Kitces & Carl Ep 139: When Have You Done ‘Enough’ For Clients (And How Do You Know)

***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 Ep 138: Crafting Your Own Stop-Doing List To Create Capacity For What Really Matters
• The Little Prince, by Antoine De Saint Exupery
• Net Promoter Score (NPS)

Kitces & Carl Transcript

Michael: Well, good afternoon, Carl.

Carl: Greetings, Michael Kitces. How are you?

Michael: I'm doing well. I'm doing well. We're transitioning into spring season by the time we're recording this, probably close to late spring, early summer by the time this goes live out to the world. So I'm assuming the weather is now getting beautiful in Utah.

Carl: So pretty. Yeah. I haven't put the skis away yet, but mainly up in the mountains running now instead of skiing. It's been amazing. So beautiful.

When Is It Okay To Stop Learning And Doing More? [00:38] 

Michael: Cool. Very cool. Well, I'm excited for today's discussion. It's kind of like an indirect version of the "stop-doing list" conversation we had last episode. I'm just gonna basically just read this question that came in, in full, from a listener. So this is what she said. "I go to conferences. I'm active on social media. I listen to podcasts, which means I'm always exposed to more ways I could be awesome for my clients, more skills I could develop, more deliverables, more knowledge to attain. And then there are the people out there still charging 1% of AUM to basically just throw someone into a third-party separately managed account and send a performance report quarterly. So what I'm trying to get a handle on, I..." The reader, we'll call her Meg. "What I'm trying to get a handle on is when can I stop doing and learning more because I'm good enough and my value is enough?"

So like, not necessarily arguing against never learning another thing, but as Meg frames, "Like my own practice this year, my goal is to not do more for clients. In fact, we're actually trying to figure out if we can cut and then spend more time making sure clients know what we are doing for them." I was fascinated by this framing because I think a lot of us sort of have this natural tendency compulsion and just like, well, I really want to make sure clients stick around. So I'm going to do a little more. I'm going to do a little more. And like, you know, we got a little more efficient with our tech and we saved a little time. So now we're going to do a little more for clients with...like, we freed up this time. And there's this tendency of always be doing more for clients.

And in the purest sense, it's hard to literally argue against doing more for clients and providing more value for clients. But to the extent that we're trying to run a business, yeah, there really is such thing as doing too much for clients or at least too much beyond what you're charging them for. And if they're not willing to pay that, then maybe that's not a good thing to be doing. I think this raises a really interesting question. As Meg framed it, like, how do you figure out when you're doing enough for clients and you really don't need to add in more value? You're good.

Carl: Such a cool question. Such a cool question. There's a couple of things. I'll just, like, maybe put them out there as bullet points so we can go through them. One I want to make sure we get to is utilization rate. I think this is an incredibly important concept. I don't know if that's its real name, but that's what I call it. Utilization of the services you provide, the rate of utilization, I think is really important. I want to talk about that last though. First, I'm like, it's so interesting that on the stop-doing list, if you remember, and I can't remember what Dave Allen had there, I think he had delete, delegate, do. I think that's what it was. Delete is my favorite one. And I really love pushing the edge of that, like really thinking about it because I think...What was Michelangelo's answer when he was asked how he made the David? I think the Pope asked him, like, how did he make the David? And he said, "Oh, it was easy. I just got rid of everything that wasn't the David."

And then you've got "The Little Prince," the saying in "The Little Prince" where he says, "Perfection is not achieved when there's nothing left to add but when there's nothing left to take away." And I think if you think about it in that light, like, really pushing the edges of delete. And my favorite story, which I hope I haven't told too often, is that the story of, like, forgetting to send out the quarterly performance report and having, like, a panic attack over the weekend, like so many people are going to be so mad, and then getting in Monday and having zero emails. And so I waited. So I didn't send it out next quarter. And I finally just changed my ADV to say performance reports available on request, and no one ever asked.

Michael: I say, did you ever even say anything to clients that you had changed the policy?

Carl: No. I just revealed preferences are more valuable to me. Like if you ask, do you value your quarterly reports, everybody is going to say yes. But if you just don't send them and nobody says anything, they clearly don't value them. So like, I'm always running experiments around what can I delete and trying to see revealed preferences, not asking. So I think it's really interesting. It's the same way I try to write. Like, what can I remove from this sentence or this paragraph and not lose the meaning? And I just think that exercise that I guess we're calling Meg, like, is pointing to is like, wouldn't it be amazing to think about what's the simplest business you could be running? On behalf of your clients. I'm not talking about, like, what's the best way to save money so I can have higher profit. I'm just saying on behalf of, what would be the simplest business? What would be the most beautiful, elegant business, right?

And I think the edges of that are we've thrown so much in here. Quarterly performance reports, to me, we taught them that they wanted them and nobody was born with, like, I need a quarterly performance report. Right? We taught them they wanted them. And then now we complain. Everybody's always asking about performance. Well, we taught them. So anyway, I don't know if it's a good idea for anybody else. I'm simply saying push the edge of delete. See what you can get rid of.

How Advicers Can Figure Out What They Can (And Should) Remove From Their Client Service Calendars [06:27]

Michael: So one of the things that strikes me about the way you frame this and that story in particular, I feel like for a lot of us, there's this fear...well, there's a fear that if I stop doing the thing, then they turn out they really wanted it and they loved it and they'll be angry at me and hate me and fire me. But there's a version of that that means we don't even want to talk about taking away. Like, if the economics of our business are such that if I'm thinking about taking something away and I talk to my 75 clients about it and 2 of them say they really like it and want to keep it, it's like, well, crap, I guess I'm doing it because I don't want 2 big clients to fire me. And 2 big clients could be big enough that it's actually profitable enough to keep doing the thing for just those 2 clients. And then you get stuck because, like, good luck finding something that literally every client all universally agree by consensus this would be a fine thing for you to stop. Like, you just...asking basically dooms you to find at least 1 or 2 people that are going to say, "I kind of like it." And then we get paralyzed and we don't do it. We don't stop it.

And to me, the most fascinating thing that you highlight in the story of the performance reports going away is that you didn't ask. It was a mistake. It was a mistake. But you didn't ask. You just tried not doing it and waited to see if anybody noticed. And if they did, like, right, "Oh, I'm sorry. I meant to send it out. It was an accident." It really was. Or, "Oh, you know, we were just exploring how we balance our services. You know, if you really want that, yeah, we'll make sure that we keep doing it." You give them back if a whole bunch of people actually say, like, "I really liked you were doing that thing. Could you bring that back again?" But as you know, I mean, you know, I go to people and say, "Hey, would you like regular updates on your portfolio?" I mean, who says no?

Carl: I totally agree.

Michael: No one says no. It feels like the prudent thing to do. Like, what responsible adults does not say, "I would like regular updates about how my money is doing?" Like, it feels obligatory. But you stop sending it and nobody notices, and maybe that's your answer right there.

Carl: We do this all the time now. Now we'll do this all the time. Like, we'll change something that we used to do. And if people complain, like, we'll watch. Like, oh, is anybody actually logging into that thing? Oh, nobody's even logging...Like, we'll reset everyone's password on it. And again, like I should be careful about...Like, I'm not suggesting that on anything. I'm just saying, like, maybe you have this tool over here that you think is really, really important to people. You think everybody's using it. Well, go check the utilization. Don't ask them if they use it. Go see if they do. Like, there's this concept in behavioral finance called revealed preferences where revealed preferences matter way more than stated preferences. And so just go see.

Michael: Yeah. Stated preferences is what they say they want if you ask them.

Carl: When they're asked. Yeah. So just go see. Think of ways you could see without causing any harm. Like, if you're careful about this, you can be careful about experiment design and see what you can learn through revealed preferences. If something happens where you have a certain tool you think a lot of people are using and, for security reasons, you make it so everybody needs to update their password and nobody asked you about what happened to the password, well, you have an idea that nobody's logging in. So I just would think through that. I'm not suggesting it. I'm just saying. And then this ties into something. It may be...right, like, I changed my ADV to say performance reports available on demand. So when somebody asked, I was like, I could hit a button anytime. There's nothing special about quarterly. I could hit a button anytime to give you a performance report. So if anybody asks, we did.

And then the other thing that's interesting to think about here is that this...One thing that I'm increasingly...and we'll have to do another episode on this, is the way we price our services is really starting to... I'm not saying stop AUM. I'm saying we are giving away a bunch of really valuable stuff. And a buddy of mine is, I think, the worldwide expert in pricing creative services. And he has started doing some work with some RIA firms that I've sent his way. And he's like, "I am shocked. You guys..." I heard this from somebody else 15 years ago. "You guys charge for the commodity and give away the valuable stuff." He's like, "The most shocking thing is I've helped some advisors start pricing the stuff they're giving. Keep the commodity the same and add a pricing layer for this stuff." And he's like, "What's crazy about your business is people are okay paying it." And so there may be some pricing things you think about there, too. Like, hey, you know, there may be services you keep around for pricing reasons, but that's not what Meg was asking.

So let me let me just say one more thing. Sorry, I'm all fired up about this. But the other thing I think is really interesting is I had this exact conversation with my coach. And I was getting asked to do something a lot. I was getting asked a lot. People were sending emails about consulting and coaching a lot. Like, "Hey, could I come to Park City and hang out with you for a day?" Or, "Do you do cold coaching?" Or, "Do you...?" And I was just like, "No, no, no," because I was like, "I don't know what that is. I don't even know. I'm not a coach." So I called my coach and I said, "I need to learn. I need to become a coachy coach," is what I said. I was like, "I need to learn, like, coaching skills. Like, what class do I take?" And she's like, "Why is your first instinct to need to know more? People are already asking. You already know enough." And then she said...

Michael: You know, people aren't asking to go get training as a coach so that they can work with you. They're literally already asking you for coaching. So apparently they already believe you're worth it.

Carl: Yeah. And so to Meg's point...and I think this is really important for advisors who do insanely good work. And I believe I probably know who sent this question. And she does do insanely good work and is incredibly well-trained and, like, one of my favorite thinkers, practitioner thinkers. I tried to avoid the word "thought leader." And so, she, my coach, said, "For part of your career, you get paid for solutions, and then you start getting paid for presence." And she said, "For the first half of your career, you get paid for solutions. For the second half of your career, you paid for presence." I'm not sure it's that clean. But it's not like the solutions go away. And somebody with the experience level of Meg doesn't need to learn anymore, right? Like, she just needs to lean in to providing the space that she already does and know that she...This is the other piece of this. You already are enough. Right?

How Can Advicers Tell If They Don't Need To Keep Pressing So Hard To Prove Their Value [13:45]

Michael: Okay, but when you're not sure you're enough, how do you really know?

Carl: I love...Okay, fine. But where's the...?

Michael: But yeah, like, okay. But where, in practice, do you draw the line? How do you figure out you're there?

Carl: Yeah, that's a really good question.

Michael: We're goal-oriented individuals that, you know, try to diversify and manage risk.

Carl: Are clients asking for any more? I think my initial answer to that is, like, external evidence because that's part of the imposter syndrome problem is, you know, you think you're not valued despite external evidence to the contrary is almost the definition of imposter syndrome. And if there's no external evidence to the contrary, well, then you're in what I call the never-ever or the newbie, which is the fake it until you make it style of imposter syndrome. I have a bunch of archetypes of imposter syndrome, and that fake it until you make it's a different one than the never this or I'm an expert. And imposter syndrome doesn't go away. In fact, it becomes heightened. The more expert you are, the more you're going to feel it because you got farther to fall. Like, when you think about it, you're like, whoa, that's a long ways down there. So it doesn't go away. So we have to learn that external evidence, like, are clients asking for more? You know, what kind of relationships do you have? You know, are people referring business? If you were to do a net promoter score, what would it be? Just guess, please don't do it. I mean, maybe you want to do it. I don't know.

Michael: What's wrong with doing that? I like NPS.

Carl: I don't know. I know. It's fine. It's fine. But I just think no reassurance is enough when you're in that space. So you have to learn to just practice being enough. That's how you know. Put that in your spreadsheet.

Michael: I can't put that in my spreadsheet. I need a spreadsheet. I mean, look, like, my head does go in the direction of what...like NPS and such. You know, if you want to know whether clients are happy with the value, ask them.

Carl: Or look at your...look, just look simply at your retention rates. You talk about this a lot. You got a 95% retention rate.

Michael: Yeah. If they're not walking out the door, you're probably doing okay. And frankly, like, the natural friction of what we do in people's lives change. Like, you should have a few walking out the door. If you have a 100% retention rate, I guarantee you're undercharging. You shouldn't have a 100% retention rate. You shouldn't have a 100% close rate. It means you're undercharging. There should be some tension that they have to meaningfully evaluate. But, you know, I really would look at surveying them and asking. I mean, not necessarily, like, what else do you want me to do or stop doing? Because that's problematic, right? The famous Henry Ford saying was, "If I asked them what they wanted, they would have said faster horses." Right? Nobody would have said a car. They couldn't imagine a thing that they didn't already have. And likewise, asking people, is it okay if I stop providing blank? To me, it's just basically setting yourself up for failure because someone's going to say they want it. If you ask enough people and then you're going to talk yourself out of it because 1 person said it was important.

You know, I tend to go the direction of, like, looking at retention rates. That's your first indicator. And if you've got some attrition, drilling down even what the attrition is. You know, I've lost some clients. Well, is it because they died? Because, like, your value is it's going to change death. You can't solve that one. I talked to an advisor a couple of years ago that was doing a lot of student loan planning and then ongoing planning work with clients and was getting real anxious about his value because he had...you know, we talk about these, like, 95%-plus retention rates. Like, his was like 80-something. And he was getting concerned, like "Do I have a really serious value problem? My retention rates just aren't near anyone else's." I'm like, "You made your business helping people solve student loan problems. I think your problem is that you're succeeding. You work with them for 6 years and you solve their student loan problems, and you've succeeded, and they're done and they move on because if you got an 84% retention rate, you turn over once every 6 years." Like, "Congratulations, like, you're being wildly successful. Go find the next new client that has student loan problems because there's like trillions of dollars in student loans, so we're probably not running out any time soon." 

So my point is being sometimes there's churn or attrition that has nothing to do with I'm not providing enough value. It's external factors, death and the like. It's you serve a specialized offering and they're just actually getting through the value stage that you were solving for. Once you get past those, like, I'm looking at retention rate. I love your framing around utilization rate. Right? Do they do they use it? We stopped printing the giant plan when we realized clients kept forgetting it after they left the meeting. If you don't care enough to bring it to bring it with you, maybe I should just stop printing it in the fancy binder. If you want a copy, I'll make you a copy. You can even ask, like, "Do you want a copy of this?" And almost everybody said no. And so then we just started doing it interactively on the screen and not printing out the plans because they didn't...We do need something to look at. Like, it's a good talking, discussion, conversation point around some concepts. But we started putting on the screen and not printing it out because we realized, like, people kept forgetting it in the meeting, which to me is like an ultimate utilization rate signal. If they don't even care enough to have the courtesy to take it out of the office and pretends that they cared and then just, like, trash it outside the building, then they really don't care.

How Offering Additional Services Can Actually Harm Client Retention Rates [20:24] 

Carl: Can we talk about that for...? There's some real risk there. And I really want to talk about this because the adding, the tendency to want to add. And especially if... It's really interesting in subscription-based, like, community-based membership programs, if churn starts to go up when you hit, sort of, natural. So this would be like client retention rates, you're losing some clients. Like, the natural thing you want to do is add more value, add more value. And the evidence is clear, like, you throw more stuff in there, churn goes up even more. And I was like, that's really puzzling. So I sort of dug into it a little bit and it's utilization rate. Like, let me give you an example. One time we had this membership community and we offered...one year we offered 7 free sketches, you know, like the sketches or whatever the digital license at behaviorgap.com is $100 . And so we were like, just people are already paying a monthly thing. We just gave them 7 free sketches. We're like, "7 free. Here's a code. You can go... it's $700 worth of sketches." And some people...you know, later, like, the normal churn amount in the next month. And I called and asked, like, "Hey, why did you leave? Just curious." And they said, "Well, you gave us 7 free sketches. I only used 3, so I wasn't getting the value I was paying for." And I was shocked. I was like, "Wait, those were free." They're like, "Yeah, but the..." So that's that was a utilization problem. If you offer all of this...

Michael: They were actually happier when you just didn't offer them. When you offered 7, they could only use 3. Then you created a gap where they felt like they weren't using the service.

Carl: Yeah. So I went and researched...This is a real problem. Like, I've talked to a bunch of, like, SAS owners and venture capitalists about this. This is a known problem. It's pretty crazy. The idea is if you offer more than...and the kitchen sink, you know, like, and this and this and this, and people don't use it, they actually feel like...even though it was all added, they feel like they're paying for it. They must be paying for it and they're not using it, so they're not getting their value. So that's a real risk in our industry. And that reminds me of my buddy, Kevin, at the firm. He's been there for 27 years. He doesn't send out birthday cards. He doesn't send out anniversary cards. And I was like, how did you build this business? It's an amazing business. Never loses a client. Rapid response to client questions and consistent experience. We just do the same thing over and over and over. And when clients call, we rapidly reply. So he has like a 100% utilization rate. You know, like, it's a super simple business. People are happy. So that's how I frame that question.

Michael: Well, the extension of that, because I got to get a spreadsheet in here somehow. And I mean, we do a version of this across a lot of our businesses as well. Just survey the people who pay you and ask them. And I mean, the key, you don't ask them, do you want me to do this? Because someone's going to say yes, then you're going to feel obligated. And you don't ask them, should we stop doing this? Because someone's going to say, I want it, and then you're going to you're going to feel obligated. The question that we always ask is, how valuable is this to you? And we give them a scale, you know, 1 to 5, 1 to 7. And let them tell you not do they want it or not want it, because we're not the greatest judges of it and, you know, people want faster horses and not cars and all that. Just ask, how valuable is this for you? And eliminate the thing at the bottom of the list. By definition, it means not many people like it.

And if you probably have more than 1 thing you do in your business, so it's not literally the only thing, the odds are overwhelmingly that if the only thing you drop is the thing that your clients widely agreed is the least valuable, the odds are ridiculously minuscule that even a single person is going to say, "That was my deal-breaker. You eliminated that, I'm out of here. I'm not going to stick with you anymore." Like, if it's rating that low, A, there's probably not anybody who's going to die on that hill. And B, if you really find 1 client who's willing to die on that hill, maybe they just actually weren't a good fit clients because they clearly value something very different than everybody else.

How Do Advicers Know When It's Okay To Stop Adding To Their Own Skillset [25:05]

Carl: Yeah. Yeah. And how I mean, like, quickly as we wrap up, how do you address, though, I need to learn more, I need to I need to be better, I need to...? Like, that part of the question.

Michael: Well, I keep learning because I want to learn. I mean, right, I'm very much wired to be a continuous learner. Like, I'm always curious and I want to go out and learn new things and learn more things. I don't stop on that on that journey. And I mean, an indirect version like your friend, was it Kevin, who just, like, rapid response, continuous experience. Like, that doesn't sound appealing to me. I know, I get why his business is effective. I would get bored in that routine. That might be my ADHD thing. Like, I would get bored in that routine. I couldn't do that version. I need some things that I'm continuing looking at and doing to keep my brain moving forward because it just doesn't shut off and I need to do more things. But like, the fact that I'm going on my learning journey and learning new things doesn't mean I need to inflict it on my business and my clients every time I discover a new object that's shiny. Sometimes it's just for my own edification.

Carl: Yeah, I love that idea of like, hey, you could build a really simple business and then find a different playground. I remember one of my executive assistants once was like, "Why are we changing CRMs again?" I'm like, "Because I like this other one." She's like, "You shouldn't be in there." Like, "Why? It works great for the people who are doing it." I'm like, "Oh, maybe I should go find some other place to get that same sort of enjoyment of change and improvement." So I love that idea.

Michael: So look, there's nothing wrong with continuing the journey. I mean I think the biggest distinction for Meg's question was like, when can I stop learning more because my value is enough? And I don't actually think those have to be connected. You can stop adding more into the business when the value is good enough. Go learn because it's fun to learn, it's intellectually stimulating, if that's what floats your boat. But, you know, learn for the sake of learning. Learn and find a different playground to apply it in. Or if you're going to bring it back to the business, be very mindful about whether this is the thing you really, really want to add. Or I guess indirectly as Meg is highlighting, or use all that learning energy to try to learn what you can cut instead. That's also a valid way to apply the learning exercise.

Carl: Yeah, yeah. Become Michelangelo. Like, what could be removed? And then the other piece I would throw in that may not fit in your spreadsheet is there is a different kind of work to realize you're already enough. Right? Like, no amount of reassurance, no amount of net promoter scores, no amount of testimonials is ever going to tell somebody like me, who's always felt like I'm not enough, that...I don't know if you...Like, that work is done in a different place. It's called a therapist's office. It's called my friends. It's called the mountains. It's never going to come from work. And so I think there is like, and do all this stuff, and maybe there's another piece of work to help everybody realize, like, you are already enough. You're already enough.

Michael: Very cool. Thank you, Carl.

Carl: Hey, Michael. So fun. Thanks.

Michael: Thank you.