Kitces & Carl Ep 12: Communicating With Clients To Bring Them Under The Cone Of Trust

***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.

Show Notes:

• Advisys (acquired Kettley Back Room Technician)
• Broadridge

Kitces & Carl Video Transcript

Carl: Greetings and welcome to Episode 12 of what we're now officially calling "Kitces & Carl." Michael, welcome.

Michael: It's good to be here. Welcome back, round 12. I don't even think I could say round anymore. It was sort of a round one, round two, round three. I think we're now past the point of boxing matches, like things that you record with rounds and I guess really, it's not like it's not Kitces versus Carl, like it's a boxing match, Kitces & Carl. I think I'm just going to have to go with episodes now. We're just going to go with episodes.

Are Advisors Still Sending Market Commentary? [01:29]

Carl: Episode 12. So here's what we're going to do today. You sent out a message on, I like to call it a toot. You sent out a toot on Twitter. Because I have such a hard time saying tweet. You sent out a tooted on Twitter and you said, "Market commentary, what do you send your clients? Anybody have any good ideas?" So talk to me, what happened after that?

Michael: So I guess I even need to give a little context leading in. I'd asked this because I've had a couple of questions coming in lately from advisors. I think this whole pressure of like, got to say more to clients, got to be in front of more clients, got to have higher touch to clients, had a bit of market volatility a few months ago. So I think there's a general pressure out there for feeling like we need to do more to stay in touch. So I'm hearing more of these questions of sending stuff to clients, sending market commentary to clients and I realized, so you're back in the old world... the old world, my old world... in early broker dealer days. We used to have two old platforms that we did for this.

One was called Kettley Back Room Technician which I don't even think is around anymore. It got bought and consolidated from someone else. But it had all these preprinted explainers of, how did revocable living trust work and how did term life insurance work and how did whole life insurance work. Just all these really handy client-friendly, educational explainer tools. And then there was the sister package called Forefield Advisor which is now owned by Broadridge, where you can get things like market commentary newsletters, and back then, it was a newsletter. I was at the firm that bought this and we paid and the printing costs to mail it to people. And the goal of networking meetings was to actually get business cards with addresses so you could pull the address off and mail them a Forefield Advisor Market commentary quarterly newsletter.

So I was getting these questions like what do people send out for market commentary today? And realized, I don't really know. I know Forefield is actually still out there. Broadridge bought them a couple of years ago. That that package is still out there and simply, I don't know what people are actually sending anymore as market commentary for clients. So I put this message out on Twitter. I tooted it on Twitter. I don't know if I can stick with that, Carl. I tweeted that on Twitter and put the question out, just asking the question, and kind of kicked off a really interesting conversation and response that was a lot more than just people responding, "Here's what I use. Here's what I use, although we got a little of that as well."

What Problem Are Advisors Trying To Solve By Sending Market Commentary [04:21]

Carl: Okay. We got to back up, because here's what I'm curious about. Before we get into the actual question that you asked. I'm curious about the thing that generated the question. So, you said you'd been hearing from people and advisors are feeling this way. I'd really like to dive into that for a minute. I didn't expect it but I'm curious about what problem are we trying to solve by sending stuff out and how do we know it's a problem?

Michael: It's a good question. As I would think about it, we do a version of this in our firm as well, frankly. We create our own stuff internally because we've got a dedicated investment team. We're not using third party materials. I'll answer this on behalf of us. I think we send it out for a couple of reasons. One is just we have a subset of clients that actually have questions. "Stuff's going on in the markets. What do you guys think about that?" And while we can have those conversations one at a time with clients, and we do have those conversations one at a time with many clients, there's just a certain level of efficiency to say, "Here's where our investment team is thinking about that stuff." We'll send it out to clients, and know full well that a big chunk of them won't read it, which is fine.

The ones that want to, will read it and we get an opportunity to answer their questions either when they were about to ask them anyways or right before they asked them. Because we've got some clients that do track what's going on in markets and genuinely want to know, what are you thinking about this? What are you doing about this? What's your take on this? And so we sent out our market commentary. Here's our take.

Carl: But my question is, yeah, here's what I'm actually really curious about. Did we create this monster? Did we, and by we, I mean the whole traditional financial services industry, the circus, the financial pornography network, the good people, the bad people, the whole lot of us. Nobody was born thinking they needed a quarterly investment commentary or a monthly newsletter. Nobody was born thinking that. Did we create this problem? And the question I have is, is this a problem in our heads, or is it a real problem? And we may end up having to spend our whole episode on that. And then we can talk about the actual result of Twitter because I think there's a useful conversation around this.

Michael: Yes and no. I don't think it's solely this demon that we created for ourselves, this cross that we put on our shoulders, that now we have to bear. There are a subset of clients, well, look, so there's a subset of clients that are, I guess I'll call them the true delegators, the ideal delegators, the perfect clients. They give you all their money and they don't call. It's wonderful when we get those. We all know how to service those. But then there's a lot of other clients that are at least a little more involved. And the realization I've had is going through this with clients over the years, I feel like there's a little bit of a, I don't know, a dance that does happen. That from the client's end, "I've given my life savings to this firm and I feel like I have some obligation or responsibility as the client, as the steward for my own money, that every now and then, I should probably check in with them just to make sure they know what the blank they're doing."

"I didn't trust my life savings. I do want to be a good steward. I want to do all that stuff. It's why I hired an advisor. But I feel I need to do something from time to time to check-in and just make sure they're tending the ship, they know what's going on, they're paying attention. I need to be reassured that I have made a good decision." And that often manifests itself as, "Hey, I heard this thing on CNBC, the internet, the news thing that prompted on my phone. And hey, just wondering what you guys are thinking about this." I mean, I get these questions sometimes from clients that...I mean, they ask...I'm like, "I know you don't actually care about this stuff that much. Why are you asking?" I don't say it that directly, "Why are you asking?" But I start thinking, "Why are they asking?" Then realize it's often this piece.

So I kind of break it up into three groups. There's the people who really don't care. And they probably don't read the stuff we sent anyways but...well, there's a group that just doesn't care, the true delegators. There's the group that really does care. That subset of clients that are more involved in investment stuff and they want to have this conversation. And then there's this group in the middle that doesn't really care that much, but they feel that they need to ask this question from time to time. And we do have to answer it reasonably or they're going to get anxious that they really did hire someone who maybe doesn't know what's going on.

And so to me, that's what pulls this up in the first place. I don't know whether that necessarily means it has be a quarterly newsletter or a monthly newsletter. There's probably a good discussion about what the timing or cadence should be. But I do feel like there's this burden on us that every now and then, you got to show up and show that you know what you're talking about, and that you know what you're doing.

Carl: I love the word dance. I think of it as sort of a righteous trick. And I think we've talked about that before, like a bait and switch is in service of me. I pull bait and switches when I'm tricking somebody. But a righteous trick is in service of the client and I love this dance. Let me tell you a quick story if that's okay. Let me just share a quick story. There was a client who was referred to me. We shared a lot of the same interests. He loved to mountain bike and backcountry ski and climb and all the same...and he was referred to me by somebody like that. His name was...well, let's just call him Dr. Terry, is what we'll call him. That's not his name.

Dr. Terry was a radiologist. And so he came in to meet with me and as part of the process, near the end of the meeting, you know, we've gone through all that. I got asked really good questions. I almost got him to cry, like that whole thing. And near the end of the meeting, I said, "How often, in an ideal world, how often would we communicate? If we work together, how often would you hear from me in an ideal world?" And he said, "Well, in an ideal world, I'd never hear from you. You'd take care of it, I'd ride my bike, I wouldn't even...in an ideal world, I'd never...I like you but in an ideal world, I'd never hear from you." I said, "All right, cool."

So we go through the process, he becomes a client, and we, you know, pretty intensive stuff up there for the first six months, a year, or whatever. We get everything settled and we go into this sort of maintenance phase and pretty simple, saving a lot of money, doing all the things, everything is right, rebalancing. And I stopped contacting him.

In an ideal world, you'd never hear from me. We're in an ideal world, so I'm going to stop. A couple of months later, not a couple of months, probably like eight, nine months go by, and transfer paperwork shows up.

Michael: Wah-Wah...

Carl: All of his money is like two and a half million dollars, gone, and it's going to...yeah, it's going to someplace. And I was like...I called and I was like, "Dr. Terry, what's the deal? It's perfect. We've got this plan you told me..." And by the way, if you just...he had moved a little further away from us. He had moved from Utah to Idaho. He had moved a little further away. I said, "By the way, if it's a local thing, I will help you find a good financial planner locally. I'm super-cool with that. But you are not moving into this place." And he's like, "Can you do that?"

I said, "No, but I'm not...I'm still not...I know you and your wife well enough that I'm not going to let you." And I'm like, "What's the deal?" And he goes, "I never hear from you." And I was like, "Dude, let me show you the words out of your mouth. You said in an ideal world, you would never..." And he is like, "I know. I know. I know. But we're not there yet." So I think that's the dance. The dance is you can't actually believe them. Now, I'm not saying we need to send market commentary. That's a separate discussion. But you actually...I don't think we can believe them because, by them, I mean the human beings that we call our client, because they're humans. Right?

How To Start Moving Clients Into The "Cone Of Trust" [13:37]

They turn on the radio, the financial pornography yells at them. They think, "I should know something. Why hasn't Carl called? You know, I can't believe we're doing nothing. Everybody else seems to be doing stuff." So we have to live in that reality. In a perfect world, they would be detoxed from all that stuff. And many of my clients, and I'm sure you've seen this too and I bet a bunch of the people who watch this, because they're all legit financial advisors and financial planners, a bunch of them have got clients who are in deep detox. We used to call it that. After Dr. Terry's experience, we would tell people, "Hey, you know what? Let me just tell you about something that's going to happen to you over the next 6 to 18 months. We don't know how long it will take but you have now," and this is exactly what I was going to say, "You have now officially entered the financial pornography detox program and this is what's going to happen. You're going to hear stuff on the radio, you're going to be concerned about it. You're going to call. Occasionally, you're going to hear a hint of annoyance or sarcasm in my responses." And I say, "I don't mean it. But there's going to come a day when you will look back on those questions and you will understand why they were kind of funny to me too. And when we get there, I want to have a party. We'll celebrate and high five. You'll know it. You'll know when you feel it. You'll start looking at the USA Today section, USA Today Money section will start becoming the funny section."

Those are the words I would use. And then when they would call in the detox problem...detox program, they'd be four months in. They would call and say, "Carl, what about Bitcoin?" And I would say, I'd be as direct...like you said, I wouldn't be that direct," now we've set it up that it's okay to joke about it, I would say, "What have you been watching? Don't make me send the financial pornography police over to your house to pick up the magazines." I would say that. And that's where our newsletter came from is I would say that. And a client named Rick, said to me after three or four of those episodes of me threatening to send the financial pornography police over to his house. He would say, "Carl, you're always telling me what not to read. Can you please tell me what I should be reading."

We don't know that you read all about Bitcoin and that you have a formed opinion. We didn't know that. So there's an element of...I love your word, dance. There's an element of understanding where people are in the detox process. Some people may never totally detox. That's okay. And guess what? Spikes happen based on like crazy, super scary news. People who I thought were totally detoxed obviously had questions in 2008. How could you not? And so I think that...we've turned this...actually, we should...I don't know if we should spend enough time now to talk about what to send, or if we want to do another episode like part two of this. But I think this is really important to understand. It's a dance. They're humans, they don't know. We don't know. We humans don't know.

And so to have a direct conversation about...one of our goals is to give you your life back. Right? One of our goals...I have another...let me tell another quick story. There's another guy named...what should I call him? Rick. We'll call him Rick. Rick used to spend four hours a week. He calculated this. He used to spend four hours a week, like half an hour a day, well, it was like half an hour four days a week plus two hours on the weekend. He'd watch...he'd read the "New York Times," the "Wall Street Journal," and then "Barron's" and "Forbes" or something. And then he went through a detox process and he woke up one day and realized he wasn't doing that anymore. And he actually calculated.

He's like, "That's 208 hours a year that I got back." And he went further and said, "Assume that I sleep, you know, blah, blah, blah," he's like, "it's 13 waking days that this detox process has given me back in my life." You want to coach your daughter's football team? You want to take a trip? You just got 13 awake days, 208 hours, back because you detoxed. That is so valuable and yet, I think people do need to know. Michael knows about this every time I call him. So instead of being like, "What are you reading? Stop doing, stop being stupid." You can say, "Oh, interesting, you should ask." Like, "Yeah, I've studied that. Let's dive into it a bit and understand we always end up in the same place. The same place is..." you're allocated correctly stay the course, 95% of the answer is the same. The answer couldn't be Nick Murry style. "Don't do that!" You can just have an answering machine. So that's where I fall on all this. What do you think we should do from here, Michael?

The Real Value Of Sending Market Commentary [18:43]

Michael: So I think we'll actually let like what do you send, what do you send to be our next episode to follow on this because I think there's a whole interesting discussion unto itself of what do you send and there is as a third party commentary or do you write it yourself or do you have to write it yourself and like how deep should you go? So I think we can follow that up in the next episode because the...the piece I still want to come back to I think around just wrapping up this discussion, I have to admit as we were getting into it, I was expecting I was going to be the one that said, "Yeah, you should still send this stuff out." Then you were going to be the one that says, "No, no, what are you sending all that stuff for?"

So I'm somewhat struck that we're actually ending out in the same place that at least for some period of time, you do have to send it. You do have to keep sending it. I find there is a crossover point. I think indirectly, it's what you pointed out in your second story that, you know, I said earlier, there's sort of three types of clients. There's the ones that just delegate and let it go. Those are easy. We kind of know what to do with them. They're not reading the stuff anyway so you can send it to them to feel good about yourself but they're not looking at it. There's the people who really want to talk investments with you. And then there's this group in the middle that don't really care that much, but they're asking the question because they feel like they have to do it to prove to themselves they're being good stewards of their money, and they're being diligent and monitoring you because they gave you the money and we do that dance.

And what strikes me about those clients is, there is a crossover point where that ends if you're with them long enough. You were talking about doing this over, like try to detox them over 9 or 18 months. When I reflect back in clients of our firm, I feel like it's frankly a lot longer than that for most of them. Maybe we need to take some lessons from you. But I find it's more like frankly, probably three to five years. And that at some point in the relationship, we've worked together so long, we've met so long, we've sat down for so many meetings, that what I find happens is just it suddenly starts getting harder to schedule them for meetings. And we call them and say or we touch base with them, "Hey, it's time for the next meeting for you to come on in, so we can check it on your planning stuff and we'll do a portfolio review and the stuff that we would do in a client meeting."

And they don't return the calls. They don't return the emails to schedule the meeting. And then usually, I got to do a follow up call or someone does a follow up call and say, "What's going on?" Because at some point, you start getting nervous, like is the transfer paperwork about to show up? And we would touch base with them and the answer is, "No, no, actually I'm fine. Look, I'll call you if there's a problem and you call me if there's a problem and short of that, I don't know why we need to keep meeting right now. I'm good." And they weren't there at the beginning. When you try to take them there too fast, you get the Dr. Terry effect, which is everything seems fine until the transfer paperwork shows up.

But there does seem to be some crossover point where you're in the trust zone now. You're really in the trust zone. You have truly stepped in the circle of trust. And once you are actually fully in the circle of trust, this stuff starts to melt away. And I think it's that group in the middle that they felt like they had to do something for a period of time to make sure they really picked the right advisor who's doing the right stuff, and knows what he or she is talking about, and that everything is okay. And then at some point, after a couple of years, everything is okay and they start to relax. They start to really relax into the relationship. And then the only ones we're left with are that subset of clients that we, most of us, I think at least have, we certainly have that just they actually like talking about the investment stuff. They're always going to want to chit-chat about every meeting. That's part of their thing. That part never ends for them. It's not a huge portion of our clients, but we've got them, most advisors I know have some of those.

But the rest just start backing off. But I still find like, we got to send them stuff regularly to get there. We have to be proactive in the communication. And that even when they don't read it, and now we can actually tell they don't read it because we get statistics on the emails of open rates and click rates, and things like that. Even when they're not reading it, you get credit for sending it. You get mental credit for sending it. My firm knows what they're doing. They're on the ball. I saw there was a headline about the market decline from last week. I didn't even bother reading it because I know they're on top of it, but they sent me something to show that they acknowledged it happened and that I might be anxious about it, and that they're on top of it with the communication.

And I think that stuff still matters. As much as I think we'd all like to say, "Oh, I just never talk about investment stuff with my clients. They never call me and they're always cool and smooth through all the bear markets." I think for most of our clients, we still have to send that stuff at least until we're much further into the trust zone and get them in our circle of trust. And even then, it still matters.

Carl: Cone of trust.

Michael: And even when they're in the cone of trust, it still matters because at some point, a volatile market thing happens and even people who've been cool as a cucumber can suddenly freak out.

Carl: Yeah, I actually think that this don't believe them thing is important. Even the people who say, you know, that appears like Dr. Terry told me, "I'd never hear from you. I don't need to hear from you." I think it doesn't happen. Now, what we send in the link, and what we send will be in the next episode and we'll talk in depth about that. But I think, let me just...like one last story. Well, there's two important things I want to just...in terms of my closing remarks.

Michael: Yeah, wrap this up. What two takeaways that we should have out of this?

Carl: One, is that I think you should...I really feel like and we've been sort of teaching this for a long time, that you should set that experience up before it happened. In other words, you should have a conversation with brand new client that says, "There will be a day when this thing happens." Use whatever you...I liked calling it the financial detox program because I thought it was fun and it kept things light and people relaxed a bit. You call it whatever you want. But I think you have that conversation because it sets it up when they get there. Here's what I think one of our greatest fears is, is like, oh, when we go into maintenance, there's nothing for us to do. And clients will see that as like, "Why am I still paying you?"

I think you'd be proactive and on the offense about that and demonstrate. That's actually when we become the most valuable. By saying, "When you get this point, we're going to have a party. I want to know. We're at high fives because we'll know." This is exactly the words that I would use, "We will know that at that point, our relationship has become really valuable. And it may take us six months, it may take us five years, but if we get to the point where you're no longer worried about it, and you're saying, If there's something important, Carl would have called." And that's real value, high fives all the way around. Right? So you're setting it up early on that when we get to the point where we no longer have to talk all that much, we've actually...our value hasn't gone down. It's gone up. So that's number one.

Number two is let me just...last story. I had client advisory council. I used to call clients every month. They would get a day in the month. So I remember like Dan Ford's day was the second Tuesday of the month. He didn't know that but on the second Tuesday, I'd walk in there and be Dan Ford's folder and there's like seven other folders that were that day, and I would pick up Dan Ford's folder, I would review it, I would go through the 17-point Wealth Management audit or whatever we called it. And I would look down, and how statements are household, and all those things rebalanced on target, like blah, blah, blah. I would initial them, check them, and then I would call him and say, "Hey, we performed our 17-point Wealth Management audit, everything is fine."

We did that month after month, after month, after month. And the answer was always the same, "Everything is fine." Month after month. Sometimes we just leave a voicemail or send an email. So I met with client advisory council, Dan was on the client advisory council. Some others were. They were my top clients. And we used to meet once or twice a year. And I asked them, "We've been doing this thing for like three years. We call every month. It's almost always the same. Everything is fine because we actively rebalance. We do all the things. We do all this stuff. But we still call you. I'm wondering do you still, you know, should we just make these quarterly? And I fully expected them to be like, "Yeah, we don't need to hear from you." My best clients all said, "No. We love getting that phone call even if we don't answer. We just love knowing that somebody was on top of it. That's all like just an email that says, we looked at your stuff, your stuff is okay. Please keep doing that."

So to me, I think don't believe them. Set up some system that works for you. Maybe it's quarterly. I'm not suggesting monthly. Maybe it's quarterly, maybe it's twice a year, maybe it's fortnightly, maybe it's weekly, maybe it's daily, I don't know, whatever your deal is, name it, set it up as a value party or value proposition and then deliver it. And when they say they don't need to hear it anymore, just go, "Okay. Cool." And then keep doing it.

Michael: Yeah. I feel like there's sort of this piece of ask them if they want this stuff, then don't believe them when they say no, and send it to them anyways. And you do that until you get them to the cone of trust when everything's okay...

Carl: High fives...

Michael: ...and the cone of trust and you can high five in the cone of trust. Then still keep doing it anyways, even though they're definitely not going to be reading it now, because the fact that you sent something they don't read still checks a mental box for them that it's okay. "I'm not reading this because Carl wrote it and I know that means he's spending the time and energy thinking about this thing, which means I don't actually need to read it because he wrote it, but I would be worried if he didn't."

Carl: Amen. And by the way, just so we're not confused in the next...and you don't listen to the next episode, we haven't really said anything about market commentary here. That may or may not include...we've been talking about clients' commentary. It may or may not include, you know, like, "Hey, I know the markets are rough." It just is like, "Hey, I looked at your stuff. Your stuff is okay."

Michael: Well, that's quite a lot for Episode 13. Now, we have to keep going on the next episode. It can't end here because, this is the closest thing you get to at Kitces & Carl cliffhanger.

Carl: That's right. This, this, I mean I don't know about Games, whatever that thing is, "Game of Thrones" or something. You better tune into Kitces & Carl Episode 13.

Michael: Tune in in two weeks for Kitces & Carl Episode 13 where we will finally actually get to the question from about a half an hour ago about market commentary because we will get there now that we have journeyed to the cone of trust.

Carl: That's right. Amen, Michael. Thank you.

Michael: Amen. Thank you, Carl.

Carl: Goodbye.