Kitces & Carl Ep 73: Introducing Financial Planning To Clients Who Previously (Only) Bought A Product

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Show Notes

• Nick Murray

Kitces & Carl Podcast Transcript

Michael: Good afternoon, Carl.

Carl: Greetings, Michael. How are you?

Michael: I'm doing well. I'm doing well. I'm fascinated by the presence of the blue sofa today, though. It has morphed itself a little bit. It is... And for those who can't see, the blue couch today is a blue Sharpie-drawn couch on the wall because you are the Sharpie guy. So this is an amazing rendering of the blue couch. I feel like we're going very meta with the blue couch now.

Carl: Yeah, I think we're accomplishing two things. Number one, I'm trying to troll you with the blue couch. I'm coming up with new ways to do that. Number two, if anyone doubted whether I had any artistic ability if anybody's ever used, "Well, I can't draw sketches because I have no artistic ability," all they have to do is see this picture of the blue couch. There's no artistic ability.

Michael: Recognizing that there's no legitimate art gallery showings for your art, for your sketches.

Carl: Yeah, yeah, all I have to do is point at the blue couch. I don't even know that I was... It does have four legs.

Michael: So, for anybody who is just listening and wondering, there is a video version of all Kitces & Carl's on YouTube. So this is Episode 73. So if you go find Kitces & Carl Episode 73 on YouTube and you want to see the visual, it's on YouTube or also on Kitces.com. Because this is a drawing not to be missed. I feel like, Carl, just at some point...because there is a little bit of this episode that's kind of like "sit on the couch therapy." I think we're just going to have to rebrand the whole thing, like, ‘Kitces & Carl: Blue Shirt and Blue Couch.’

Carl: How about just ‘The Blue Couch’? That's the new podcast name, ‘The Blue Couch.’

Michael: Welcome to the Blue Couch.

Carl: Welcome to the Blue Couch.

Michael: Welcome to the Blue Couch. Just take a seat and let's talk about your challenges today.

Carl: Oh good. So good.

How Advisors Get Stuck In “Boxes” That Don’t Showcase All Of Their Skills [2:18]

Michael: So, speaking of which, today's theme is very much someone who sent in their blue couch problem. So, I thought it was a good one because it's emblematic of something I'm seeing a lot these days. So an advisor wrote in and said, "We manage a great team, $300 million practice that's been growing by buying other small solo advisors who were not very financial-planning oriented. And they're turning their clients into financial planning clients." So they bought some other planning firms, and they went out and bought two life insurance agent firms. Old school insurance agents who have a bazillion clients. And often the valuations of firms are frankly not terribly high because a lot of it's one-time commission revenue. So you can buy a life insurance advisor's book of clients for a lot less than an RIA’s book of clients.

So they went to buy the life insurance agent's clients to start offering them their financial planning and more comprehensive services and try to bring them in. “Basically, the life insurance agents are so pegged as life insurance agents, we're having trouble expanding the conversation without it just feeling like we're giving them just a financial planning sales pitch."

Carl: Yeah.

Michael: And so, the question came in. I thought this is a good one, these situations. I think we do this to ourselves sometimes. And certainly, it happens in situations like this, where you buy a practice. Clients tend to remember us for the one first thing that they came to us for. "If my elbow hurts, I go to my doctor. My doctor is going to forever be, in my head, is my elbow guy." It could be that they do all sorts of wonderful things, they're a general practitioner. But, "You fixed my elbow, you're my elbow guy." I tell anybody who has a hurt elbow to talk to my doctor.

And so, when we sell a life insurance policy, we get known as a life insurance person, even if we do a whole bunch of other stuff as well. Heck, when the first thing we do is implement a portfolio, we can get shoehorned into being, "My investment person," even though you wanted to be a comprehensive planner that just happened to implement a portfolio because that was part of what they had and needed. So we get stuck in these boxes.

Sometimes we inflict it on ourselves. Sometimes it's the history of the firm that we buy. So to me, there's the direct question here, how do I position this conversation when I'm buying a life insurance agent's practice and I want to enrich the offering with financial planning? I think just more generally, how do we get ourselves out of these boxes with clients when we get stuck in them?

Carl: Yeah. Yeah, that's such a fun conversation to think about. And the first thing I think about is getting really clear on the mindset. Because I think there's this fear and worry, and it even came across in that email and that person would not be alone. We all feel this way. So I'm not in any way picking on that person. This is a giant empathetic hug, which is, we think, "Oh, we don't want to come across as sales pitchy."

And I think if we can change that mindset to realize, "No, you're saving people." You know for sure that... I think the doctor analogy is awesome. Especially if you were the primary care doc, or... You've got to have a comprehensive history. You can't just... And if somebody came into you and said, "I really am having some problems with my heart," and they asked you other questions that seemed to you to be outside of...it wasn't specifically about the heart, you wouldn't say, "I'm sorry, I'm not going to tell you that." You wouldn't feel like they were trying to pitch you. You would feel like they were trying to get a thorough diagnosis so they could write a prescription.

So I think if we can get our mindset shift first like, "Wait, I'm just trying to help here." And Nick Murray has done a lot of cool work on that. Like, "I don't want to be one of the generals. I want to be the Chairman of the Joint Chiefs of Staff," that whole idea. And then the second thing I think that's important for context is the range of these conversations. It's one thing if you're adjacent, like you built a portfolio based on some goals and now you want to expand that relationship a little bit. That feels much closer than what I would call a customer who bought a single product, particularly around insurance. I think...

Michael: Which I think, realistically, is the context here. Just... And look, I'm not trying to be negative to insurance agents in general. And some do pretty broad work. But I think clearly, the context of the conversation for this advisor really is just the life insurance agents pegged the life insurance agent as a life insurance agent, and they were right.

Carl: Yeah.

Michael: And he's trying to come in and sell something broader and do more and expand the conversation, but it's just feeling like a sales job.

Developing A Deeper Sense Of Purpose With Pre-Existing Clients [7:34]

Carl: Yeah, so let me give you a little...Maybe I can share a little secret because I've been working on this problem. And it's been a little more adjacent for me, the investment person wants to be, but I think it still applies. And then we can talk about how to adapt it way out to the edge. But this seems to be a hang-up for a lot of people. "I got into this industry because I wanted to be...I was an investment person. And now I realize I want to be comprehensive, but nobody signed up to cry on my couch, the blue couch. None of this stuff. How do I have these conversations? Because it's a little embarrassing. I probably should have had this conversation. I'm now realizing, how did I even build a portfolio without knowing a deeper sense of why? It's a little embarrassing. How do I do it?"

And it's a real hang-up for people. And it was a hang-up for me for a long time until I just figured out one simple way to solve the problem. And super simple, super easy if you have your mindset correct. And it's just, you do your normal review. So maybe on our way in this discussion, we can peg that way far, the life insurance example. Maybe you just do a normal life insurance review. "Hey, I realize you bought this life insurance product four years ago. We're implementing some new things around here. We want everybody to come in once a year just to make sure that we've taken care of your needs. You do your normal review, the normal review, and as you just save 10 minutes at the end of the agenda.

And at the end of the agenda, you say... Now, first, I want to start from the perspective of this is more adjacent, the investment person. Then we'll have to back up a little bit. But the investment person you just save 10 minutes. You do your portfolio, this is what it would be. Quarterly performance report. I've been doing this for 10 years. Do it. Do that. Sometimes we get all worried that we have to make some big announcement. I think the thing I wouldn't want to do here is announce, "We are now comprehensive financial planners who want to play a central..."

I wouldn't make a big announcement, even if it was more adjacent. I would just show and I wouldn't tell. And the way to show them is to do your normal thing, the thing you've been doing in the portfolio thing. The performance review, save 10 minutes at the end. If you have to put it on the agenda, just put a conversation, say 10 minutes and say, "Michael, we've been working together for three years, two months, 20 years," whatever. "We've been working together for, whatever, three years. And I've gotten to know you pretty well over that time. And so I think..." And again, I realized we're going to have to back up to the life insurance thing. But, "I've gotten to know you pretty well over that time. And so I think I know the answer to these questions. But they're so important, I didn't want to make any assumptions."

And you could only say that if it's true, which is a problem for the customer life insurance thing, which we'll get to. "I think I know the answer to these questions. But they're so important, I didn't want to make any assumptions. So, Michael..." And then, dive into basically your first meeting question, your new first meeting. For me, it would be, "Michael, tell me, why is money important to you?" For Dan Sullivan it would be, "Michael, I was just thinking about this. If we were meeting three years from today, what would need to happen, financially, in order for you to feel like the last three years had been a success?"

Whatever it is your question is, just dive into it. And then listen, do all the things you'd normally do, ask follow-up questions. And then say, "Gosh, man, Michael, thank you. Like I said, I thought I knew, but you know what? That actually informs some of the work we'll do. So would it be okay if, when we meet next time, I reference back to this conversation?" You may learn some things where you even need to say, "Gosh, Michael, I learned some things here that I want to go back and look at our investments through that lens. Is that okay? And I think it might even be worth it. Let's get together in a couple of weeks, and I'll tell you what I see because we might want to make some changes."

Depending on what you learn, you can adjust what's the next step. Because it could just be, "Thanks for that. Next time we meet, I'll make sure I bring that up again."

So that's been hugely helpful. No big deal. You don't need to make a big thing. So how do we do that with the life insurance people? And I think the conversation would be something like, "Hey, Michael, I know you..." Am I still the agent? Or is the agent gone?

Michael: The agent is gone. I think the agent would probably sell policies 2,000 people, had a great run, I'm retired. You bought it.

Carl: Yeah. So, I'm going to have to make some assumptions that the policy was good. The experience was...at least that one transaction was. Because it would just take us five hours to unwind bad transactions. But if we make that assumption, we can say, "Hey, five years ago, Michael, I know you were working with Jim back then. And Jim helped you find this life insurance policy that served the purpose, and we've been reviewing it. So, we'd love to have you come back in and review."

And then, I would just flow into it. It would take a little practice. But I'd just flow into that conversation and say, "Look, this policy has performed the way we expected. And I'm just curious, Jim, as we looked at this - I could guess at the answers to this question based on the insurance policy and the notes we have, but that'd be kind of silly. So let me ask you a question. If we were meeting three years from today..." Just dive straight into your question.

I think the other option would be to say, "We bought this firm, a bunch of life insurance clients, we're financial planners. Let me walk you through it." But that feels to me too hand-wavy, that's the only word I can come up with. so, that's how I would do it is I would just slowly start the process of building a relationship of trust. The easiest way to build a relationship of trust is not to talk but to ask really good questions and listen, diagnose slowly, and don't make any huge declarations would be my approach.

Setting A Contextual Groundwork Before “Just” Asking Big Questions [14:00]

Michael: Yeah. Because to me, so much of this as a function of, again, we get stuck in the box that we were set in originally. And I think the challenge, particularly if you're acquiring your way into a practice, is you don't even know necessarily what box that was, that was the original context of the relationship. So, to me, just hearing this scenario, I would be approaching it by first, obviously, get in touch with all the clients. And not with the big rollout like, "We've bought out Jim and I'd love to come and tell you what we do." But just, "Hey, we've taken over for Jim. He retired. We wish him all the best. I know you have a policy that you bought through Jim in the past. I'd love to come out and just review it, make sure it still fits for your situation, get to know a little bit more about you. Would it be okay if we came out to meet?"

First, let's just even get that level of permission. Because sometimes, "I just bought the policy and moved on. I don't even remember that Jim sold it to me. We can clarify that." When you get out, I would start with, "What led you to work with Jim originally? Were you still working with Jim actively? Or had you guys not really been in touch in the past few years?" And just, let's understand what that relationship looked like originally. Was that covering... You could even then start probing, "What were you... How did you feel about that relationship with Jim? Was that covering all of your needs?"

Carl: Or can I just interject real quick? I love where that's going. It could just be, "Hey, walk me through how you made the decision for this specific product, this specific life insurance." Like, "Hey, I don't know much about this. Just tell me about how this has happened." I like that idea of just explaining that.

Michael: I think part of what you understand, there's a difference between the client who bought a life insurance policy from Jim because that's all they wanted. The client that bought a life insurance policy from Jim because they thought they were going to get more advice and was really not thrilled with it. And it turned out Jim only did insurance and would be totally welcoming of you doing this. There's also the client, yeah, they only bought a policy with Jim and because of that, they have financial advisors. They already went and hired someone else, and might have been working with them for years.

So rather than starting with, "Well, I'd love to tell you about all the stuff we're going to do now that we've taken over for Jim." Just start with, what's their financial advisor journey been? Did it start with Jim, end with Jim? Was Jim the one? Was Jim not the one? So that you understand whether there's even a door open here. And if so, then I think it takes you to an endpoint of, for someone where the door is open, "Look, we're going to take great care of you and this policy that you bought from Jim originally. But I do want to let you know that we actually do a little bit more for our clients than what Jim did. And would it be okay for me to share with you a little bit more about some of the other work that we do with clients that we work with?"

Carl: Yeah, what else comes to mind too, though, is just, without even having to say... And yeah, you totally could say that. I think that would work well. I also love the idea of just looking for just the adjacent solution. First of all, demonstrate that you know more about that life insurance product than anybody else on the planet. "Let me walk you through this." Because I'm just thinking of this right now as, yeah, we'll go totally unnamed, but my car, my insurance, my car and homeowners' policy.

I mean, listen, we found out after five years of working with this company, this specific agent that I hired that I know personally, we were underinsured for our home by 50%. That's crazy.

Michael: Yeah.

Carl: We had the wrong on our rental home. He didn't ever ask if there was a basement. So he forgot to put the rider on it that allows for a backup of the plumbing, sewage.

Michael: Oh, in case it all dumps nastiness into your basement, yes.

Carl: Well, we had one of those. There was no rider. Every single person I've ever spoken to in Salt Lake City that has a basement, has that rider checked. Ours wasn't, because the person forgot to...the agent forgot to ask us. Fifty thousand dollars, I remember exactly where I was when I was told that was denied. So, remodel to put that basement back together cost us $50,000. So that mistake cost us $50,000.

And when I told our new insurance agent about this, they were just like, "I can't believe that they didn't." So the bar sometimes...and this is true financial planners, this is true of investment. We're not picking on insurance agents here. I'm just saying, bankers, the bar generally is pretty low. So if you go in and demonstrate, "You may or may not know this, Michael, but let me walk you through this policy, exactly how it works. And at one point you chose this face amount. Do you recall how that decision was made?"

And I would just love to find an adjacent thing like, "Well, you know what? We actually bought that because we invest the difference. It's a term policy, we invest the difference." "Oh, tell me a little bit about how you made that decision."

Michael: Yeah.

Carl: And then...

Michael: How's the difference going?

Carl: Yeah, exactly. How is that...

Michael: "You bought it to invest the difference. How's the difference going?"

Carl: Yeah. How's that going?

Michael: We're now into your investment discussion.

Carl: Yeah. How's that going?

Michael: Look where we ended up.

Carl: I would much rather find a way to show them that we do more than tell them that we do more. So it would be like, "Oh, yeah."

Michael: And I think that's the powerful thing, just when you start going down the conversation here. "What led you to buy this policy? What was going on at the time? Help me understand, where did this face amount come from? How did you end up buying from Jim? Where did that... How did you get introduced to Jim?

When you go down that road, literally, you just you get a client that's starting to feel heard and understood because they get to talk about themselves and their journey, which is what most people like to do. And there's a decent chance you're already forming a deeper relationship than Jim had with them, particularly if Jim really was in a box of just sold policies and moved on to the next. They probably didn't actually have as deep of a relationship with Jim unless he was that small subset of top clients.

So as you said, you may just start showing them with your actions, with your interaction, "You're going to have a different kind of relationship with me than you had with Jim. And if you like this kind of relationship, I'd love to share a little bit more about the other things that we do, because we do more than life insurance work here."

Carl: Yeah, and let's just keep playing this game for a minute. Because I think even right at that spot, it's so beautiful the thought of just going out and being curious and seeing...looking for ways you could be helpful adjacently, and then being helpful without asking for permission to show anything. Just being helpful. What if you went home from that meeting, and you just stared at the ceiling with that person's name, and thought creatively, "Oh, they told me that they bought a 20-year policy because their first child was born. And it's been 18 years. Oh, gosh, I wonder what's going on with education planning."

Or, "They told me they invest the difference in the portfolio." I wonder if you got home and you sent, "Hey, I was thinking about you." A week later, "Just thinking about you. And I remember you mentioned the kid. Hey, how's the education planning going?" You just didn't ask for permission, you just started showing that you do more and in a thoughtful, considerate way. I don't think there's any better way to do that. The other way is to blast email everybody and say, "We bought this thing, and we're holistic, and we're..." And we all know how that goes. Those words mean nothing to anyone anymore. They've been stolen.

Leveraging Active Listening To Demonstrate Differentiation And Problem-Solving [22:33]

Michael: Well, and to me, there's a core of this. The classic rule of thumb is you're probably having a good approach talk with the prospect if they're talking 80% of the meeting. And if you of it the same way here, it's not going out to them to say, "We'd love to introduce ourselves and tell you about all the more comprehensive or planning work that we do," even though you do and it's awesome. It's, "I'd love to come out and just learn more about you. You've done some prior work with Jim. I'd love to just get up to speed on what you had, make sure you're clear on what you have, make sure I understand why you have it. And just learn and get to know a little bit more about you since you're now technically a client of our firm. But we really want to put some meaning to that."

Carl: Totally.

Michael: If you got to the same point and they talk 80% of the time through that meeting because you're asking questions and just getting the backstory in the journey, you're probably finding your way to the same conversations that you would if it was a cold prospect who had a life insurance agent who retired and was looking for a new advisor.

Carl: And you're demonstrating immediately that this is different. "What? Nobody's ever come out and listened." You're not trying to sell anything. And I think that idea of just showing up being human and being curious. And you could say, "You bought this policy years ago, we've now purchased this business. We actually take this really seriously. We consider you a customer of the firm. And we actually wouldn't even call you a customer anymore. We'd call you a client. And so, we'd love to just sit down and find out more and make sure that this thing that you own is appropriate. Let's start there." And then you just demonstrated immediately how different you are.

And if they do have an advisor, the other thing that's really interesting, not that we're running around trying to steal it. But look, if they do have an advisor, they're probably not as good as you. And so, we want them to be with you. And so, if they do have an advisor, you'll be demonstrating how different you are from them by just listening, no pitching. No...just listening, asking really great questions, feeling heard, finding an adjacent way you can be helpful. How can I serve? How can I serve? How can I serve? So much better.

Michael: I think the other thing to me that's particularly important just to recognize in this context, in particular, buying Jim's life insurance practice and going out to see Jim's clients, there's a special qualifier that comes when we sit across from prospects in our office. They're only there because they reached out and said they wanted to meet. That's pretty much how it happens. They call it or email or got referred or whatever it is, but they came because they were looking for something. Something's hurting enough that they decided they were going to actually meet with a financial advisor to figure that out.

And that's not necessarily true of Jim's clients. They may not have any pain. They may not have any particular thing that they're looking for help for. And to me, just part of what that means at a fundamental level of why it's so important to come to them with, "Hey, I just want to learn about you and your story since you've now got a policy with our firm since we've taken over for Jim." Is recognizing there's a good chance most of them are going to do business with you anytime soon. And it's not because you're not awesome and valuable at what you do. It's they literally don't have any pain point or need or motivation to hire an advisor.

And if they're not feeling the pain and desire to act, they're just not going to act right now. At best, you can make them aware of what you do, and how you show up, and the way that you connect with them so that when their elbow hurts, they know who to call. But to me, there is an expectations adjustment that's really important, because if you don't adjust those expectations down or recognize that a lot of these clients just aren't going to have a need right now, then you put the pressure on to get some business. And your pressure and your need for them to say yes is going to kill this, even if the rest of it is going well.

So if you approach it understanding this is almost certainly a long game, because the odds any of them actually need a comprehensive advisor at the exact same moment you bought Jim's practice is actually pretty low. So assume you're playing a long game, which means this is a prospect you get to build a relationship with, it's a warm lead, if you will because you've got an existing piece of business with them. But you have to approach it that way.

Carl: Yeah, this is really important, and I don't know if we're close to wrapping up, but a fun place to think about that is don't make the mistake that there's some magic trick that if you just set it they would go, "Oh, Carl, I'm so glad you're here. We were just thinking we needed a comprehensive financial planner to pay $15,000 a year to. I'm so glad." There's no like magic word. I think the thing that we need to remember is two things have got to happen. And this is just a slightly quicker way than your cold marketing.

Two things have to happen. One, they have to know that they have a problem. I'm using that word. I don't mean it negatively. I mean like a math problem. They have something that needs to be solved. And we could call it a pain point. They have to know that they're sick. All of that as a negative connotation. So please don't take it that way. But they have to know they have a need.

And number two...and this needs to happen simultaneously. If I was drawing it, I would draw two paths crossing. Number two, they have to know that you can solve that problem. They have to know that they have a problem, and you have the solution. Well, the chances of you showing up that day and that happening are pretty low. It's higher than cold. So, but what do you do with them? Well, you put them on whatever nurture system you have. For me, that's a weekly email. And then they just start getting that. They know you care. Six months later, you do another insurance review. You get a chance to help with the adjacent issues. You just... Yeah, I think it's a long game, which I love.

Michael: Yeah. Well, awesome. Appreciate the discussion, Carl.'

Carl: Super fun, Michael. Thanks.

Michael: Absolutely. Thank you.