Executive Summary
It is an experience that almost any financial planner has gone through at some point: a prospective client who is totally disconnected from reality. Unreasonable expectations, completely unrealistic goals, and an obsession with the latest get rich quick investing scheme. Sometimes, the prospect can be guided in a more reasonable direction, but often there's just no connection to be made, and we show the prospective client the door, acknowledging that some people we just can't help. We move on to the next prospect, who hopefully won't be such a "bad" future client.
Yet I have to wonder... given the state of financial literacy - or lack thereof - in the United States, many such prospective clients have totally impossible expectations and goals not because they're being irrational, but simply due to financial ignorance. And by excluding such prospective client relationships, are financial planners themselves excluding the majority of Americans as potential clients?
Because if that's the case - that we as financial planners have put ourselves in a position than we can't help the majority of all Americans - then I also have to wonder if maybe it's not the the prospective clients who have the problem... maybe WE are the ones with the problem?
The inspiration for today's blog post comes from some offline feedback I have received in response to my post earlier this week about how financial planners might learn something from the so-called personal finance "gurus" like Suze Orman, Dave Ramsey, and David Bach, and from a video making the rounds with financial planners called "A Day In The Life Of A Financial Advisor".
In the video, we see a parody of a meeting between a financial advisor and a prospective new client, cascading into a worse and worse disconnect as the conversation wears on. As with any parody, the problems highlighted from the video are worse than what typically happens in any particular client meeting, yet the parody seems to be resonating well with financial planners because it does in fact capture the essence of the planner-new client disconnect that so often occurs.
Without further ado, I'll let you go ahead and watch the video, with more thoughts shared below.
Most planners will probably be able to identify quickly with the challenges shown in the video. The advisor gives all of the industry-standard responses - gathering information so that proper recommendations can be given, "gold is often a part of a well diversified portfolio", "Your IRA is intended to generate income in retirement, it is wise to save it for your future [and not buy a car with it", etc., etc. Yet the client just persists with totally unrealistic goals and unreasonable expectations, from sending a child to college with no savings to retiring in 5 years with only modest savings to investing in gold or a Florida condo. A classic "bad" client to be avoided.
Yet I have to wonder, how would this meeting feel from the prospective client's perspective? If we look at it from the other side...
- You start off the meeting asking a bunch of personal questions. I hardly even know you! I have no idea if you're someone I can trust!
- I heard that gold is a good investment and ask you for advice; you respond with some financial mumbo-jumbo terms and never actually give a yes or no answer!
- I need a car, and have limited options about how to pay for it. When I try to ask you for guidance about how to pay for it, you respond with more financial mumbo-jumbo about "rapidly depreciating assets" and don't actually give me a useful solution about how to get the car I need!
- I am very proud of my son and want to send him to college, and need to figure out how to pay for it. You tell me I can't afford to send him to college, yet you also tell me that I can't get any scholarships and I can't qualify for financial aid either. How can I not afford college, yet not be eligible for financial aid!? Isn't that the point of financial aid? And once again, you give me no solution, either.
- I take advice from people I trust. I trust my brother, I've known him all my life. You talk down to me and you talk down at him because he's an electrician and you sit in an office and have a fancy degree. I still don't know if I should trust you, but now I'm not sure I even like you.
- I am somewhat lost in the financial world. I read occasionally and hear about things I can do to improve myself, like investing in gold, buying a condo, avoiding expense annuities, and socially responsible investing. When I ask you about these things, you shoot them down, talk down to me, sometimes insult me, and never once give me any actual useful advice in response! The more questions I ask, the more rude you get; isn't the point of you being an ADVISOR that I ask questions and you give me advice?!
While we as financial planners watch this video, and laugh and smile at how it parodies a meeting with a difficult client, I wonder if consumers might also watch this same video, and see an excellent parody of how financial planners talk down to them, use lots of mumbo-jumbo words that no one understands, and generally don't give any useful advice unless you already have tons of money. In other words, perhaps this video isn't just an illustration of a planner and prospective client failing to connect; maybe it's also a metaphor at a broader level for the higher level disconnect between the financial planning profession and the average, not-already-very-wealthy American.
Go back and watch the video once more. Put yourself in the prospective client's shoes, walking in an information-overloaded world and facing significant personal financial challenges, and see how you would feel about financial planners standing in that person's shoes? And if the reality is that there are over 100,000,000 American who are struggling financially and need advice, and 60,000 CFP certificants trying to give them advice - and having disconnects like the one the video illustrates - who is it that needs to change to bridge the gap? As financial planners, we tend to walk away from "bad" clients like this, implying that the fault lies with the client; but if this is truly a demonstration of the challenges that the average American faces, one has to wonder... maybe the problem is not with bad clients, but with us for being out of touch? Maybe we need to spend more time learning tools and techniques to actually connect with and provide helpful advice to clients like this, rather than dismissing them for their financial ignorance?
So what do you think? Does this video resonate with you and your challenges in working with clients? Do you have a different take on the video when you watch it again trying to put yourself in the client's shoes? Who needs to change to bridge the gap?
Michael,
As usual, great post. Let me start by saying that I found the video hilarious and I believe that many of us in the planning industry find this story relatable.
I truly believe in the vast disconnect between financial planning and the majority of Americans. That being said, I think that a lot of the problem comes from the fact that what we do is not considered a “professional” vocation. There is no “degree” earned by an individual that allows them to offer financial advice. So, even though there are many of us who have been in this business for several years, always put the client first and have multiple certifications, we are still only trusted a little more than a car salesman.
I am not saying that we shouldn’t be questioned or that the financial planning process should not involve education however, our starting place on the food chain of trust certainly doesn’t help.
Replace your “other side” with a fictitious first conversation between doctor and patient or attorney and client and I think that the issue begins to become evident:
“I heard that Lipitor is a good drug, why don’t you give me some of that…”
Thanks again for some great content and a thought provoking point of view.
I cannot believe how awesome this post of yours is, Michael. People in this field NEVER say this kind of thing. It’s not done!
You’ve hit it on the head. Yes, client demands are not always reasonable. But the JOB is to HELP, not to find fault. WHY are client demands not reasonable? What are people in this field doing wrong? Figure that one out and you have identified where the biggest opportunities lie.
Bill Bernstein often complains that investors just do not understand math well enough. My Lord! You are not going to get people to take calculus. The job is to figure out how to make sense of investing without all the numbers mumbo jumbo. This can be done! You just need to go into it with the right attitude. (And I love Bernstein’s stuff — that’s not the point here.)
Rob
Thank you Michael. Most professionals forget what it is like to walk in someone else’s shoes because we never take ours off. The video is hysterically funny….I was a little offended by the gender bias but not surprised and it certainly helps make your point. Thanks for the work you do!
I explain six components of Pfp to my tax clients. Some engage some do not. But we should educate and move forward to plan only with those that value planning. You gather, analyze, present plan, make recommendations and sometimes no follow thru to open an IRA or establish a 529, or increase 401k, buy insurance, get a will at first but maybe come around. Also some people don’t value an emergency savings account or a budget for that matter either. I think asset management is different they trust you to manage their assets, assess risk tolerance and make portfolio recommendations to attain a goal.
You try and help and educate but you can’t make them take action all the time 🙂 I question how to help more all the time! 2/3 don’t have a fin plan for a reason – they are not planners and live day to day at all income levels.