My guest today is Carl Richards. He is a Certified Financial PlannerTM, the creator of The Behavior Gap, and has been the Sketch Guy columnist for the New York Times since 2010. Through his simple sketches, Carl makes complex financial concepts easy to understand. His sketches serve as the foundation for his two books, The One-Page Financial Plan: A Simple Way to Be Smart About Your Money and The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money (Portfolio/Penguin).
In this conversation, we discuss how to establish trust in an industry with a lot of bad actors, and how to make certain you’re on track to be, what Carl calls, “A real financial advisor”… You’ll walk away with practical steps to rediscover the humanity in our industry — and learn how to be an advocate for your clients’ needs.
Don’t miss one of our favorite moments, when Carl shares the story of a client explaining why they chose their Fiduciary Advisor: “Because of the way you made us feel.” When was the last time you connected with you clients on such a deep level? How much did you listen in your last meeting with a prospect? We hope you will find some practical ideas to try — and walk away inspired.
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Carl Richards: 00:01
There's this secret society of real financial advisors literally saving marriages and people's health and all of that and nobody believes they exist. It was like a fairy tale and I was like, "No, there are these people. The problem is you don't know where they are."
Patrick Brewer: 00:18
Welcome to The Model FA podcast, my name is Patrick Brewer, I'll be your host. Today I have Carl Richards who really requires no introduction. Carl, how are you doing?
Carl Richards: 00:26
Great Patrick, thank you very much. That was a great introduction.
Patrick Brewer: 00:29
Oh yeah, we got you. So Carl is joining us from the South Island of New Zealand I believe.
Carl Richards: 00:36 That's exactly right, the South Island of New Zealand.
Patrick Brewer: 00:39 He has become a sheep shearer and he is farming the lands [
Carl Richards: 00:45
That's exactly true. After all the passive versus active debate that you and I love so much, I had to move as far away as possible to get away from it.
Patrick Brewer: 00:52
I know, I know. Well thank you for making the time, I'm super excited for our discussion today and I really want to start by focusing on one critical area that I know you've poured a lot of time and energy into over the years and that's this idea of real financial advice. What does that mean to you, the idea of real financial advice?
Carl Richards: 01:15
It's really funny. I can't tell you how many times I've been asked that question, a slightly different version of it. Normally it's like, "What does that even mean? And who are you to say what it is?" So I'll answer that version of the question, maybe a little backstory will help.
Patrick Brewer: 01:30 Cool.
Carl Richards: 01:31
We were at FPA Retreat, I think they still do those, the sort of smaller venue FPA conference where you had a chance to get in groups and talk and as I recall, Michael Kitces, Tim Mower and I were on a panel and I was feeling particularly frustrated, I've only gotten more grumpy about this subject so this is going to be super fun to talk about.
Patrick Brewer: 01:55 That's good.
Carl Richards: 01:56
I was feeling really frustrated by the disparity between what most of the emails I was getting from the New York Times column that I write, from consumers of financial advice, human beings out there trying to sort through our industry. Most of their emails about our industry and most of the news about our industry and most of the press about our industry and I'm using the word industry on purpose, like the traditional financial services industry. How much different that was from like the people-
Patrick Brewer: 02:25 The people.
Carl Richards: 02:26
I would have hoped at the time the job I was doing but certainly the job I was seeing many real financial advisors around the world doing and I remember at that panel just saying like, "I'm so frustrated, it's like there's this," and this was the first time I'd spoken out loud and it's like, there's this secret society of real financial advisors and nobody believes they exist. I would tell journalist friends about a colleague of mine that, I mean I also view them like literally saving somebody's life, like that important of work and certainly saving marriages and people's health and all of that stuff. And I would tell a journalist friend of mine that and they would look at me like, "That's cute Carl, like the butcher, the baker, the candle stick maker." It was like a fairytale and I was like, "No, there are these people. The problem is you don't know where they are. And you can't look up in the Yellow Pages or type in the Google machine real financial advisors."
Carl Richards: 03:18
So that's where the term came from and since I said it, I sort of got to choose who belonged in the society. Right? And originally the criteria was like, "Would I send my mother to you?"
Patrick Brewer: 03:34
That's a good manifesto, I feel like that's the only thing that's required.
Carl Richards: 03:37
Yeah. It was that simple, like could I trust you? And what was crazy was there were people at big, bad brokers firms that I would send my mother to, right?
Patrick Brewer: 03:47 Interesting.
Carl Richards: 03:48
In fact, [Ron Leber 00:03:50] and I worked on this once where we tried to come up with a check list of what it would mean to be a real financial advisor and every time we'd write about it publicly within a week or two, somebody who checked all the boxes, "fiduciary, independent, CFP," every time we write that publicly somebody who checked all the boxes steals money from a little old lady.
Patrick Brewer: 04:11 Yeah.
Carl Richards: 04:12
So it's like you can't come up with a checklist that out of the bottom falls trustworthy. So we can dive in more to what it is and what it looks like, but that's kind of the genesis of the idea behind it.
Patrick Brewer: 04:23
What do you think got you so passionate about it? What was the switch that flipped where you were like sitting at this conference in maybe the day before you weren't quite as passionate or like not to that degree? Was it gradual that it kind of built up over time? Was it an event that happened very specifically that created the passion around this idea of real financial advice?
Carl Richards: 04:46
Yeah and I kind of realized I misspoke because there is a video before that FPA retreat when I was doing a bunch of video, almost like video blogging early on and it was in, if I recall, I need to find this. It was in like 2007, 2008 or 2009, somewhere in there.
Patrick Brewer: 05:07 Okay.
Carl Richards: 05:08
And there was all the made off and mini made off stuff going on and I remember sitting in my office recording this video and I remember being like, "Hey, let me tell you a secret," because that was the event, to answer your question what it was, was the disparity between what people were saying about our industry and to be honest, it's the truth. Like 95%, I don't know what the right number is, but I'm just going to pick one because I can, 95% of the industry should be selling shoes or cars. So it is the truth but what I was frustrated with was, "But wait," because I remember during the global financial crisis I remember the work I was doing was saving people's next 20 years of their lives. And more importantly, the work I was seeing my friends and colleagues in the industry doing and so on one hand I was seeing that.
Carl Richards: 06:06
And all I was reading about was this garbage and that's what got me so passionate about it. It's like, "No, no, no. Just because you haven't met one, doesn't mean they don't exist. They're out there, you just need to find one." And I kind of from there was like, "I'm going to become the Lorax for those people." I remember the Lorax was like, "I speak for the trees because they can't speak for themselves."
Patrick Brewer: 06:27 Yeah.
Carl Richards: 06:27
Like, I feel like I'm a double Lorax, I speak for the people to the industry and I say, "Please, please, please. This is what they want, I promise you this is what they want." And then I get to speak for this little subset of the industry called professionals and I say, "Look they're here. Go find one, here's what it would look like if you found one." So that's maybe the event was, this giant cognitive distance between the two.
Patrick Brewer: 06:54
Deterioration. Yeah, for sure. And I kind of experienced the same thing. When I came out of school, I worked at Vanguard, I worked at DFA, I consulted with hundreds of advisors around the country so most of those people are good humans. They're trying to help the humans make better decisions with their finances but they're not marketing. They're not getting their message out there because then they perceive themselves as being sales-ier, they perceive themselves as being part of these news headlines if they're out there actually communicating in a way that is similar to the larger institutions that are trying to, bluntly put, brainwash the public that their only option is to work with a sales person. So I kind of experienced the same level of frustration and double downed on that frustrations when I started my own RIA and realized that people have a very, very hard time differentiating if you're even one of those people because most consumers don't really care at all about your credentials, your ability to articulate capitol markets or financial planning, they just want to be heard. So it's difficult. So how-
Carl Richards: 07:57
Yeah, before you move on to [inaudible 00:07:59] I got to comment on two things, number one because the group of people listening to this are probably similar to many of the groups I have hung out with, you and I have both grown up inside, or at least I spent a portion of my career, the last bit of my career inside of an intellectual bubble where everything is awesome.
Patrick Brewer: 08:20 Yeah, for sure.
Carl Richards: 08:21
And you grew up in that and many of the people listening to this are, and what I want to say that group like preaching to the choir like please don't forget how valuable... You live in fantasy land, the way you do things, you think everybody else does things this way, no they don't. No one else does it the way you do it, like the quote unquote right way and I'm just talking about being empathetic and passionate and build, and by the way all those soft skills have to be on top of an absolute technical rockstar, right? Like those are definitely the technical skills went away they didn't-
Patrick Brewer: 08:58 In the background.
Carl Richards: 08:59
Yeah, yeah. They're table stakes. You have to do that and then you're right, no one knows. That's sort of been one of my goals and I'm really glad it's one of your goals which is, "Let's make this society not to secret anymore."
Patrick Brewer: 09:14 Yeah.
Carl Richards: 09:14
And then one of the complications is you can't say, right? Like that's the problem. You can't say, "I'm different."
Patrick Brewer: 09:21 Yeah, that was going to be my follow up question.
Carl Richards: 09:22
You can't say, "I'm trust"... OH, if you say, "I'm trustworthy," like get out.
Patrick Brewer: 09:27 You're a dead person.
Carl Richards: 09:27
It just won't work, no one will believe you. That's as bad as having a picture of that middle aged couple walking on the beach on the front of your brochure. It just doesn't do anything for anybody anymore because all those terms have been completely ruined by the industry.
Patrick Brewer: 09:41
Yeah, yeah for sure. So what are we supposed to do? I mean we have these real financial advisors that are hiding among the public, they don't really have a platform to get their message out in a way that fully differentiates them, they can't use these overused words that are tarnished by the industry and we have no real objective criteria for measuring them, no checklist so to speak that they can go through and as you said produce trustworthy out the bottom. What are your thoughts? How do we solve this problem?
Carl Richards: 10:08
Yeah. It's pretty... The crazy part about this is it's pretty simple not to be confused with easy, right? Like we and I think it's so simple that I am confident that even among your listeners who are rock stars, I don't know what the number is but most of them won't do it because it's so simple. They just think, "Oh it's too simple." You just have to give people the experience of real financial advice one person at a time and then make it easy for them to share. And that's, it's Seth Goden work, you give them a remarkable experience, stop trying to figure out how to sell better or how to get referrals or how to... Focus everything on trying to give somebody a remarkable experience which by the way, the bar is so low in our industry that it's really easy to do.
Carl Richards: 11:06
Give people a remarkable experience, make it easy to share and making it easy to share is just a function of playing in traffic a bit, like doing your work in public a bit and that's all the work that you do. Like, writing a little bit about it, talking about it in a way that somebody goes, "Oh, yeah, that," because it's bit like the Supreme Court's definition of pornography. They said, "We can't define but we know it when we see it." I think that's it and you know, those stickers on the back of a Jeep, you've probably seen these in Texas that say, "You wouldn't understand, it's a Jeep thing." It's a little bit like that where you're like, "I can't really tell you but I can take you through the experience."
Patrick Brewer: 11:46 So it's-
Carl Richards: 11:48 And then you can point your friends to it.
Patrick Brewer: 11:50
So let's talk about sharing because we got two things. We've got the client experience, so it needs to be, if I'm hearing you correctly, tangible enough to the client where it feels like a real experience that they're walking through. So I think that's a whole section of things that we could talk about and then there's the idea of sharing which is different than referrals. So talk me through the idea of sharing, how do we get clients to share this experience in your mind?
Carl Richards: 12:16
Yes, super good. So first we've got to make an assumption and we'll just make this assumption, if we have time we can circle back to the first part which is you've got to give them a remarkable experience.
Patrick Brewer: 12:26 Yeah.
Carl Richards: 12:27
And like I said, it turns out that's not so hard. I mean, I probably shouldn't keep saying, it's not very complex, it's really simple. It can be scary because it's being authentic and listening and all these wacky things and people might cry and it doesn't fit in a spreadsheet so you're probably scared of it but assuming you've given them that experience, right? Then please just talk about that experience in a form that makes it easy to share. So let's get really specific.
Carl Richards: 13:00
There's this crazy idea, it's really new Patrick, I don't know if you've heard of it, it's called blogging and then there's this other really wacky idea called email and another crazy idea if you want to get really crazy you could do things like LinkedIn and oh, this new fangled thing called YouTube... If you just simply started doing a little bit of your work in public, so that people could share it, you don't even have to ask them to share it. In fact, I would almost encourage you not to and so let's just talk about what that could look like, right?
Carl Richards: 13:38
Okay, prospective client comes in, client comes in, whatever. This is how it worked for me, clients comes in, in fact I can remember who it was, Dave and Diane come in. This is way early on, this is the beginning of the Behavior Gap, they come in super good clients, good friends of mine, they cried in my office. I knew their goals and dreams and they were trying to make a really major decision, I can even remember what it was and there was this concept that they really needed, I was convinced they needed to understand this concept in order to make the right decision. Dave was a doctor, Diana was a sales executive, like these are smart, successful people and I was trying to explain the concept to them and I was just getting blank stares.
Carl Richards: 14:21
And it wasn't their fault, smart successful people, this was my fault and out of an act of desperation I was like, I jumped up, there's a white board behind me I'd never used but I was like, "No, like this." And I drew some squares and circles and arrows and they were like, "Oh, now I get it."
Patrick Brewer: 14:41 Yep.
Carl Richards: 14:42
I took that moment, not don't get confused here because here's where people are going to hide, "I can't draw," no that's not what this is about. Like we're all looking for places to hide, I do it, you do it, so I can call you on it. Don't hide behind anything here, I'm just using an example. Dave and Diane left and I thought, "Huh, if they thought that was interesting, I wonder if somebody else might think that's interesting." I took the thing I drew up on the board, I started a little blog called behaviorgap.com, I put the picture of the thing I drew on the board, I wrote 250 words and I shared it.
Carl Richards: 15:20
My mom and my sister said they were reading it, it turns out my sister was lying, it was just my mom but I kept having that experience with clients it's like, "Oh, that analogy I just used for risk seemed to work. What if I just shared that?" Let me give you another timely example that everybody listening to this is having happen to them, people are calling you and asking you about... insert financial pornography news event of the day. You're picking up the phone, when you answer a question the second or third time, a bell should go off. Like you should literally have a bell that goes off in your head and you go, "Oh. If two people have asked me that question, I bet there's more people who wonder about it. I've answered the question." You've already done all the work.
Patrick Brewer: 16:11 Yep, you have.
Carl Richards: 16:12
And answered the question, how about you just write? And don't give me any compliance stuff. Like, you... You just hide behind the compliance stuff. You can find a way to say, "A friend asked me at lunch this question, and we had this conversation. I thought this explanation was useful, he found it useful. I hope you like it." And then you can say something at the end instead of, "Please retweet or please share," just don't do that, we're not allowed. Don't beg. You can just say something, "If you found this useful, don't hesitate to share it with your friends and family."
Patrick Brewer: 16:52 Yeah, very simple.
Carl Richards: 16:53
It's a pretty simple thing and now no, like I said, no one listening to this, well they probably will because you're involved, but normally I can say with confidence that no one listening to this will go do it.
Patrick Brewer: 17:04
They definitely will because I force them to do it so that's like 50%-
Carl Richards: 17:08
Yeah, two simple, two easy, and then what I know because I have these conversations with them. They call me, you know, crying saying, "I'm scared."
Patrick Brewer: 17:21 Yeah.
Carl Richards: 17:22
So in the end, we'll hide behind tactics all day along and one of the things I love about the work that you do and a lot of what we try to do continually is we're just trying to leave people no place to hide. So then at the end we can get real and go, "Okay, cool. It's not about tactics, is it? It's about fear. You're scared of doing public work, you're scared making an impact, you're scared of what may happen if you don't have to hold onto this starving financial planner identity you built." Whatever.
Patrick Brewer: 17:51
Yeah, at the end of the day... And I had a post on this, I'm not sure if you saw it, I just listed all of the ways that financial planners like to hide and some of them are really, really good excuses like attending industry conferences or studying for another designation or doing client work but at the end of the day it's frustrating. And I know that you're frustrated by it too, you've got these... I don't know how many there are. Have you estimated how many real financial advisors are out there? Is it 5000? 10 000? 20?
Carl Richards: 18:20
I don't know. I mean like, I just realized when I get asked, because I get asked all the time, for a referral. Like a human will say, "Hey, I need an advisor." I just know that my list of people to send them to is pretty short.
Patrick Brewer: 18:35 Yeah, yeah, mine is too.
Carl Richards: 18:37
But worldwide, yeah, there's... Right, let's say there's 100 000 worldwide and I feel like that would be on the high end.
Patrick Brewer: 18:42 Okay, yeah. I would say 40 000, that'd be mine.
Carl Richards: 18:45 There you go, whatever.
Patrick Brewer: 18:45
It's my go to. So you take these 40 000 people and if they don't get out there and put their belief system, all the stories and experiences and these conversations that they have, like you're saying just simply sharing them out through... I'm a big advocate of video because it allows you to communicate the nuance better of what we do. The written word, it's hard to illicit emotion, it's hard to get that same context across with the written word and most of the time you'll just see advisors hiding behind 28 000 blog posts on wealth conversions and saying, "Hey, I checked the box from my blog this week. Look how good I did." Right?
Patrick Brewer: 19:25
So I think it's more about acknowledging the fact that you're going to be uncomfortable and just sitting in that and getting coached through it. So is that what the real financial advisor, manifesto, the group that you're putting together have put together. Is that ultimately what you're trying to break down is these places that people hide and getting advisors to be real about exposing themselves essentially, obviously in a good way, to the marketplace so that they can help people.
Carl Richards: 19:51
Yeah, totally and I have to, look let's just be super honest for a minute. Like a part of my job is to find a balance between a zen Buddhist monk and a drill sergeant.
Patrick Brewer: 20:05 Yeah.
Carl Richards: 20:06
And I only speak this grumpily or directly or candidly because I know how easy it is to hide. I do it every day. I know that feeling of fear and I know all about it, every area of it like the fear of success, the hanging onto... Which color should my font be? All of those things and I have... So I just want, if I was in the room with your listener right now, I'm sort of yelling at saying, "Please, please, please," and by yelling I mean begging. I don't mean ranting, I mean like, "Please." I would grab them by the arm and look them in the eyes and go, "Hey brother, sister listen. I know that feeling of fear."
Carl Richards: 20:56
So once we get there and we realize like, "You said those are often really good reasons but we will do anything like..." Steven Pressfield named it The Resistance, Seth has talked a lot about Steven's work and also about the lizard brain. We all do it and what I'm really trying to do, the last five years of my career have really, really been focused. Like we specifically have a meeting that we revisit this goal of stripping away every place to hide. Like I'm purposefully building structures in my life to leave me at the appropriate intervals because you've got to rest between this, you can't be scared your whole life or else you'll die but at the appropriate intervals which is multiple times a week, to be scared and I've just changed that dynamic. Like for me, I put a name on it... Like a psychiatrist, well when I say psychiatrist I mean like a business psychiatrist, business psychologist coach named it for me. I didn't know how to name, called the Imposter Syndrome.
Carl Richards: 22:04
And I've personified it, the Imposter Syndrome shows up for me as Homer Simpson's boss, it's Mr Burns and he shows up every time. He showed up before we did this, he's going to show up in an hour when I have to hit send on the New York Times column, every single week. Like listen, to every week I have to send something in from the South Island of New Zealand and before that it was from the hills in Utah to the New York Times and it's a sharpie drawing. Now it's on my iPad, of course, but it's a sharpie drawing and every time I go to hit send the door opens to my left, I look over my left shoulder every single time, I look over my left shoulder and the door creeps open and around the corner peaks this Mr Burns dude just right out of The Simpsons.
Carl Richards: 22:56
And he says to me like, "Carl, what's going on in here? Who gave you permission to do?" And I used to think that was a stop sign. I used to think that was a sign that I'd done something wrong and then I realized like, "Wait a second, he seems to show up every time I do something cool. He showed up at my wedding, he showed up at the birth of my first child, he showed... every time I enter a mountain bike race, every river I kayak. He aways shows up." So it turns out Mr Burns is at every party I ever have a good time at so now I'm like, "Hey man. I'm so glad you're back. Come in, I'm just sending an email, no one's going to die. Take a seat. You can be here but you can't make any decisions my friend," because I don't buy into the kick fear in the teeth, fear has kept me alive so I'm like, "You're a useful buddy you just can't..."
Carl Richards: 23:53
Elizabeth Gilbert likes to say, "Fear in the Imposter Syndrome can come on the trip. It just can't drive."
Patrick Brewer: 24:02
What strategies have you used to overcome the imposter syndrome? So for the advisor who's sitting there right now who they know they need to do video content, maybe are planning on doing a guest post or a guest podcast or launching their own podcast but they're frozen with fear, with uncertainty. What are they supposed to do?
Carl Richards: 24:21
There's a couple things. Number one, so the best news about starting this is that no one's going to see it.
Patrick Brewer: 24:30 Yeah.
Carl Richards: 24:33
So just remember like, when you start, no one's going to see it anyway.
Patrick Brewer: 24:37
Nobody cares and the other thing I'll just add this and I'm going to let you finish is, what I've see is most people care about themselves so they have their own Mr Burns that they're dealing with almost all the time so they're not really caring about you and your content as much as you might think.
Carl Richards: 24:53
Yeah, like I know the work you do is going to help them so the people do see it but the reality is even with the work you do-
Patrick Brewer: 25:00 Yeah, when they're ready.
Carl Richards: 25:01
... they're going to have seven or 10 views on the first thing they do, it's going to take a couple of months of repeatedly exposing yourself to traffic, getting stuff out there for you to even cross 100 and so first, just relax because no one's going to see it. Like that's part, but then there's the temptation to go, "Well, if no one's going to see it, why should I do it?" Well because I love the compound influence chart and it looks exactly the same as the compound interest chart and this is just sort of, lesson number one and then we'll move onto two more ideas but the compound interest chart, everybody listening to this knows this, "Well jeez, it's so boring. 50 bucks a month when I'm 18? What? What impact is that going to make?" We all know that chart is flat at the beginning.
Patrick Brewer: 25:51 Yeah.
Carl Richards: 25:51
Like boringly flat. The exciting end of the curve is the last double, the second to last double and the last double. The curve gets steep at the end, every day you wait you're cutting off the steep end of the curve and so what drive me crazy right now is the number of advisors who are running around looking for solutions to skip the flat end of the curve. Now there's things like what you do that can be rocket fuel to propel you through that but you still can't skip it.
Patrick Brewer: 26:26 Yeah, nothing's easy, nothing's short so...
Carl Richards: 26:29
Right, right, right. It's the laws, so number one, no one's going to see it first. Number two, please believe me, and I can tell you, I feel like I'm maybe sitting in a very unique position given the work I do on both sides of this fence. And I can tell you, that what you have going on in your mind and the stuff that you said in the last meeting you were in is valuable. You don't believe me and I know you don't because I've sat with you and I say, "Produce content," and you go, "I don't have anything to say," and the reason you think that is because you're human and you think that things that are easy to you, that have become easy because you do them all the time, that story you tell about diversification it's become easy. Because it's easy to you, you think it's easy to everyone else and because it's easy to everyone else it has no value.
Patrick Brewer: 27:25 Mm-hmm (affirmative).
Carl Richards: 27:27
That's a fundamental tenant of the imposter syndrome and I'm here to tell you it's not. Like, that story could change somebody's life. So that's number two, the content you have is valuable.
Carl Richards: 27:38
And number three is just, you just have to practice. You just have to go... And I found this particularly difficult. I love that you push video because video has a super high perceived value and for some of us I just happen to be lucky this way, I'm wired. I can't fix a car, I couldn't take care of myself if it depended on a garden but I can sit in front of a camera and talk. It so happens right now there's a high perceived value on this and for me it's a relatively low cost, I've found for most advisors it's a pretty high cost, it's hard.
Patrick Brewer: 28:10 Yeah.
Carl Richards: 28:11 So practice and don't be scared to be like... I mean I often start many of my videos these days with like, "I've done like 12 takes of this, I can't figure out how to tell you what I want to tell you so can I just tell you?" And I'll leave that in the video and people are like, because it's true.
Patrick Brewer: 28:29 Yeah.
Carl Richards: 28:30 So don't be afraid to just talk, right? So anyway, those are the three. Just please, just do it. By the time you get comfortable with it, people will start watching. So your uncomfortable stuff, nobody will see anyway.
Patrick Brewer: 28:47
Love that advice. It can't be more relevant for an advisor that's looking to get their message out there, row their business. I mean those three things alone will allow you to shorten the curve if you're willing to accept the advice. So switching gears a little bit, what are your thoughts as far as where the industry is going? So we've acknowledged that there's this problem. We've got a subsection of the industry, real financial advisors looking to connect with consumers that have a need. We've got megabehemouth advisory firms let's say that are spending money brainwashing the public, trying to get them to think that we're all terrible humans which in certain cases we can't really refute that. There are examples in the financial space that would make those claims feel like reality.
Patrick Brewer: 29:32
Where do you think the industry is going from a, I guess, in general? Let's start there and then we're going to filter down.
Carl Richards: 29:39
Yeah. So I think a lot of people listening to this will be like, "Duh, we've been saying this for 20 years, and these are these really hardcore, early financial planners and particularly people who embrace, just for the record I don't love the term because I think it's confusing to people but I certainly can't fault the work, like George Kinder's work on life planning is unbelievable. So the work that those people have been doing and you know, Dick Wagner and that whole crew, Marty Kurtz, that whole crew of hardcore financial planners that have been around a long time. They've been doing this work for a long time understanding both the science and the art of this, the money and the life. But here's... In terms of what I think is happening is that it's just such an interesting paradox right now.
Carl Richards: 30:30
I think never before has the traditional financial service industry been under bigger threat of like it's going to go away but totally disrupted, out of business. Never before have more... I'm going to use this term really broadly. Never before have more financial advisors been in trouble.
Patrick Brewer: 30:48 Yeah.
Carl Richards: 30:49
Of less value, like you're going to be out of business and never before at the same time, has this little subset that I really think given the work you do that we're talking to right now, never before has that subset been more valuable. It's just that we aren't clear, like I can almost look everybody listening to this in the eye and say, "That thing that you thought was really valuable, it turns out it's not. It's just a table, it's just table stakes." And particularly if you come from a really hardcore or evidence based or academic approach, you used to think that that was valuable. In fact, let me tell you a super quick story.
Carl Richards: 31:26
There's an advisor, he's one of my best friends, he's in St Louise and does amazing work and they forever were really proud of their investment process and disciplined academic, evidence based approach to investing. He's built these beautiful portfolios, really proud of it and they hung their hats on it and you probably know what I'm talking about, like a group of people that seemed to point at that all the time and by the way, it's not that it's not valuable, it's insanely valuable. It's just no one cares. And no one knows, that was my biggest disappointment when I sort of adopted that approach to investing or when I became a fiduciary, I was like, "Yeah, I'm a fiduciary, I'll tell the world," and like collective yawn.
Patrick Brewer: 32:08 No one cares.
Carl Richards: 32:09
Yeah. So he's really happy, he has a big client, prospective client, $20 million. Wife is the primary breadwinner and the one that earned all this money, wife meets with them a couple times trying to decide, you know, they're in competition with two other firms and they stick to their guns and their fees, they stick to their guns and they do everything the way they always do it, the right way. Perfect.
Carl Richards: 32:33
Wife calls one day, calls my friend who we'll just call Mr Advisor and says, "Hey, we've made a decision to hire you but I want you to know something, it's not because of that investment process you're so proud of. In fact I want to be clear, it's actually in spite of it. We've chosen to hire you," now get this Patrick, "we've chosen to hire you because of the way you made us feel. And more importantly the way you made our adult children feel." Now how does that fit into your little spreadsheet?
Patrick Brewer: 33:07 I think it breaks it.
Carl Richards: 33:07
Right, right? And so that's where I think the industry is going, is you're either going to be sort of roboed out of business. There's a huge reason to feel under threat. If you think a 17 question risk tolerance questionnaire is your business model and asset allocation and even heaven forbid, security selection but portfolio design, asset location is your value, you're just going to keep struggling on a gerbil wheel of C compression. But then if you understand what that story demonstrates is how we take that important foundation and we layer on top of it this messy work of how we make people feel, you can't even put a price on that.
Patrick Brewer: 33:52
Hey Model FAs, this podcast is all about helping you grow your business so I wanted to share a new tool that we created to help you do just that. It's a webinar and it's going to show you how to add two to three plus new clients to your practice with consistency and in some cases, without even spending any money. You can check it out at get.brewerconsulting.co/webinar. Again, get.brewerconsulting.co/webinar. Look forward to seeing you there.
Patrick Brewer: 34:22
Where do you think advisors should start then? Should they learn the technical side of the business and then progress into more of that emotional behaviorally driven conversation? How do they even get access to materials that will allow them to have these type of discussions with prospects?
Carl Richards: 34:40 Yeah.
Patrick Brewer: 34:40 Or where do they?
Carl Richards: 34:41
That's so interesting. So, two parts to that question. One, where do they start? We get asked this question all the time, what should I study at university? And I used to, I studied finance, I used to think it was finance and now I'm like, "I don't know. Is it marriage counseling? Is it psychology?" But I sometimes get accused of like, "Well wait, isn't the technical stuff important?" And that's why I've been so... gone to such lengths in this conversation to point out like, "Yes."
Carl Richards: 35:09
So yeah, I think you need both. Now it may not be that you personally need both. Like I've seen some really successful advisory firms or practices that have somebody who's really, really good at the technical piece but they don't really know how to talk to humans.
Patrick Brewer: 35:30 Yeah.
Carl Richards: 35:30
And they've got somebody else who understands the technical piece well enough to translate really, really well. Like they could hold their own in 95% of all conversations. I've actually found most advisors who think... Would try to tell me... Like I bet we could ask 95% of the industry to explain to us standard deviation and they wouldn't know how to do it.
Patrick Brewer: 35:49 Yeah.
Carl Richards: 35:50
So again, the bar's not that high. So you've got to have some base level and then you layer on top of it this ability to talk to humans. Now the second part of your question, where do you go? I mean, I want to be super careful to not be self serving but that's the question I get asked more than any other question from big firms and training and education people and conference organizers is like, we don't know anybody who's teaching advisors how to talk to humans. Right? And I think there's some places I could point you to like, I would go read George Kinder's work, I'd try to find everything he's written. Moira Summers wrote a book called Advice that Stick which is just amazing. I'd go check out this, it's sort of out there as this can sound, I'd go check out all the work the financial therapy institute is doing. Like they've got a journal, who knew? The financial therapy journal.
Carl Richards: 36:47
Sonya [Luderick 00:36:49], amazing work on that side. Like I would read that, the academic work around it, Sonya's done some amazing studies about it. It's incredible, academic peer reviewed articles, papers about it. So you can get all that there and then of course that's what we really try to do. I mean to me, it feels like my job is to help advisors figure out how to communicate to humans.
Patrick Brewer: 37:12
How long does it take for... I mean because a lot of these advisors have been trained to not communicate like a human being for a long time. And some of them, and I'm sure you've witnessed this, are resistant to the idea of shifting their communication style because they've either done it for so long one way or they're just not open to a new way. Like what percentage of advisors are even open to learning a new style of communication?
Carl Richards: 37:34
That's such a good question. I didn't... I mean I'm always uncomfortable a bit with this but I'm trying to be less uncomfortable with it because I want to make a difference. And what I mean by uncomfortable is just like, this is my area of focus, it's what I focus on and I thought this was a couple years ago, actually Michael Kitces and Alan Moore said to me, it was Alan specifically, the funder of XYPN. He said, "I don't know if you know this, but you're not really... Sure the sketches are nice and the simplicity's nice but really, it's about mastering communication." And he said, "You know, most of us," so I don't know what that number is, like how many of us do... I just know the vast majority of advisors I talk to are not comfortable doing this and yet they know they need to.
Carl Richards: 38:22
There's actually a moment in my presentations where I can sense that because I'm like, "Yeah, yeah, yeah, yeah," people are nodding their heads, "yep, yep, yep," and then there's this moment where it suddenly gets, "Oh my gosh, I don't know how to do that. Yes I know I need to but oh my gosh I don't know how." And so how long does it take and what do you do? I think you just practice. Like the reason you're bad at this, and by bad at this I just mean like, having empathetic conversations with clients, like I used to have a goal that with prospective clients in the first meeting that somebody was going to cry and it wasn't going to be me and that was kind of a tongue in cheek goal but it sort of set my mindset.
Carl Richards: 39:03
And the other goal I used to play around with was... Two more. I think the first meeting is kind of the place that all this takes... Well, you've got to upstream work. Like, the communication style that you're using in your marketing will set the stage for when somebody walks in and self select out people that you don't want walking in to a large degree. Whenever anybody asks me about overcoming objections and like particularly overcoming objections, I'm like, "I don't want you to get better at overcoming objections. I want to be better upstream so there are no objections."
Patrick Brewer: 39:39 Yeah.
Carl Richards: 39:40
So somebody comes in, if I were giving and training right now, I think the first meeting is the golf swing of our business. It's the place to get videoed and it's scary, scary, scary work to do. But a couple of rules that I tried was, somebody was going to cry. Number two, if you timed who was talking, me or the clients, the goal was me speaking five minutes and then speaking 55. Now I never got there, it's just sort of a goal to pull you because I bet right now, I bet there's plenty of advisors that are like, "Oh yeah, yeah. I'm pretty good at that. I bet the clients are speaking for 45 minutes." No they're not.
Patrick Brewer: 40:22 Nope. Nah, at best half and half.
Carl Richards: 40:25
Yeah I thought I was really good at it though, and I was like, "Oh my gosh, I just spoke for 55 minutes." And then the third game to play is everything that comes out of your mouth after the first five minutes, everything that comes out of your mouth has to end in a question mark.
Patrick Brewer: 40:42 Yep.
Carl Richards: 40:42
So just get really good at asking good questions and here's one last thing on like how to start, I know we all go home from like, listen to podcasts, you go to a training event, you go to a conference and you're like, "I'm going to implement all this right away, yeah. This is so great." That's cool and cold turkey's awesome and if you can do that, that's awesome but give yourself permission in your next client review like tomorrow, your next client review can you just tack in 10 minutes of the 60 minutes. [inaudible 00:41:22] do your portfolio review, do your performance review, talk about the markets, do all that stuff you've been doing for 20, you're fine.
Carl Richards: 41:27
At the end can you just find a couple questions? Something simple, George Kinder's got a bunch but something simple like, "Hey, what's your earliest memory of money?" Could you just find some interesting questions, "Okay cool, great, thanks, we'll see you in six months." And then if the next one, you're up to like a half of the meeting is more on life values, goals, and less on performance and reporting. Can you just start shifting that a bit?
Patrick Brewer: 41:56
Yes, small goals. Small goals that can lead to big outcomes. So I mean I think that's fantastic advice. So from your perspective, actually let me just share something real quick because I don't know if you can relate to this at all. But when I started Brewer Consulting my thought was that most of the people that would be interested in it was going to be these, let's say, real financial advisors that were more formally trained, EFA, Vanguard and they would see the light. It's like, "Oh my goodness, I'm going to be able to get my message out there and I'm going to be able to do it in a way that isn't awkward, pushy or sales-y and I'm going to get more clients and have this massive impact where more people are going to have access to this type of advice.
Patrick Brewer: 42:36
The exact opposite happened. I think I have about five advisors that have come through that channel, like the more formally trained, larger, mid-sized DFA Vanguard affiliated firms. And most of my clients are people that we've been investing into from a development standpoint trying to get them to understand that there is this whole real financial advice movement and instill that in them and then help them broadcast the message out. I was actually just surprised at how few advisors who fall into that cohort that let's say you and I are somewhat agreeing on right now or wanting to join our company. So what do you think the hesitation it there for the expert advisor who should be doing a lot of these things? Is it really just the imposter syndrome is so strong that they don't want to put themselves out there? Or are they just comfortable financially so they don't really think it's necessary and they're not willing to endure that level of uncomfort? What do you think is holding these firms back from doing some things that get that out there?
Carl Richards: 43:40 Yeah well I think they're just fat and happy.
Patrick Brewer: 43:44 Yeah, that wad kind of my thought too.
Carl Richards: 43:47
And again, we have plenty of people coming to us that are sort of 10, 20 years into their career saying, "Hey, I kind of want to do this differently. I've tasted this before but I'd like to do more of it," but I do also think there's a growing recognition among young advisors and planners that are like, "Is this all there is?" In fact, I just had this great email from a woman who's at UVU, Utah Valley University's got the largest financial planning program in the country now and she was getting ready to quit because she's like, "I didn't realize I was just going to be selling annuities and life insurance."
Carl Richards: 44:29
And not because UVU teaches her, UVU's the opposite right but she was bumping into that in her internship.
Patrick Brewer: 44:34 Yeah, when she was going to monetize her skill set.
Carl Richards: 44:37
She was out and like, "Whoa, this is different than what I was taught at school and they're saying I'm out," or they'll run across something where they'll finally go, "Oh wait, there's a better way." And then there's the career guys and girls that are just fat and happy that won't change. That's fine. They remind me of when I got in the business, they remind me of the 55 year old stock broker that, I started at Merrill Lynch, this 55 year old stock broker who still thought his value was access to information and transactions and was still cold calling. And you know, he's able to milk that out until he was 62 and retired, fine.
Patrick Brewer: 45:14 Yep.
Carl Richards: 45:15
If that's what you want to do, that's great. But one trick I've found and I think of it as a righteous trick, with that group of people who've built successful firms, is to focus on the impact they want to make in the world. And so that's where the work we've done around-
Patrick Brewer: 45:31 Significance.
Carl Richards: 45:31
... scaling influence comes in and I've found there's a large number of people for some reason, I find this more in the UK than anywhere else, but there's a large number of advisors that have built successful firms that are now saying, "Okay right, I got into this business because it was a hash in, almost like a calling. I built a successful firm, I've been successful beyond my wildest dreams. What next? What can I do to scale this influence? Can I write a book?" And to take them from that angle and then help them understand through, it's not a bait and switch, it's a righteous trick because it's in their service that the way to get there is through these conversations. And then they go, "Oh yeah, right. I've been having those conversations on that kind of stuff."
Patrick Brewer: 46:18
For sure. So what's next for you? I mean we talked a lot about the industry, talking about the concept of finding these advisors that want to offer real financial advice potentially helping them get to the consumer market, are you thinking that you can be the bridge and the megaphone to help advisors that fall into this cohort meet more consumers, grow their business? Are you focused more on training? Are you moving in a different direction? What do you feel is the vision for what you're building over the next couple years?
Carl Richards: 46:49
Well I mean... I just want to keep shouting from the rooftops that, "Hey, there's a better way. And the people need you. I'm talking to the people and the people are telling me this. Please, will you give them this?" So I just, I'm so bored, like just completely bored with discussion around asset allocation and financial planning calculators and software and tools and again, all important but I think what we're all missing is... This is an example from when I was writing [inaudible 00:47:23] I can remember one specific example without giving a last name. Her name was Maxine and Maxine's husband had just died and Maxine came from kind of a generation where it was pretty typical that Maxine didn't know anything about the money and didn't want to. It's fine, her husband took care of everything.
Carl Richards: 47:44
And again I realize that those things are always true and I also realize they've changed dramatically but I'm talking 20 years ago and Maxine was 65 too, so it was a completely different generation. Maxine comes in and we could flip this script by the way, the husband comes in, fine. Maxine comes in with literally a shoe box, like I'm not actually making that up. An actual shoebox full of statements and legal documents and trusts and will and it's like, four weeks after her husband's passing and she got referred to me and she brings this shoebox in and what I want to see more of, because I think what happens in most financial advisor offices when Maxine walks in... is and this could be 32 year old that just sold a business and is totally overwhelmed with the complexity, this could be single dad suddenly having to deal with the fact that his wife just passed away and he's got a big pool of life insurance money.
Carl Richards: 48:48
Like whatever it is, there's some event what happens when Maxine walks into most offices is we go, "Okay, cool. Can you fill out this questionnaire?" And what I want to see is somebody looking across the table and going, "Maxine, I'm so sorry. This must be really overwhelming for you. How would you like to proceed? How can I guide you through this event in your life?" Because that's what people need, they're so scared and so nervous and so worried. They're so uncertain about the future and they don't, by the way, they don't need us to sell them certainty because they know that's a myth. They don't know it, but they intuitively feel it.
Carl Richards: 49:25
What they need is for us to say, "Hey, I've got you. I'm going to understand you well enough to be there as a guide in a changing landscape. And when things come up, I'll be there. I don't have all the answers, I don't know what the future looks like, I'm going to plot the future for you as sort of a guess and that's cool. But what's important is these course corrections that we're going to make. I'm going to be there when things go well, I'm going to be there when things go bad." That's what I think about my work, that's what I want to be doing.
Patrick Brewer: 50:01
Love it. How do you feel that's best carried out as far as if you're an advisor and let's say that resonates with you and that's the experience that you want to provide to the Maxines and everyone else in the world that's seeking financial advice? Do you do that as a solo entrepreneur? Do you do that in a small team? Do you do that as part of a larger firm? How do you feel that is best delivered considering that's a fairly defined skillset? I mean you've got to be really emotionally engaged in those relationships, you've got to probably spend a good amount of time with Maxine, you've got to create a client experience that's going to be tangible that will allow you to grow your business and then thrive. So how do you feel the advisor should be structured in that situation?
Carl Richards: 50:44
This is the cool thing about our business is what if you just said, "Here's the business I want. Here's the kind of people I want to deal with." So that's how I would start. I'd go, "Great, what do I need? What do I need in income? What do I want the business to look like for me?" Gross that up for expenses that you think you'll have and then say, "All right. What kind of people do I want to deal with? Do I want to deal with a client that has a $20 000 retainer a year? Which is a different skillset in a fun, amazing, but different-"
Patrick Brewer: 51:22 yeah, different problems.
Carl Richards: 51:24
$200 a month, $2400 a year? Like what do I want? And then you say, "Great, I need X in revenue, divided by that $20 000 or that $2400, whatever number you decide, that equals, okay, I only need 25 clients or I need 200 clients and then you build the business model to match that level of service that you've got to deliver to that client.
Patrick Brewer: 51:47
Yeah, I love that. Start with the vision first and then back into the input. So 100% on board with that and we've seen tons of advisors inside of our program that have done just that. I mean, a lot of guys come in and they're not to that point where they've fully defined the vision and I'm sure you've helped a lot of folks with this too but you get them to the point where it's like, "Okay, we're going to focus on associate attorneys, we just need 100 of them across the country with this set of problems. We're going to attract them in this way. We're going to do the stuff that makes us uncomfortable for six to 18 months and now we have a burgeoning practice that we can operate from our living room.
Carl Richards: 52:21
Yeah, totally and I guess the point is, build a business that's optimized after serving the clients of course, build a business that's optimized for the happiness of the owner. Be intentional about, think about it and you may want like Josh Brown and Barry building with this big national firm, awesome, they like that. But a buddy in Colorado building a local, awesome. Sophia Bera, you can do it. I think that's part of the problem is the options are endless, it gets really paralyzing for people.
Patrick Brewer: 52:47 Yeah.
Carl Richards: 52:47 So anyway, that's all I'm going to say about that.
Patrick Brewer: 52:50
Awesome. Carl, thank you so much for coming on the podcast. I really enjoyed our discussion and I'm looking forward to hopefully having you on again in the future. Thank you so much for your time.
Carl Richards: 52:59 Cool Patrick, my pleasure. It was really fun.
Patrick Brewer: 53:01 Awesome, thanks.