Executive Summary
A cornerstone service that many financial advisors provide is education. While strategic advice is crucial, advisors also face the challenge of presenting the strategies to clients in context, explaining different financial planning concepts, and showing clients how to implement these strategies (as well as pointing out any long-term consequences). While curious, proactive clients who are ready to learn may be the ideal, this can become complicated when clients bring 'good' advice they've heard from unreliable sources that doesn’t apply to their individual circumstance – or, worse, the advice itself is rooted in misinformation. This puts advisors in a challenging situation to re-educate or redirect the client without becoming combative or condescending.
In our 146th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the "overconfidence gap" that can be created by clients bringing misinformed strategies and suggestions from various sources to their advisors, and how advisors can navigate the conversation to get clients back on track (without also offending them).
One potential dynamic of these conversations might involve the advisor's bruised feelings from knowing the client had been searching for financial planning answers somewhere else rather than coming to the advisor and asking their questions directly. A natural first reaction might be to prove why the client's source is 'wrong' and how the advisor's advice is 'right' – but in doing so, advisors run the risk of alienating their client who may interpret the response as a suggestion that they were ignorant or gullible in believing obvious misinformation. Instead, leading the conversation by thanking the client for bringing the idea to the meeting can be a more helpful approach, and then asking for context around the problem the client wants to solve with the advice they were given by the outside source. This strategy encourages the client to open up about their intent, problems, and even insecurities, giving the advisor an opportunity to better understand the client and solve more problems for them – ultimately building more trust!
While such one-off discussions with 1 or 2 clients in meetings can be fruitful, multiple clients who bring up the same questions can signal an opportunity to address the misinformation for a broader group of clients head-on. For example, if an advisor has clients who are small business owners, and several of its clients consistently have questions about the same tax savings strategy (or consistently come to the wrong conclusion about where it applies, thanks to either what they find on the Internet or hear by word of mouth), many of the advisor's clients may benefit from educational resources created by the advisor themselves, perhaps in a written, video, or audio format; this not only allows the advisor to craft the sort of response they want to send, but also reduces the need to answer the question more than once. Alternatively, advisors can hold educational events to address common questions and give clients an opportunity to voice their specific questions or concerns.
Ultimately, the key point is that when clients bring forward ideas rooted in misinformation, advisors have an opportunity to solve a problem in a way that can further enhance trust in the relationship by providing high-quality resources that help clients with their specific needs. And while there may be some upfront work required to coordinate such resources (or events) for clients, doing so may end up helping the advisor save time by allowing them to answer the same questions that crop up more efficiently, thoroughly, and proactively – not just for the client sitting in front of them, but for several clients with the same questions throughout the firm!
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***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
Kitces & Carl Transcript
Michael: Well, greetings, Carl.
Carl: Hello, Michael Kitces.
Michael: How are you doing today?
Carl: I am really great. We've just had a beautiful string of weather here.
Michael: Nice.
Carl: It's summer. It's just it's great.
Michael: So, I'm going to highlight, because it's been a few episodes. You said the blue couch was coming back at some point, and we've done a few more episodes.
Carl: I know.
Michael: And the couch is not back.
Carl: You know what's so great? Is I just realized, as you were saying that, that I'm moving into a new studio and there's going to be a place for it.
Michael: All right. All right. So, maybe next few episodes.
Carl: Yeah. A couple...give me a couple of weeks to get fully moved in there and you'll see the blue couch back.
Michael: Fantastic. Fantastic. So, in diving in today, got this question from an advisor out on the Internet. We get a lot of inspiration because people just literally tweet at us, like, "Would you all please talk about this?" And we really do take those in and cover some of them. So, for anyone that's been thinking you want to see us cover a topic, no joke, just tweet at us, @MichaelKitces, @BehaviorGap. We really do see them.
So, this is one that came in. I actually didn't grab the original name. So, we'll go with Todd. So, Todd asks, "I've got clients who want to get educated about some of the things that we're working on. So, they do their own journey reading online. And then I have to end up retraining the concept relative to their specific circumstances because they don't actually know what's applicable and correct for them."
How Generally 'Good' Financial Advice Can Affect Specific Clients Negatively [01:59]
Michael: And so Todd's question basically boils up to we want our clients to be educated. And then in practice, a lot of clients create a lot of messes for us when they go and get educated because they don't quite learn the right things and there's a lot of stuff on the internet.
And so I just wanted to set that out there. What do you do with that problem, Carl? That we want to see our clients get educated, and then they go miseducate themselves. And then we have to spend more work re-educating them than it was when they just weren't educated in the first place. So, I'm going to presume the answer is not, "Well, you just keep them in the dark and put the hood over them." So, we know we're shooting for something education, I think, unless you've got an alternative take. But how do we deal with this phenomenon that clients getting themselves educated often doesn't go well in the real world, right? In theory, everyone's supposed to be more educated. In the real world, this creates messes.
Carl: Yeah. Yeah, I think first we have kind of deep empathy for this problem because it's just such a common challenge. We know that most of the information out there in the kind of financial pornography sphere, just all the personal finance, investing, the whole thing, is...
Michael: I used to dread emails that came in with, "So, I have a question. I was reading online..."
Carl: A guy on the Internet...
Michael: Any email that opens with that, just like, "Well, crap. This is going to toast an hour or 2 at least."
Carl: Yeah. And it is not any better when it's said in hushed reverence and says, "I was reading The Economist." It's not necessarily any better. And it's not because either of those sources of information are necessarily bad. It's because we know that rules of thumb and general financial advice can be... Look, there's a bunch of garbage advice. Let's just be flat out about that. But there's also a huge amount of advice that could be good for 1 person and bad for another. And to take it as generally applicable is hard.
But I think the empathy for me comes from the idea that this is a pretty normal problem. And it's specifically when we're dealing with... Most of the clients that the listeners to this podcast serve are smart, successful people. And so you've got a classic almost Dunning-Kruger problem here. Right? And that phenomenon really is that people with limited knowledge or competence in 1...sorry, people with plenty of knowledge and expertise in 1 domain may overestimate their ability in another domain.
And often this is an overconfidence problem. And overconfidence is so tricky because it's the result of experts behaving exactly as you would expect an expert to behave. So, here we are, we've got an expert, a client that is an expert, probably, in some field. And we could always pick on doctors because they're always the ones that we pick on when we talk about overconfidence. But it could be engineering, it could be anything.
Michael: We could stay on the doctors, it's contextually appropriate.
Carl: Yes. Right? "I'm a surgeon. I think I know everything." And you would expect me to behave that way because you don't want an underconfident surgeon.
Michael: Yeah.
Carl: So, yeah, how do you deal with... And if I were to draw this, as one might, I would have a bar graph with just 2 bars. And 1 bar would say "confidence" and the other bar substantially lower would say "competence." And that gap, I would call that the overconfidence gap. Right?
And so what do you do when somebody comes in with an overconfidence gap? Their confidence in their answer. They have a classic Dunning-Kruger problem. Their confidence in their answer is actually below their competence, they just don't know it.
Michael: Well, all right. So, how do you handle it? Because I'm presuming the answer does not start with, "Well, Mr. Client, you're being a little overconfident."
Carl: Or I think it would be great to just say, "That's cute. Have you heard of the Dunning-Kruger effect?"
Michael: To be fair, I could think of a few over the years where I probably could actually get away with that.
Carl: Of course, I think there are clients where you could be really direct. You could be really direct. But for most people, to me the answer would lie in asking some questions.
Michael: So, what are you asking? Where do you take this client conversation?
Carl: Yeah, the very first question that comes to mind, to me, is curiosity about where this information came from. This isn't very far off from the client who comes in with a full financial plan, like, "I need $5 million, I want to retire to a sailboat." That's the same confidence they have in that, that that's the plan, that they need $5 million, and that the sailboat is the thing. They got a lot of confidence. They probably don't have the "competence" in understanding that they probably don't know yet.
So, similar to that, I would say, "Oh, that's a very specific number. Tell me where... It sounds like you've done some work." And I would want to be...I don't want to be a smart aleck about this. I would want to be genuine in the idea of... And I think it would apply here, too. "I got educated. Isn't it great that somebody took the time?"
So, how could we live in that space a little bit with them and be like, "Wow, it sounds like you worked really hard on that. I want to congratulate you. It shows you're really committed to making good decisions with your money. Not very many people would do that. Let's talk through that. Tell me what you learned. Where did that information come from? Oh, I see." And I would just start to try to understand. Because what we're trying to get to is help them understand that the context may not match the information that they have, but probably this is a better answer than no answer.
And so we start pointing to the idea that small tweaks around the edges. "Man, you've done a really great job here. And as you know, compounding is a really important role in what we do. And compounding happens with decision-making, too. And my job, largely, is to help you avoid really costly mistakes and to make really small tweaks around the edges over a long period of time. So, what if we took that and we adjusted here?" Right?
I think, to me, that's a much better way than, "Hey, you knucklehead, that's a really dumb idea." Even if it was something that's literally out of left field, kind of silly. You may be a little bit more direct in that. And you've also got a decision to make, "Can I talk somebody out of this? Is this some sort of weird conspiracy theory they got educated about that's not going to go well anyway?" There's a lot going on here.
So, now that I've opened that can of worms, where do you go?
Michael: Well, I'm just flashing back to moments where this came up over the years. And, I don't think I handle the...well, I don't think I handle the conversations nearly as well even as you're painting the path here. Because my brain would get stuck in something to the effect of, "Why are you reading this crap? Do you really not trust me? Do you really not trust me enough that you need to go research this on the internet and then have a debate with me about what I do for a living?"
And, obviously, I never said it that way to a client, but that's basically what's running through my head. And so it's not the most positive tone for the conversation, even if I'm not going to voice it in those words. And I'm pretty sure most of these conversations probably started with a heavy sigh, which was my passive-aggressive way...
Carl: Seriously? Right, right, right.
Michael: Well, yeah. Seriously, if I try to remember back to some of these moments, yeah.
Carl: No, I don't mean "seriously" you. I mean that's the sigh I could hear myself having. Like, "Seriously? You're asking me this question?" So, I'm agreeing with you.
Michael: Yeah.
Carl: That I remember those feelings. Let me ask you a question. How do you think... I was just thinking of who would have the most direct response to these kind of things. How do you think Nick Murray would handle one of these experiences?
Michael: I'm always afraid to speak for Nick, but it's a fair point. Probably quite directly.
Carl: Yeah. I just want to give permission, not that anybody like that would need permission from me. But there's another way to handle this.
Michael: Yeah.
Carl: And the other way to handle this is a little bit of let's be really, really direct. And so I think there's nothing wrong with that either. And I can't believe how often I'd be tempted to do that. Like, "Wait, seriously?" And I could imagine you specifically with the amount of ammunition you would have for that kind of a conversation.
Michael: Well, yeah. Because then I go back to my college debate days. I'm just like, "Oh, you want to throw down?"
Carl: Right. Yeah. "Oh, really? This sounds fun." Yeah, yeah.
Asking “Why” To Get The Context Of The Client's Problem [12:16]
Michael: I will say I think there is some evolution. I think about this early career versus late career. "Late career." I'm not that old. Later than my early career. My gut response at the beginning was something to the effect of, "Why are you reading this crap?" And now it's more like, "Why are you reading this crap?" There's something going on that you're feeling the need to seek this out. I'm going to at least assume for a moment it's not that you just fundamentally don't trust me and we've got a crappy relationship, although maybe that's the issue. So, something is bothering you that I clearly have not sufficiently addressed, because you're seeking out more information online beyond what we've talked about.
"So, what's on your mind? Something else is going on here that maybe we haven't talked about enough, or that I have not addressed with you in the way that you needed. Tell me a little bit more about what's going on that you were searching for this."
And I think that's where the conversation goes now. Ironically, it's still some version of, "Why are you reading this crap?" But I will say earlier I would have emphasized the "crap." "It's crap, and I'm going to prove to you that it's crap. Let me. Game on." And now I get a little bit more interested in the why, because something is leading you down this path. Something is missing in the relationship or the conversation, or some concern or anxiety that I've not tackled or that we have not talked about. And now I want to figure out what that is.
Carl: Yeah, I think that... And I was just thinking back, too. And in fact, I just yesterday got a question from somebody about how we... It was something we talked about at The Society of Advice. And they wanted to know tactically how we did something. And I used a line that I learned 25 years ago. Because I started to answer and I was like, "Oh man, I could go on and answer and answer and answer." And I realized I wasn't clear about what the question actually was. So, I used a line that, 25 years ago, somebody taught me, which I think is brilliant. And somebody else taught it to me, it's not my idea. And I just simply said, "Hey, in order to get you the best answer, could you give me a little bit more context for the question? Why are you asking?"
Michael: Okay.
Carl: And I think we can use a very similar thing here. Like, "Hey, before I address"... It may not even have been a question, it may have just been a statement. Like, "I read this thing and I want to do this, this, this." It could be a very interesting thing to say, "Hey, thank you for sharing that. It's clear you care a lot about making good decisions with money. You put some work into this. Before I address that, could I get a little bit more context? What was it you were trying to solve for when you went looking for that information? Or is there some"... You get a little more context.
Because what we're ultimately trying to do here, especially if they're wrong... Let's just pretend for a minute that this is information that is going to...if they were to implement it, it would be, I don't want to use the word "disastrous," but it would be a bad decision. It's wrong. We're trying to help somebody understand that they're wrong. If you just think about how that goes in any other area of your life, it normally doesn't work to lecture.
Michael: Right.
Carl: It normally doesn't work.
Michael: I try. I try though.
Carl: Yeah, I know. Me too. But it normally works to sort of explore together with a bit of curiosity. And I think maybe one way to do that would be to start with just, "Hey, before I...before we... I really want to get into that, because it's really important. But before we do, help me understand what was it that you were trying to solve for when you went looking for that information." And they could just be, "Well, jeez, I just"... They could just be hoping you'd be proud of them. Right? Like, "I just thought I would be more involved here." And you'd be, "Oh, okay, cool. Would it be helpful if I sent you some information that you could study? And I've got a couple... Are you looking for books to read?" I just want to be engaged.
And you don't have to say, "Guess what? You don't have to be engaged." Of course we want to engage clients. If clients would read the books you give them, of course you'd want that. Right? So, I think that getting a little more context before you dive in could be really helpful.
Creating Educational Materials To Address Common Client Questions [17:03]
Michael: Now, I'll admit that the other direction that my brain went in hearing Todd's question, this, "My clients learn themselves up online, and then I have to retrain the concept and get them reined back in again," is if this keeps happening, particularly if this keeps happening at particular areas that are cropping up over and over again, then maybe it's time to make your own educational materials for that.
Carl: Can I talk about that for a second.
Michael: Yeah.
Carl: I had a client. I remember who it was, that's why this pops into my head. Oh, yeah. And for some reason let's just call him Rob. I was always telling clients what not to read. And I kind of...I would kind of joke about it, but they'd call with like, "Hey, I want to buy some gold," or whatever was on the financial pornography network. And I would tell them, "Have you been watching the finance"... And I would say, "I'm sending the financial pornography police over your house to take that away." And I used to joke about that a lot. And 1 client finally came to me and said, "You're always telling me what not to read. Would you please tell me what to read?"
And that's how the weekly letter started. The Behavior Gap weekly letter started because it was like, "Oh, good point." So, I started sending like, "Here's 3 things you could read this week. You don't need to, but here's 3 things. If you're looking for good information about what you should be thinking about financially, here's 3 things." And that was because a client was like, "You're always saying what not to read. You're always joking about the financial pornography police. Give me something to read." I love that.
Michael: Yeah, I... Look, for me, the whole genesis of our kitces.com site, if you go all the way back, whatever it was, 15, 16 years ago, I was analyzing problems for individual clients, and doing it for multiple clients, and just got tired of the fact that I was basically preparing the same explanations for different clients over and over again. And said, "Let me just make 1 version that's my definitive write-up article about this. And I'm just going to send them all to that."
And now I don't have to keep saying it and explaining it over and over again. Just any question that repeated, if I got it 3 times, 3 was my magic number. If I heard the same question from 3 different clients, I'm going to make a stinking article and just put it out there and get it out to everyone, because apparently a lot of people are asking this question. And if someone fails to read it and ask me in the future, I can just say, "Hey, we've actually got some educational material out on this. Go here and you can just read through here." Right? And it's that "tell me what to read."
Now, I was doing that many years ago. So, now maybe you're writing an article, maybe you put out a little podcast, maybe you record a video. Right? Whatever your content creation modality of choice is. If you're not a writer, you don't have to do this written. That was just my style. But if you keep getting the question, it means people are asking, and more people are probably going to ask in the future. So, if you want them educated your way, just make it once and get it out to all of them. And then you don't have to keep having the same darn conversation over and over again.
Carl: That's exactly right. And it's so interesting to think about that. Because if you want to create meaningful, relevant content, just answer the questions you're being asked. Do it in a way that's public and allow people to share it.
Michael: For my prior firm, we took this a step further in the context of investment conversation in particular. That firm, we were more of, I guess, what I would now characterize as a tactical ETF manager. But 15, 20 years ago, that wasn't really a thing. And before F-Squared and all that stuff happened with tactical ETF managers. But we had a particular investment process that we followed, and an investment team that executed on it. And that meant there was a nontrivial amount of client education about getting clients up to speed.
And so we just started doing client educational events twice a year. Where we would bring everyone in, and put our chief investment officer and the investment team up on the podium. And they would spend the better part of probably 60 or 75 minutes. Half of it was just talking about our investment process and explaining or reminding people what our process is. And the other half was some version of outlook on markets in the current environments, most of which was, "Let me explain to you why we're not doing all the crazy things that you want us to do, even though you see us occasionally trading and you think we're day traders and we're really not. And let's re-anchor those expectations."
But we just ran educational events twice a year. Local hotel, Saturday morning, cater the breakfast with eggs and hotel food, do our stuff, and everybody's out by like 10:30 or 11:00. And we got a huge chunk of the client base that would come out. Our new clients would disproportionately come out because they want to kind of learn the thing and get more comfortable. We had a second set of clients that would come like clockwork every 2 years.
Carl: Because of the hotel food.
Michael: Yeah, clearly because of the hotel food. There's a thing probably that they want to feel like "good clients." "Good clients," I'm putting it in air quotes. They want to feel like they're being good stewards of their money. And that part of that means being diligent and checking up that your advisor still knows their stuff from time to time. So, that was basically their way of testing us out a little and making sure that we were still doing our thing, that we still sounded competent, like we knew what we were doing.
And then even a few of our higher maintenance clients, they came to every single one, every single one. They had all the questions during the Q&A part. But we answered it, we answered them there. We would even get the high-maintenance clients that would ask questions that would resolve the other high-maintenance clients who also basically had the same question. Because there was a lot of overlap in the questions that they would ask anyways.
And ultimately what we found... It took a nontrivial amount of time to put on the event. But it's not that complex. You get a room, you get some food. You send emails out. We actually did printed invitations back then because it was old. But we did our thing. And we easily saved a half-hour or hour conversation per year with all those clients. Just got their stuff answered 1 to many, and then called slightly less or had slightly fewer questions or were a little better educated on our process. So, we didn't quite have to remind them as much when stuff came up. And we would have 100 or 200 clients in the room. So, all of a sudden, it's like, "Well, that's a couple hundred hours of team time that was saved."
So, yes, it took a bit of time to put the event together. But A, not nearly as much as a few hundred hours that were ultimately saved by answering questions in mass. And B, from the advisor end, the team mostly organized the event, I have to take all the client calls. So, saving my time with the time that's replaced with the team helping to execute an event was an effective time delegation shift, as well.
But it all basically boiled down to we realized early on... This was more investment-centric at the time. But our investment process was unique enough that if we were going to have good client conversations, they needed to be educated. And if we were going to have them be well-educated, we may as well make the education ourselves. It's way easier than educating them 1 at a time. And maybe you do that in person, maybe you do that virtually now. We have all sorts of solutions. Maybe you create a course in a learning management system and do it that way virtually. Right? There's more choices to this than run a local client event. That's just 1 example in context.
But to me, what it gets back to, in the context of Todd's question, is yes, there's 1 version of this that's essentially, "Let me dial you back from your spurious information and get re-educated, and re-educate you in the right direction and try to figure out how to get you there." And the other is, "Or if my clients keep doing this, and particularly in certain realms, let's just proactively educate them." Because it takes a little time to create the content or run the event or whatever it is. But once you get to a critical mass of clients, you or the firm, if you're multi-advisor, you will collectively save way more time on this than what you spend doing it. And this is one that scales well. The more advisors and clients we had, it takes the same amount of time to run the event and show up in the room at the front. But the more clients and advisors we had, the more collective time savings the firm had for the same fixed events. It scaled wonderfully as the firm grew.
Carl: I wish we could start this over. Because if we'd start this over, I'd send one of my famous emails that are cryptic. And I would just say, "Replace, don't resist." Right? I would essentially say I like this much better than the argument around, "Okay, how do we fight it?" I love the idea of just being like, "Oh, yeah."
And we had a thing we called the financial pornography detox program. So, build, essentially... If that's a problem, which it is probably for everybody, all clients, build a financial pornography detox program. And replace the information they're getting, instead of resisting it. Because any time you resist it, you're going to fight. Replace it. And I think that's exactly where we should end. You know what I mean? Your idea, it's because at scale. By the way, it's great marketing. By the way, it helps people who aren't clients.
Michael: Oh, yeah. Then a few people would bring their friends as a soft way to introduce us. We didn't specifically ask them to, but we made it clear that it was okay if you want to bring someone along. And sometimes they'd bring their friends, sometimes they'd bring their kids. And it was not primarily a marketing event for us, but it probably at least paid for itself in the occasional new client that came in from it, in addition to just the sheer time savings of the team by educating 1 to many so we didn't have to have the darn conversation over and over again.
Carl: For sure. I love that. Love that, Michael. Thanks.
Michael: Awesome. Thank you, Carl.
Carl: Yeah, cheers.
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