Executive Summary
Within the financial planning world, there is often little love for popular consumer "personal finance gurus" like Suze Orman, David Bach, and Dave Ramsey. Whether it's because of their entertainment-style deliver of financial advice (in the case of the former), their bombastic platitudes of overgeneralized advice with little client-specific information (in the case of both), or their controversial views about how to address common problems like debt (in the case of the latter), most financial planners don't seem to think highly of their consumer-popular counterparts.
Yet the success of those like Orman, Bach, and Ramsey - who, in the end, touch the lives of hundreds of thousands if not millions, while the "average" financial planner's impact may only be measured by a mere few dozen or hundred clients - makes me wonder: Maybe there is something we as financial planners could - and should - learn from the success of those like Orman and Ramsey?
The inspiration for today's post came to me as I was browsing the popular books section at the airport bookstore, seeing books by both Dave Ramsey and Suze Orman, and David Bach's "Debt Free For Life" book top the shelves. As a "classically trained" financial planner, I too tend to recoil at the overgeneralized advice platitudes delivered by many of these so-called personal finance gurus. Yet at the same time, my eye was drawn to one of the headlines on David Bach's book: 7 million copies sold.
7 million copies. There are currently about 60,000 CFP certificants in the United States. If each of them have deep personal financial planning relationships with 100 individual clients, the collective financial planning community nationwide serves... 6 million Americans. So David Bach, alone, apparently may have reached more Americans that all CFP certificants in the aggregate? And then there's the books (and other programs) of Dave Ramsey, and Suze Orman, and others. Viewed in this perspective, I feel like we as financial planners perhaps need to eat a little humble pie; we may have rich relationships with our clients, but our reach is dwarfed by those like Bach, Orman, and Ramsey.
Is it just because those personal finance gurus are "marketing experts" while the average financial planner is not? Maybe they're just better at being popular TV and radio book celebrities than most financial planners are? That is perhaps the most common reason we suggest that Bach, Orman, and Ramsey have such success, but the more I think about it, the less convinced I am.
Instead, I have to wonder if it's because at the end of the day, the messages and programs and books that Bach, Orman, and Ramsey put forth change lives. A lot of lives. They have a significant success and impact on those they reach. And more than anything else, it is perhaps that success that they bring to their "clients" at large, that feeds their popularity, success, and "celebrity" status. In other words, maybe we need to give them a lot more credit for being popular because, in the real world, what they're doing really does help a whole lot of people.
It's interesting as well to look at some of the messages put forth by some of these personal finance gurus on their websites. Take a look at the sites for Suze Orman, or Dave Ramsey, or David Bach. What do you see? I see messages about "protection" and "making it simple"; I see Action Plans and Financial Peace; I see crushing debt and finishing rich.
And what don't you see? I don't see messages about managing wealth and portfolios; I don't see proposals for personalized financial advice and determining your goals; and I see costs that are $10-$50 or perhaps $100-$200, not $1,000 - $5,000 or more. Yes, we as financial planners are entitled to be paid for the time we spend and the value we bring; but one has to wonder if perhaps we need to figure out a better balance between what we provide and how much we have to charge to make it business feasible.
I'm not quite certain what to make of all of this. Those like Orman, Ramsey, and Bach don't spend a lot of time asking you about your goals. They assume your goals - get control of your debt, find financial peace, and retire and finish rich - and tell you how to achieve them. They don't spend a lot of time worrying about the details; they just give actionable steps to change your life, presumably for the better, and expect (and guide) you to follow them. Perhaps we as financial planners are making a lot of this more complex than it needs to be?
And perhaps most of all, it's notable that I think the "average" follower of Orman, Ramsey, or Bach probably has a much lower average income and net worth than the typical financial planner's client. Have financial planners, with the tremendous depth of their financial advice, forced themselves into a niche for the most wealthy top few percent of the country, when in reality the overwhelming majority of Americans need less depth of advice and more actionable steps that can be delivered in bite-sized (and much more cost effective) pieces? Is this a clue as to how financial planners could change their own time horizon for planning from years and decades to a more tangible days, weeks, and months with measurable positive outcomes?
I suspect that many who read this blog post will still be unable to do much but recoil at the thought of the impact that those like Bach, Ramsey, and Suze Orman have on the lives of Americans, for all the reasons that I stated earlier. But the reality remains that their impact, and the number of people that just these three personal finance gurus reach and in whom they evoke positive change, may be far more than all 60,000+ CFP certificants in the aggregate. So maybe we need to spend a little less time throwing stones, and a little more time trying to figure out what it is that allows these three to positively impact so many lives, and see if there are any aspects of what "they" do that "we" should be doing, too.
So what do you think? Is there something that we could - and should - be learning from those like David Bach, Dave Ramsey, and Suze Orman, about how to broaden the reach of financial planning and make it more relevant to more people?
Paul Bennett says
I am a big fan of the Dave Ramsey materials. I was a part of a team that presented this material and led a small group after Ramsey’s weekly video. I like Ramsey because of the ‘simple’ and effective way of delivering the information. What we don’t realize as CFP’s is (I don’t know the exact number) but 80% of the population has no ability to save – some of it is an income problem, but most of it is a spending problem. Ramsey hits at the core of spending and attempts to change habits/patterns. He is real focused on debt/cash flow/being smart and finding bargain buys. Items CFP’s don’t want to really to discuss. His 7 steps makes so much sense and really gets people on the right track.
We can all take a page out of his program and integrate it into our practice – some of their advice is counterproductive to a profitable asset management fee based practice (like paying off mortgages) but I always tell my clients, “I am in favor of paying off your mortgage because it will make your life simpler” – at the end of the day isn’t that what we are trying to do for our clients? Make their life easier?
Jim.Pursley says
I stopped formal “financial planning” years ago. Why? Few systematically and completely followed my suggestions and fewer still stuck with the process for very long. Was I such an ineffective planner? I don’t think so, but the mass marketing financial gurus’ messages may have rung a better bell than I could have. In the end, I decided that I was an asset manager, not a financial counselor. Sure, I’ll do simple financial planning when it’s called for but by and large I spend my day doing investment research and portfolio management. By so doing, I can better compete in an area that has come under tgremendous competition by internet asset allocators such as financial engines and from low cost ETF’s and their academic gurus like Rob Arnett, Burton Malkiel, etc. Do I feel bad about missing the great mass of Americans? Does your accountant feel bad about not reaching as many people as do H&R Block and Turbotax? I doubt it. A great question, this? I seldom run across references by clients to such mass financial marketers any more. Clearly, my “population” is not intersecting much with their work.
Janet Tyler Johnson says
Michael: I think this is a question of great importance. If we are to be thought of as a profession, how do we get help out to the masses? I don’t have any concrete answers but by speaking to groups, writing a newsletter that goes out to anyone who will give me an email address, and having written a book, my hope is that my message is getting out to more than just the high net worth individual. I don’t say these things to toot my own horn, but rather to encourage others to think bigger.
I think the individuals you have mentioned have done us a great service — they have raised awareness and that is a huge thing. We have so much wisdom among the 60,000 certificants that my hope is that more of us will have the desire and courage to step more into who we are and share our wisdom with a wider audience whenever possible.
Rob Bennett says
I think it may be a personality type issue. This field attracts the INTJ personality type (the Engineer/Mastermind). This personality type is good at reading research but not good at forming emotional connections.
Saving and investing are activities done by HUMANS. Money management is not a math problem. It is a motivation problem.
People in this field need to stop studying tables of numbers and start studying people, in my assessment.
Rob
Kathryn C says
Hi Rob, long time no chat. Interesting on the INTJ point.
I’m an INFJ. That test is spot on for me.
“Have financial planners, with the tremendous depth of their financial advice, forced themselves into a niche for the most wealthy top few percent of the country, when in reality the overwhelming majority of Americans need less depth of advice and more actionable steps that can be delivered in bite-sized (and much more cost effective) pieces?”
YES.
It’s the whole Seth Godin concept. Do you go for the belly of the bell curve, or do you go for a tail? I’m a fan of the tail, but to your point, you alienate the mass market.
But if you’re really good at nailing that target market, ie the tail of the bell curve, you’re as successful as the people who go for the belly of the curve, because you can charge more.
There seem to be two clear models that work: target the heck out of a niche market and charge more (the tail of the curve), or do mass market, like they do. Middle of the road seems tough.
Michael Kitces says
Kathryn,
I agree with your comments here at a lot. I’m a fan of niche businesses targeted at “The Long Tail” (as Chris Anderson wrote at http://amzn.to/AndersonTheLongTail).
I think in reality the problem is that not financial planning is a business aimed at the tail of the population. It’s that we as financial planners don’t seem willing or able to acknowledge that it IS a tail business!
Respectfully,
– Michael
Most people don’t want comprehensive financial plans for the same reason most people don’t go to the Mayo Clinic for a medical check-up. It’s too much of a big deal. It takes too long, costs too much and raises issues that the client/patient doesn’t want to deal with currently.
People go to a doctor with a simple goal: I have something that hurts. Make it stop hurting. Long range thinking adds the question, How can I prevent this from hurting again. Very few people are interested in where the hurt came from.
Orman and the others focus on problem solving at the margin. People define a single problem or question (Can I afford to buy this new item?). Suze tells them yes or no. Generally, people are happy with a short, sweet and actionable answer.
Some need “comprehensive planning”, many do not. I actually prefer “modular” planning.
As far as cost, well, I don’t see how we compete with the authors you mention. No matter how you slice it, there are only 24 hours in a day, and 8-10 in a work day. It’s really not a feasible business model to spend 2,4,6,8+ hours for $50 to help someone. Lawyers don’t do it. CPAs don’t do it. Doctors don’t do it.
If all 60,000 CFPs write a book, will more than 120,000 people, in aggregate, read those books? Can we all hire Suze’s publicist?
If we all volunteer to teach Dave Ramsey classes, that may be admirable an honorable, but Dave Ramsey still gets paid and we do not. Charity and altruism don’t pay the bills.
At the end of the day I think the problem is that we don’t teach our kids how to handle money. Maybe we should be focusing on teaching personal finance in the schools. And I mean having professionals teach, not 23 year old college grads or 50 year old career academics who think the government should be our nanny. It’s harder to teach an old dog new tricks. We need to teach them as puppies.
What I think we all have to learn as planners is that the delivery of financial advice has to change. These folks take a complex subject and grind it down into simple, easy-to-understand concepts that the average person has no trouble understanding. We cling to our models and jargon as if it is the lifeblood of our work, but I would posit that most people find that intimidating rather than helpful. None of these people use complex charts and graphs, and they absolutely leave out the details. Why do we insist on continuing to show them?
It’s a revenue model and customer base question. We make money in a particular way that doesn’t align with the inspirational tips and tricks model of these three gurus. Their advice isn’t deep. It’s aimed at folks who are in debt and struggle to figure out how to spend less than they make (a genuinely devastating problem). Our business requires people to have assets to invest. Ultimately, I bet the majority of the 7M who bought that book are not ideal potential financial planning clients.
It’s the difference between Dr Oz and my GP. I can’t ask Dr Oz about my head cold, and I didn’t hire my GP to be inspiring and insightful. I need customized medical advice. Like a client who has been an ideal client for five years and then decides she is going to put 40% of her investable net worth into her boyfriend’s startup. That person NEEDS customized advice. She doesn’t know it, but this situation is why she hired me five years ago. Suze Orman can’t help her.
However, that said, I AM in awe of the power of media, and intend to use it to earn third party credibility for myself, my firm, and the integrous (yet sometimes over-principled!) profession of comprehensive planning. This is why we launched our comprehensive social media strategy this year. As planners who do want to be effective, we have to learn to make our message(s) parsable, quotable, and sexier simply because it’s such an overstimulated world.
Hilary,
Thanks for the feedback.
Just playing devil’s advocate here to some extent, but you suggest “Like a client who has been an ideal client for five years and then decides she is going to put 40% of her investable net worth into her boyfriend’s startup. That person NEEDS customized advice.”
Does she? I’m pretty sure ANY financial planner would probably have a very similar response to that client situation, as would Suze Orman, Dave Ramsey, or David Bach. They would all strongly caution the client about the risk of pursuing that path.
Which is actually my point to some extent. Is the client advice in that scenario REALLY as customized as most of us make it out to be?
Respectfully,
– Michael
But the point is that SHE thinks it’s a great idea. So she doesn’t ask for advice. She just saunters into my office one day and announces it. She wouldn’t have asked any guru whether she should do it, she suffers from contagion of the over-confidence of her guy. So without my strong reaction and bringing the published and academic evidence to the table, she’d plunk down her cash fully believing she is setting herself up to be a multi-millionaire. In that case, I saved her hide.
It’s not that the advice we give is customized, it’s that we give it when the clients don’t know they need it. We keep them on the right track, like bumper bowling. 😉 We are not investment managers, we are INVESTOR managers. There are dozens of similar examples from my own practice that I can come up with. A millionaire who has half his portfolio in his company stock, and believes he is far, far smarter than these 3 gurus. He would never READ their advice, let alone take it, he only bends after (literally) years of strong pushing from us. Multiple clients who, even though we consistently tell the buy-and-hold-equities story, want to buy gold at the top. I’m sure you can think of your own.
Yes, our clients need us. They need us to save them from their own amygdalas. Fight, flight or fright doesn’t work in investing, but as human beings in high anxiety environments, that’s all we have brain programming for.