got hit. America is strong. We’ll bounce back.” There was such a surge of patriotism that I felt this acknowledgment, “Yes. We got hit and this may have done some economic damage, but we’re better than this. We’re stronger than this. We will power through this.” And the surge of patriotism that came to me, I never had doubts in 2001 going through 9/11, of, “Would markets be okay? Would the economy be okay?” Yes, terrorism has hit home. Our lives have changed.” We haven’t gotten away from TSA since. But there were never doubts for me in telling clients that they needed to stay the course, about staying the course.
2008 and 2009 to me felt different, right? Even as participants in the financial services industry, we were seeing things that we had never seen before. Institutions that we were accustomed to, even within the industry, were suddenly disappearing and vanishing. Organizations that had been around for a hundred-plus years were suddenly vanishing basically overnight.
I remember conversations with clients of the firm in the fall of 2008, trying to keep them on board, and all the same stuff – this too shall pass, let me pull out the charts, here’s how long it typically takes for recovery and bounce back periods – all that stuff that we try to do to anchor people. But I’ll admit for that one, that nagging fear in the back of the mind was definitely there like, “Man, I hope this is actually true because if it’s not we’re all kind of screwed here.”
The irony to me, at least with the nerdy logical rational brain that I have, frankly, was that it was kind of a comfort in some ways. It sort of reminds me of the bunker portfolio scenarios even before the coronavirus. The folks that want to buy 100% gold because they think the whole economic system is going to melt down someday for all the various reasons that they think the whole economic system is going to melt down.
There was always a piece of those scenarios of like, “So what exactly are you going to do if it really melts down? Are you going to chop the gold with your knife?” You really need guns and food storage. And even that’s only going to last you so long if literally the whole economic system has melted down.
There comes a point where I feel like you have to keep powering forward not just because the alternative is too awful to contemplate, but because there are no tools for the alternative where you’re like, “We can talk about gold as a hedge, but if you really want to blow up the entire economic system, gold ain’t going to cut it.” That actually still assumes there’s some foundation of government and systems that cares about gold and the interchangeable nature of commodities as opposed to just owning hard goods.
It’s not exactly the same, I think, for this coronavirus cycle. But the more it grows, the more it compounds, the more these discussions of sadly how many people may die, how much loss of life there will be, how much permanent harm we are doing to the economy as travel starts grinding to a halt and business starts grinding to a halt. These questions start surfacing again like, “What if we don’t come back from this?” or “What if we don’t come back in the same way that we have all the other times that terrible things play out?”
But I still keep coming back to some combination of, okay, well, we actually still have some historical precedents for this like the Spanish flu. And yes, eventually, the world did come back and it did grow again. We still get through this. We’re not quite at the 12 Monkeys level and I don’t know what the alternative would be anyway.
There comes a point where you may as well bet on the system recovering because none of our bets really matter if you think it’s not going to. It’s sort of a Pascal’s wager. Do you want to bet that God exists or not? Not to go into an entirely religious direction here, but famous philosophy wager around should you bet that God exists or not. And it essentially comes down to well, you may as well because if you’re right this is going to go well for you and if you’re wrong this is going to go really bad for you. But if God doesn’t exist, you’re not giving up much by betting he does. So you may as well go for it.
I feel like there’s a similar thing that comes forward, but even that to me still leaves this lingering doubt. It means that we’re sort of assuming this blind confidence for ourselves. I’m going to tell clients, “You gotta keep going, it’s going to be okay,” even though I’m actually not sure deep down it’s going to be okay because I don’t know where else I could take them anyway. So we may as well keep going down this journey together and we’ll all collectively pray it works out.
Carl: But here’s the deal with that. Right? So number one, what are you going to do anyway? What are your alternatives? That’s the way I always think through it. What are my alternatives? Okay.
Number two, the only rational conclusion based on the weighty evidence of history – at least the piece of history we’re using – the only rational conclusion is that we’ll get through this. Right? And we just have to remember that humans are uniquely qualified and really good at dealing with problems right in front of their faces. Right? MacGyver bubble gum and duct tape style. We’ll figure this out. I don’t know, but we’ll figure it out. Right? We’re terrible at understanding what’s going to happen two weeks from now.
What has Nick Murray been saying? Optimism is the only realism. Being irrationally optimistic about this is the only thing to do and it’s actually that “We’ll figure it out” has been true. So I’m totally cool with assuming otherwise. If I had a bunch of data that told me that, “Oh, you know what? It actually turns out 50% of the time, we don’t figure this out.”
But so far and what I’m talking about figuring out is the capitalist system speaking broadly. I have no idea. If you own individual holdings or you’ve made bets on Bitcoin, or you bet on whatever else, gold, any individual, I have no idea. I only know how to handle this: when I’ve got a broad-based globally diversified portfolio that’s aligned with what I said was important to me. The reason my money is invested that way is because it gives me the greatest likelihood of meeting my goals based on the weighty evidence of history. That weighty evidence of history included the idea that we would have markets like this (in air quotes).
We didn’t know when, we didn’t know how, but we knew they would come and we’re not even… Where are we, 25? As we’re speaking I don’t know what the numbers, but we’ve crossed into bear market territory. But we’re not down 50. The S&P 500’s not … The Nasdaq’s not down 82 or whatever it was in 2002. Right? And I’m scared to death. I’m talking right now as if I’m not, but, of course, I am. I’m human. But this is the dialogue we have internally.
And then there’s one more piece that I think is useful for people to remember. So now let’s talk a little bit about how you would feel it out with clients. There are times when overconfidence plays a productive role, where overconfidence becomes a tool in a backpack, right? And I can’t find the reference, but somebody told me about the role, the sort of research that had been done in military science around times where you have to look people in the eyes even though you’re not sure yourself and say, “It’s going to be okay.”
I’ve been in places like that in the woods in some of the adventures that I do. I’ve been in places where I was, “I’m not sure exactly this is going to work out.” I was the leader. I couldn’t look at the other people and go, “I’m not sure this is going to work out.” I had to look at them and say, “I know you’re freezing. I know you’re cold. I know that’s a really scary place to go, but listen to me. We’ve got to go there.” Right?
So, Dan and Barbara, that’s what I had to do in that meeting. I had to say, “Okay, look. I’m not sure. We’re in uncharted territory. I can acknowledge that. This field is crazy, but Dan and Barbara, I can’t think of anything better to do. We built this portfolio based on your values and goals. We’re broadly diversified. We followed all those principles. We got low-cost investments. The investments are working like we expected them to work in this environment. Right? There’s nothing broken there. There’s no fraud. I can’t think of anything we should do differently,” and then I have to walk out and go, “Oh, gosh. I hope I’m right.” Right? That’s all we can do.
If there’s something better to do, tell me, but I can’t think of something better to do. And we might be wrong. But to assume we’re wrong would be to deny the weighty evidence of history. How about that?
How Advisors Can Use (Rational) Overconfidence As A Powerful Tool For Effective Leadership During Difficult Times [00:25:21]
Michael: It’s an interesting point of just how we talk about these as behavioral biases, all the negative implications of behavioral biases, which overconfidence is always one of the big ones that’s out there. But yeah, I think you sort of indirectly make a good point. There’s a reason why this behavior got naturally selected for that, right? If it was actually counterproductive to our survival, the people that carry that trait tend not to survive. There’s a reason this is honed for us and I think you make a good point. Right?
Take it out of modern environments and back to our roots just a few thousand years ago. Almost everything in the world was scary uncertainty. We didn’t know how anything worked and every day was just survival mode with the herd, right, with fellow humans, where someone was the leader leading the herd. And you needed a confident leader, and the leader may or may not have actually known what was going on. But someone has to lead and you have to lead confidently or people don’t follow. Right? It’s one of the first things you discover. I still remember as a parent early on, learning that lesson that if you see your child fall and get hurt and you rush them upset that they got hurt, they just get more upset because they see you’re upset.
If you want to calm a child when they’ve gotten hurt, when something’s happened, you have to be calm and exude the calmness, and they feed off your calmness. And it helps to settle them down even if you’re still thinking about it in your head like, “Oh, my God. Did you just break a bone?” How about, “Is she hurt? What just happened?” Right? All those thoughts are rushing in your head as a parent, but you have to exude the confidence because it helps the other side even when you have the doubts or the worries in your head.
I think there’s a striking similarity; there’s a striking parallel here to me. It’s just recognizing that it’s okay to be confident. It’s okay to be overconfident. It’s okay to be irrationally overconfident sometimes. And you can still recognize that you might be wrong in the back of your head. Right? We don’t know these things. We don’t know the future. I cannot unequivocally know that this time won’t be different and if it will end the way it was kind of differently leading in. But at the end, I’ve got a role to play in trying to transfer that confidence to my client, which means even if I’ve got doubts, I need to carry the overconfidence. That’s part of the burden we bear.
Carl: Hey, Michael, one quick thing I just want to point out is it’s not irrational overconfidence that we’re talking about, right? Because we’ve already said the story; so yes, it’s overconfidence…
Michael: It’s rational overconfidence.
Carl: We’re not talking about a leader who’s going to take the whole world down in flames. I don’t want you to run with me off a cliff. What I’m saying here, based on everything I have, the course of action here is still uncertain, which is me acknowledging the reality of uncertainty internally and then saying, “We don’t know.”
And in the face of that uncertainty, this is a little different than a critical care doctor that looks at somebody knowing that person is going to die, but saying, “You’re going to be fine. You’re going to be fine.” Right? This is different than that in the sense of this is a critical care doctor that’s more like, “Well, this is touch and go. I don’t know how the situation is going to work exactly, but I’ve been through this a couple times before. And I think there’s an 85%, 90%, 95% chance that if we get this person in the hospital quick enough they’ll survive.”
They’re not going to talk to the patient, and say, “I think there’s an 85% chance that you’ll be okay… But there’s still a 15% chance you’re going to die.” They’re not going to say that. They’re going to look at you in the eyes… This is what we’re talking about here, right? This is rational overconfidence. They’re going to look at you in the eyes and go, “You’re going to be okay. Stay with me. We got you.” Right? That’s rational overconfidence. I don’t even know if it’s the correct way to say it, but that feels different to me than like, “Follow me. We’re going.” It feels different to me than “Braveheart” – against all odds and it will happen to work out. Well, if this were against all odds, we would be making a different decision right now.
How Advisors Can Deal With Lingering Doubts Even While Reassuring Clients [00:30:05]
Michael: So I like the framing of rational overconfidence. But I guess as we wrap up, the one other question I’d put back to you, Carl, is just how do you handle, how do you process, how do you quell the doubtful thoughts that still sit in the back of your mind as you’re trying to have that conversation with clients?
I think some of us, maybe more than others, but all of us, at some point, still come back to the thought of, “Man, I hope I’m right about this, but I’m not sure.”
Carl: Here’s the tool I wish I would have used in 2008 a little more explicitly. I was doing it in my head, but I didn’t realize I was doing it. And it’s what I do now. Write yourself an argument. Pretend like you’ve got to convince a court, a jury, of the position you’ve taken. Get it written out; it should just be one page, right, with a Sharpie even. That’s the level of resolution I’m talking about.
So you just go through like, “Here’s how I’ve made this decision that the best course of action right now…” You’re dealing with a complex adaptive system, right? It’s changing. New information’s becoming available. So you’re going to have to keep updating this thing.
But I think you write out, “Here are the principles. Based on the weighty evidence of history, da-da-da-da-a. I recognize that this time the beginning was different.” And at the end, you come up with this conclusion that, “Based on all of these facts, the only reasonable thing I can think to do is to stay the course because of all of this.”
Then if you have that written down, keep pulling it out, right? Just use it as a touchstone because what happens is you swirl and you lose track of what you’re even swirling about. And then you can go, “Wait, I’ve already made this decision” You can pull that document and go, “Is there any new information that requires me to change what’s on this document?” Because if you keep that touchstone there and keep going back, you’ll catch yourself. You’re going to still do it 50 times a day. Right? You’re going to wake up early and see how Tokyo opened or whatever. Right?
But if we can get to the point where we can take ourselves back to breathe at a touchstone, the things that we can control are on a piece of paper and then we have to let go of the rest. That’s it. Right? That’s all I’ve got. I’ve been thinking about this for a decade. That’s all I’ve got.
Michael: Yeah. And for me, I think it really comes back to this fundamental challenge. I don’t know what the alternative is that I would plan for anyways. There comes a point where there is no Plan B. Right? Markets may go down, they may go down a lot, and they may go down a lot, a lot. Some people may die. A lot of people may die. The economy may go down some. The economy may go down a lot. Heck, take it back to the Great Depression when the market crashed almost 89% from top to bottom – and we aren’t even that bad yet. We’ve had such horrible stuff, but at some point, humans move on and adapt. The system adapts. We start growing again. We move on to new opportunities and new highs because if the whole system just fundamentally breaks, I don’t know how else to plan for that anyways. And not to be totally morbid about it.
It’s amazing how adaptive the system can be even in the face of horrible, horrible stuff that has happened historically. But there comes a point where I feel like you have to power on with that belief, with that rational overconfidence framework, because I don’t have a solution for the alternative, “What if the entire system stops functioning?”
Carl: Look, I know we have to wrap up, but here’s one mental framework I use, around that exact thing. I would literally get down and say, “Okay. Great. Let’s go that path.” Right? So then you go down the guns and butter path, really. If we go that path – I used to have this conversation with clients. “Let’s just explore this together.” Right? “If we go down that path, what would be the reasonable portfolio? What would be our conclusion portfolio?” So let’s just go with guns and butter. My clients would say cigarettes and powdered chocolate. Somebody said powdered chocolate. She’s like, ”That way I can trade with all of you people who just have powdered milk; it tastes so gross.”
Anyway, guns and butter; then the framework I used was, “Okay. Guns and butter would be the appropriate portfolio in that environment.” And then the question that I found really helpful to myself was what percentage of the time in the history that we’re dealing with, modern markets history, what percentage of the time has guns and butter been the appropriate portfolio? Zero? Maybe if you’ve dealt with days? Like, “Oh, yeah. I could pick out a few days where it would have been…” But mainly it’s zero. Do I want to make a bet on zero?
That’s how I would get that. I realize the odds. Maybe it’s 5%. Do you want to make a bet on 5% or 95%? In the end that’s where we get to be rationally overconfident. Just the odds are in your favor of saying what you said, which I think we’ve got to remember. It’s unbelievable how good humans can be at adapting and making something work, at figuring things out. We’ve gone through way crazier stuff and we don’t even know what the role of the massive amount of news, social media, the stable market we’ve had, politics, and nationalism. And you mix all that in and it’s, “We’ll figure it out. We’ll figure it out.” So anyway, that’s all I got for you.
Michael: The takeaway to me: it’s okay to be rationally overconfident. It’s the reality of our role in trying to lead clients that sometimes as a leader, you have to express a rational level of overconfidence, even if there are some nagging doubts in the back of your mind, and it’s okay to have the doubts.
That doesn’t make you a bad advisor or a lesser advisor. You can acknowledge the doubts and recognize that you have them. And then do what you need to do to help move clients forward.
Carl: Yeah. I’m fine. I know we’ll record another episode about this probably, but just on that little note, just find a place where it’s safe for you to have those doubts. Right? Whether that’s a paid place or a friend, you gotta have a place that’s safe to have those doubts where you can just go, “I don’t know.”
Talk it through. Hug it out. Well, don’t hug it out right now. Air hug it out and then get back to being irrationally overconfident because we need you. Right? We need you, and the people need you. So thanks, Michael.
Michael: Thank you, Carl.
***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 30: Conveying Rational Overconfidence In Talking To Clients About Coronavirus Fears
- Derek Lawson; Kansas State University Faculty
- Hal Gregersen; MIT Sloan School of Management Faculty
- Values-Based Financial Planning by Bill Bachrach
- Start With Why by Simon Sinek
- John Bowen
- Pricing Creativity – A Guide To Profit Beyond The Billable Hour by Blair Enns
- The Dan Sullivan Question by Dan Sullivan
- George Kinder – Three Life Planning Questions
- Brian Koppelman – “The Moment” Podcast
- The Smartest Sales Book You’ll Ever Read by Dan Solin
Kitces & Carl Podcast Transcript
Michael: Welcome Carl.
Carl: Well, greetings, Michael. How are you?
Michael: I’m doing well. How are you?
Carl: Good. Yes. Things are good.
Michael: We’re just slowly figuring out this stuff as the world begins to reopen and we emerge from our shells and start doing business again. I have to figure out how all this stuff works all over again.
Carl: Yeah. For sure. For sure. Lots of that.
Michael: So in kind of this theme of re-emerging, maybe small bits of life getting back to normal again, I think for a lot of firms now we’re sort of out of the “keep the clients on board, get through the craziness phase” and back into the “let’s get growing again.” Maybe I’m down a little on revenue I got to make up. Maybe I just want to get growing again because I’m behind or whatever my goals were originally for the year but I’m hearing a lot more marketing and growth-oriented conversations.
And so going down that road, one of the questions I know I perennially hear, I know you get this as well is just when you’re sitting down in prospective client meetings what are the actual questions you like to use and ask to get to know them, build trust, get going? Literally, what are the questions? What are the Carl magic words with a prospective client that you use to get going now that we’re getting to actually go out and see more prospects and start having these conversations again?
The Upstream Source of a Prospective Client Can Help An Advisor Choose The Meeting Questions That Can Build Trust Most Effectively [00:02:35]
Carl: Yeah. Love, love, love this conversation. So let’s do like a 30-seconds of context. Remember one of the first places I go when this conversation comes up is upstream. We’re not going to cover it here because we’ve talked a lot about it but how did they get there? That drives a huge piece. It doesn’t change the question, but it will change the effect of this.
Michael: Meaning, where they referred to you, or did they come to you cold?
Carl: Right. Right. And how were they referred? What have they read? How did they get there? I think anytime you’re having problems with this first meeting, the first thing to think about is upstream. Right? Don’t get better at overcoming objections, don’t get better at selling, get better at upstream first and then you’re at the first meeting.
And then we have a bunch of mindset stuff we got to spend 20 seconds on because we’ve talked about it before. Remember they came there of their own free will and choice. Unless you have rules somewhere in the country you live in, that I’m not aware of, they came there of their own free will. Right?
Carl: And they overcame a couple of things to come. They’ve overcome a cultural thing around talking about money. They may be depending on what’s been in the press lately. They’ve overcome this general perception of our industry speaking broadly and yet they’re still there. So when you walk into that meeting, I think the first step of these questions working is you got to walk in feeling confident, like you know what you’re doing. Right? So we’ve covered that before.
We can cover it at length, but assuming all of that, you sit down and then a couple more big principles, I think. You can look at Brad Conklin, Derek Lawson’s work, and a lot of the other work. Hal Gregersen at MIT does some amazing work around questions and they all point to this idea of open-ended being conversational rather than feeling like an interrogation.
So many people feel like, “Here’s my 17-point intake form. Fill it out.” Nobody enjoys that. So we get all that context and you’re sitting down, you’re feeling confident. The other thing I would point out is I don’t feel like a question zealot. There are some question zealots in our midst who have developed specific questions and feel like they are the only ones. I think there’s plenty of room for you to work out what works for you, but remember I think that the hallmark of a good question is, often people have never been asked it before.
And when they haven’t been asked a question before often when they’re first asked, it can feel a little uncomfortable. They didn’t necessarily come in expecting that question. So when it feels uncomfortable, don’t confuse that and this is a real art to sort out like what’s a good question because it feels uncomfortable and what’s maybe a question that doesn’t work for you because it was just too uncomfortable. And that’s something for you to sort out.
But given all of that, here are some of my favorites. You can always go to Bill Bachrach’s stuff around “Why is money important to you?” It’s sort of a classic in our industry and Bill teaches it better than anybody.
Bill Bachrach and Simon Sinek – Getting To The Root of What/Why Money Is Important To The Client [00:05:59]
Michael: Wait. Let me just frame it up. So “What’s important about money to you?” is…
Carl: “Why is money important to you?” is always my favorite question.
Michael: Well, I didn’t even actually mean to shift it, I was just trying to remember my Bachrach as well. I guess it’s a good point. Is it “What’s important about money to you?” or “Why is money important to you?” because those actually are very different questions.
Carl: Totally. Bill is the master and I would go look at all of his material. And he uses “What’s important about money to you?” He’s the master of that question. I still love and teach smashing Simon Sinek’s work around why together with Bill’s work, but it needs to be done softly. It can’t feel like, “Michael, why is money important to you?” It can’t feel like an interrogation. It needs to feel soft, like “Michael, why is money important to you?” And then I go the same path as Bill teachers. So I’d refer you there. So that’s one.
Michael: And the essence of that is because you start getting an understanding of just the lens through which someone is viewing money. If you say, “What’s important about money to you?” Some people will say usually some version of safety, security and make sure that we’ve got our home and we’re safe and we’re protected, and we can provide for our goods.
If you get someone where money is about safety and protection and security it’s a very, very different mindset than some people who are very giving and charitably inclined. Like, “What’s important about money to you?” “Well, it’s my opportunity to help friends and family and the organizations that are important to me.” It’s like, “Oh okay. Well if that’s your go-to instead of safety, security, we’re going to have some different conversations.”
And you’ve got entrepreneurial types and “What’s important about money to you?” It’s like, “Well, it’s my next business opportunity. It’s the next thing I can build or create.” “Okay. Well, we’re going to have completely different conversations than my other client who said it’s about giving or my other client who said it’s about safety and security.” So I think the essence of that question is just understanding someone’s frame around money because it would or should very much guide the question about where you are going in the business or where are you going with your business with that like where you are taking this client meeting.
Carl: Yeah. I think that’s an important framing to understand what I believe we’re trying to do in a first meeting is to… I believe it’s a mutual discovery process and I do think it’s a well-intentioned goal to understand what the client may want and compare that with what you want and what you’re able to deliver and I think that gives you a sense of confidence. I only got 100 seeds. I’m interviewing people like that feeling, but there’s something that sits a little bit underneath goals is kind of what we’re pointing at. Right?
One of the questions you’re not allowed to use is “What are your goals?” And there’s a whole bunch of reasons around that because nobody knows, first of all. They don’t want to be asked that question. They’ve told me, hundreds of them send me emails saying, “I don’t want to meet with a financial planner because they’re going to ask me what my utility bills are going to be 17 ½ years from now.”
So there’s something that sits underneath it. Bill refers to it as ‘values’, and that’s a great reframing. I also love the idea of purpose. I’ve been working for the last couple of years on an idea of a statement of financial purpose is the first kind of thing which will cover in another episode. So let’s just keep in mind…
John Bowen and Blair Enns – How Prospective Clients Evaluate Their Prospective Advisors [00:09:58]
So I think the other well-intentioned goal of this first meeting is trust. And John Bowen used to say, I’m sure he still does, that people will judge you by the quality of the questions you ask. And I love to think of trust is not a function of the quantity of time you spend together but a function of the quality of the experience. When you smash those two together you sort of get trust will be a function of the quality of the questions you ask and the experience you give them being listened to.
And then one last piece of the framework which I just think is so valuable is Blair Enns. And if you’re not familiar with Blair’s work it’s amazing, his work on pricing. Blair says the pricing decision – and this is him synthesizing other people’s academic work – but the pricing decision, what’s going on in a client’s mind, generating trust, deciding if we want to work together, is they are saying, “I’ve got a desired future state and I’m going to discount you, the advisor, I’m going to discount this relationship based on my confidence that you can get me to my desired future state.” So the way he says that is a desired future state discounted for uncertainty.
And so what’s interesting is that there’s massive uncertainty in your ability to get me to a desired future state if you don’t even know what the desired future state is. So all of that is like the backdrop. And what’s interesting, I just realized this, we just hired a new financial planner as a family. And let’s put a button on this to spend a whole episode on like why, but she’s read a lot of my work and we sort of made a deal that was like, “We’re firing Carl Richards as the family’s financial planner. We’re hiring you. You do your thing.”
But one question she asked us was, she used those words, she just said, “Hey, I’m assuming you’ve probably thought about this, but if I were to ask you what’s your desired future state?” Like she said it that way just really soft. And it wasn’t “Desired future state.” It was like, “What’s your desired future state? If you had to paint a picture for me what would that be?” That’s an amazing question. I was all in until I was 10 minutes into it and then I was like, “That’s my question.” It was so good.
Dan Sullivan and George Kinder – Exploring A Client’s Future Goals Reveals What’s Most Meaningful To Clients [00:12:36]
Michael: Well that’s a version of the famous Dan Sullivan question as well. If this relationship works out well over the next three years, what has to have gone well or changed for you to decide that this was meaningful for you three years from now?
Carl: So good. Yeah. So that would be where I would’ve gone next is Dan Sullivan’s question and the book The Dan Sullivan Question. Pretty easy. He wrote the book on it. The question, and he feels really strongly about this is, use the date. “So if we were meeting three years from now on, and we’re recording this on May 21st, 2023, what would have to happen both personally and professionally in order for you to feel like the last three years were a success?” Powerful, right? It gives you a timeframe. It projects your future. It’s a way of asking for a desired future state without using those words.
But I’ve always thought you shouldn’t use desired future state words until our planner did it to us. And I was like, “That was beautiful. Really well done.” So that’s Dan Sullivan’s. Then the other question I love, and I don’t really know who, it’s just a mash-up of what I’ve seen great planners do all over the world, and I love this because it’s so simple. And I think Bill Bachrach’s question…Oh, we can put George Kinder’s three questions about if you only had a month to live or a year to live, a month to live, a day to live or something or you were writing your own obituary, we can put those George I think on a continuum of comfort level.
You might be like George’s questions and again amazing and go to George’s work for it. And if you can get yourself there, and what I mean by that is it involves some pretty intense personal work too, to get yourself comfortable with those questions. George, Bill, Dan Sullivan, and then this question over here I feel like it’s sort of a comfort level thing is simply I love this question because it’s so simple and I don’t know, no small talk. Literally, “Michael, it’s so good to have you here.”
My favorite thing to say was, “Michael, thanks for spending the time” or “Michael thanks for coming in today. It shows how committed you are to making smart decisions about money. So let’s start here. What brought you in today?” It’s my favorite one. It’s my new favorite. Like “What brought you in today?” Quiet and remember we’ll cover this in other episodes but how to make this meeting effective that’s a different subject.
Brian Koppelman and Dan Solin –The Value of Deeply Focusing On One Key Question [00:15:24]
Now we’re just giving you questions but one of the things you need to learn is quiet. Listen. And then Brian Koppelman is the master at this, his podcast, “The Moment” he’ll say things like, it’s amazing, he’ll ask one question. It’ll be a 20-minute conversation and he’ll just go, “Go deeper. Tell me more. Oh, that’s interesting. Why is that?” So, “What brought you in today? Oh, tell me more.” And that involves a comfort and a confidence level that you just need to practice. You may say, “I can’t do that.” Yes, you can. Yes, you can. It’s just practice because you don’t have a script. “Tell me more. What about that? When did you first learn that?”
And then the killer follow-up after a little bit of back-and-forth in there this is like the best question, “What brought you in today?” You ask some questions, clarifying questions, and then simply to say, “Thank you for that. How do you think I can help with that?” So good. And I believe Dan Solin – not to be confused with Dan Sullivan – who wrote The Smartest Sales Book You’ll Ever Read, one of those two. I believe Dan was the one that was just sort of like, “Stop with all the fanciness, just ask them why they’re there.” So that would be my set of four or five favorite questions.
Michael: Yeah. And I’ve been starting to experiment with the last one in particular. That is always been one of my favorites just getting every new meeting started off with, “What brought you in today? What brings you to meet with us today?” The version that I’ve actually been experimenting with a little bit lately that I’m finding I like a little bit more is asking, “As we get started, I’m just wondering, what led you to schedule this meeting with me today that brings you here?”
Carl: So good.
Michael: And the reason I anchor it that way is I find that asking what led you to schedule this meeting today and bring you here usually gets them immediately to the trigger point.
Carl: Right. That’s so good. There was an event. Yeah.
Michael: Right. There was a thing. Because just asking, “What brings you to the office today?” “Oh, I’m concerned about retirement. I’m not sure we’ve got enough.” They’ll acknowledge some pain points. “My portfolio has been volatile lately just a little bit.” They’ll usually acknowledge something about the pain points, but I find understanding the trigger event is very powerful.
And asking, “What led you to schedule this meeting with us today and bring you in?” they tend to start very directly with whatever the triggering event was and I find that brings even more clarity. “Knowing we’re coming up for retirement for a while but I just got the paperwork about what I’m supposed to do with my pension and realize I have no idea what to do with this paperwork.” I’m like, “Okay. Awesome.”
So that’s actually the question on top of your mind and you just got the paperwork so I’m already starting to fill in your retirement date and a bunch of other contexts and then can go deeper to say, “Tell me more about what you’re working on? Why is that causing you so much anxiety?” Then we get down immediately thereafter to the sort of the second stage of “But what really brought you in? What’s the concern? What’s the anxiety? What’s the pain point that we’re trying to solve?”
But I’ve found that kind of framing up, “What led you to schedule the meeting?” gets them not just the pain, but the trigger. And I usually find a lot of perspective on the trigger. “You’ve known you were going to retire for a long time. You’ve known you might not have enough for a long time. Something made you do the meeting today and not 6 months ago or 12 months ago or 2 years ago or 3 years ago. What made it today?”
Carl: I love that. And I think because we’re focused on the questions I want to acknowledge that this may leave some people feeling a little unsatisfied because we can’t dive into what happens next.
I just want to acknowledge to everybody listening, we’re doing that on purpose. We can’t spend the time and we’ve covered it in other places and I think we’ll dig in even deeper, but one thing that’s really important here is to realize that thing, that trigger is probably going to be something, it’s not going to be some deep…most of the time it’s not going to be some deep clarifying statement like, “Well, because I realized we had unclear goals and I really wanted to come in and talk to somebody who would help me.” It’s going to be most likely, “My performance…
Michael: “I really wanted to come into a financial planner. I realized I just don’t have one. I really wanted all the pages.”
Carl: “I don’t have a holistic plan. Well, we were thinking we needed a trusted advisor.” That’s not going to be, what it’s going to be is a thing and it’s an acute problem typically related to investment performance if we’re honest.
Often, I bet we can say 50% of the time its’ related to investment horrors, and then we have cash flow, life insurance, and inheritance, but it’s all those things. And then we have to acknowledge here that there’s a really amazing dance because we’ve had other questions about this. It’s an amazing dance to take them from what they really want right then, and we’re okay. I’m going to use the word selling.
I’m okay acknowledging and even selling something that they want, but I like to think of it as a ‘righteous’ trick. The art of this business is so beautiful. The art of this business is pulling the righteous trick to get them from what they want to what we all know they need. And we all know that’s the delicate dance of the first or second or third meeting. It’s like, “How do I take you there?”
So what happens there is you got to remember if you asked the question, you better darn well care about the answer. So you can’t be like, “Oh, investment performance. That’s stupid. What we do here is holistic financial.” What we do is we say, “I can understand. The fact that your portfolio is down or your portfolio is not up as much as you’d hope or whatever, I can understand why that would be a problem. In fact, that’s a really important part of the work we do here. Really important.” And then the trick becomes a whole bunch of stuff like, “And before we get there, can we…” And then we back up to all that context, but we’ll cover that in another thing. So those are my favorite questions.
Identifying The Questions That Work Best For Advisors Takes Practice [00:22:31]
Michael: I guess ironically, we’ve sort of anchored around three questions, not to riff on George Kinder’s great three questions but this is like, “What brought you in today? What led you to schedule this meeting with us today? What’s important about money to you?” And drilling a little deeper on that and the Dan Sullivan question. “If we were meeting three years from now in May of 2023 what would have had to happen personally and professionally for this relationship to have been a success?”
Carl: Totally. Totally. Yeah. I don’t think there’s much else. I think, I don’t know what the right number is, the bulk of first meetings…
Michael: Carl, I need a number.
Carl: I know you do. You’re going to have to do a little research to figure it out.
Michael: Are you forgetting who you’re talking to?
Carl: I know, your team will have to go do a little research and do the thing you do.
Michael: All right. I’m going to approximate 92% but we’ll do the follow-up.
Carl: You don’t even know what I was going to say, but yeah, I think that’s right. I think 92.7% of all financial professionals speaking broad at these meetings would go up a factor if they used any one of those three and got comfortable and sort of locked in and practice.
None of them are comfortable. Most of us humans, especially us humans with calculators, this is the part of the business we might not be comfortable with, but you can get better at it, and the way you get better at it is practicing.
And any one of those three, the tendency is you try one and you’re like, “Oh, that wasn’t fun.” Well yeah, it wasn’t fun. Neither is getting your golf swing filmed for the first time. Never fun. But any one of those three – just pick one. The Buddha said something like there’s 80,000 paths to enlightenment, pick one. And I love that idea, any one of those questions I think would dramatically improve 92.7% of financial advisors’ meetings, just because we’re not naturally good at this.
Michael: Well, awesome. I hope these are helpful questions for folks. Let us know what you think. Send something into the site and let us know because we need to know how many of you find these questions useful to validate the 92.7% estimates that we have made. But thank you Carl for sharing this.
Carl: Amen. Thanks, Michael. Oh, you know, we should mention real quick that question, just know that we treat this seriously, that question came through Twitter from Russ Thornton.
So when we ask for questions, we mean it and it makes this whole experience better for all of us. So thank you to Russ and many other people that second, sort of liked or retweeted that question on Twitter. Thanks.
Michael: So check us out there and let us know what else you want to hear.
Carl: Perfect. Thanks, Michael.
Michael: Thank you, Carl.