Kitces & Carl Ep 11: What Do You Call Yourself? Planner, Advisor, Industry, Profession

***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:

• AdvicePay
• Cerulli Associates

Kitces & Carl Video Transcript

Carl: Greetings, Michael.

Michael: Hello, Carl, how are you?

Carl: I'm Fantastic. Fantastic. What's new?

Michael: God, what's new?

Carl: What's new in the blue shirt, nerdy, weekend reading, times 27,000...

Michael: Just juggling everything. It's been an interesting couple of months with...we had a lot of growth in XY Planning Network, we've had a lot of growth at AdvicePay, with lots of enterprises that now want to come into this world of charging...

Carl: Whoa, whoa, tell me real quick, what's AdvicePay?

Michael: So AdvicePay...

Carl: Not that I don't know, but tell the people.

Michael: So AdvicePay is our payment platform for advisors that are charging planning fees. Like, if you want to do a planning fee for a millennial, and they don't have a checkbook so they can't write you a check, how do you get your fee? They don't have an investment account and you need to bill them, we made a solution for that, which we aptly called AdvicePay, because I always name my businesses very literally. Like, New Planner Recruiting, guess what we do? AdvicePay, guess what problem we solve?

But advisor charging fees have been out there for a while, but we built this originally, particularly for advisors that are doing retainer fees, monthly subscription fees, or recurring, where you really don't want to get checks over and over again every month and a quarter across a whole bunch of different clients.

And so we're getting a lot of firms, a lot of large firms, now that are interested in, since Schwab announced a little ways back that they were now doing monthly subscription fees as a part of their intelligent advisory platform, now Schwab Intelligent Portfolios premium, or whatever they're calling it, we're seeing a whole lot more people that want to talk about doing monthly fees for their planning services, now that Schwab is doing monthly fees for the planning services.

Carl: It's so funny to me that such a simple thing can turn into such a massive headache if you don't have an easy solution.

Michael: Yeah. Yeah. We've talked to some very large firms that they were saying that we bring in 30 to 50 paper checks a day. Large broker-dealers have lots of advisors and clients.

Carl: That's one of those like, "Oh, first world problems." But if it's your problem, it's a problem.

Michael: Yeah. Well, they had four full-time staff members whose sole job was just to process all these paper checks, and track them, and reconcile them, and get them remitted to the right advisor across the whole organization. And we were like, "Yeah, or you can use our software and a part-time person who will be bored." Like, "That sounds good."

Carl: Right. Right.

Michael: So we ended up at the front edge of this shift in fees to charging more standalone fees, and really, recurring fees. I think that historically planning fees was like, "I've got to pay the check once, and then that's that," which is hard to model around. But when you do it with monthly subscription fees, ongoing retainer fees, it's a recurring revenue, so you can actually build and scale a business. So I think that's why we're seeing a lot more momentum behind it.

Carl: And is that just advicepay.com?

Michael: Advicepay.com. I keep it as simple as we possibly can.

What DO Advisors Call Themselves? [03:20]

Carl: Sure, for sure. Well, let me ask you a question. I want to take you back, whatever. How far back do we have to go when you were just a financial planner? That was your primary job. How far back in?

Michael: What, a little over 10 years ago?

Carl: Okay, so let's go back 10 years. You're on a plane, somebody sits down next to you, and they say, "What do you do for work?" How did you answer that question? This isn't, by the way, I don't want to talk about elevator pitches. I'm just curious, what did you call yourself?

Michael: What did I call myself?

Carl: What was on your business card?

Michael: Wealth Manager. Well, it sort of blended, Director of Finance Planning, for a while, because I was running the...

Carl: Before that.

Michael: ...the planning area. Wealth manager. And then before that was just financial, actually, God, before that, I was at a broker-dealer, but it was financial consultant.

Carl: Yes, I'm so excited, because nobody else... I'm sure I can't remember. I was so confused for the first 10 years of my career because my, I wish I had every business card. Because all of those, financial consultant. I remember how proud I was, because it's like, "Oh, yeah, I have some buddies that they are management consultants at Bain or McKinsey. I'm a consultant."

Michael: A financial consultant. Of course, they get paid $300,000 a year, and you sold an IRA for a $300 commission, but you're both consultants.

Carl: And they got their MBAs from Wharton, and I went to Southern Community College. There's nothing wrong with Southern Community College. This idea of what we call ourselves is so interesting to me. I hope it's starting to settle out, because I remember that I never knew, not only did I not know what my job was, I remember I spent the first three years in this industry saying, what's my job? But I didn't even know what to call myself, wealth manager? Financial consultant? Vice president of investments? Associate Vice President Investments, financial planner, financial advisor? So what do we do with this? Because there's another realm, like after we solve this problem, we've got to solve the, are we an industry or profession problem?

Michael: Okay, we'll get into that next.

Carl: I get in so much trouble. I get in so much trouble, like literally have people send me emails that like, "How come you call us an industry?!" So when I have a chance to clarify that as we go. So what do people, planner or advisor? It feels to me like we've narrowed in on planner or advisor.

Michael: So I make a distinction between them, but I think it's just that part of the stories we tell ourselves to just try to distinguish ourselves. At least the evolution as I've experienced it, and this doesn't make it right, just the path I've lived, was first I was either a financial advisor or a financial consultant. This was very retail investment advice stuff, so classic advisor job.

Then I was a financial planner. And financial planner meant I was more holistic, because I'm doing the whole planning process. I'm not just a financial advisor giving you advice in your IRA rollover. I'm a financial planner.

Carl: I thought that was a wealth manager.

Michael: What was that?

Carl: I thought that was a wealth manager.

Michael: No, a wealth manager is when they have more money.

Carl: A wealth advisor is when what, an advisor with more money?

Michael: No, a planner with more. A holistic planner, but there's more things to be holistic for. You've got more wealth, so there's more wealth to manage. This was actually tracked by Cerulli Associates. They did a study on this a couple of years ago, that they could actually see...now, this was probably dated, I think the titles have moved further. But there was a pretty clear delineation a number of years ago that people who are calling themselves financial planners tended to work with mass market, mass affluence, and people who call themselves wealth managers tended to be working with millionaires and multimillionaires, but basically doing the same holistic advice thing. It was sort of a wealth segmentation term.

So like going from advisor to planner was more comprehensive, going from planner to wealth manager was doing it for more money, or doing it for clients who have more money. It was a wealth scale thing.

Carl: Yeah. And it also depended on which channel you were in, because it could be wealth manager was just a fancy way to sell more expensive shoes, because you didn't know how to sell shoes, so you came and sold seven percent surrender charge annuities to be like... but I was going say lipstick on a pig, right? That's...

Michael: But we do sell wealth management in our title, but, yes.

What SHOULD Advisors Call Themselves? [08:19]

Carl: Yeah. Look, that's the part of the problem, is I went through a phase where I was like, I'm going to take back the name financial planning. Because here's what happened to me. I'd be on a plane, somebody would say, "What do you do for a living?" And I only had to answer a couple of times to figure out that if I wanted peace and quiet, and I didn't want my seatmate to ask me anything the rest of the trip, all I had to do is turn and look them right in the eyes and say, "I'm a financial planner." Because what they heard was, "I'm going to try and sell you life insurance," right?

And I went through a period where I was like, "No, we're going to take that name back. We're going to redefine for the public what financial planning means," right? It's CFP board. We're going to redefine what that means. And then I was like, "You know? That seems like a silly fight, right?" Good fight, let's let other people do that. I'm never going to win that battle.

So I was like, "Oh, then what do we call ourselves?" And the problem is everything's been solid, right? Wealth manager is such a good description, right? Except that, we've all seen the ads on TV from places that just sell product, calling themselves wealth managers. So I think the thing that's maybe...so what do you do? What do you do?

Michael: So I look at this a few different ways. At the individual advisor level, I think you sort of have two choices. One is: pick the version of the titles and labels you like the most, or dislike the least, and just own it as best you can. "Hey, we are a firm that works with fairly affluent folks. We stuck with, we're a private wealth management firm." People who've got some wealth, connect to that label.

Because bear in mind, it's not about what it means to us, because we know lots of different terms and labels, it is ultimately about what it means to clients. And, yes, there's a challenge, I think, across the board. Any label that associates you with financial services makes people want to take at least one step back, which is particularly challenging in an airplane because it's enclosed, so they just don't turn you and face you again, so you get your quiet flight.

Carl: Yes.

Michael: But you can still try to find labels that will connect with the target audience that you want to reach, and connect with them accordingly. And we found affluent people still connect with "wealth manager" and "private wealth management," so we're using that term as long as it continues to fit.

The second option I think is out there, and this is maybe a little bit easier depending on your clientele and who you're working with. But particularly, if you've got some niche or specialization or area you're focused, pick a title that fits them, that fits their world. I had known an advisor who worked back with doctors, and I think he literally called himself a financial physician.

Carl: Yeah, I was going to ask you about real quickly, let's just talk about, financial physician, financial coach, family CFO. What do you think about those?

Michael: Well, so, twofold. One, whatever your client connects with, like if it was a family...

Carl: Financial architect.

Michael: Yeah. But if financial architect works, you want them to conjure up images of you building and constructing this plan thing for them, or your niche is actually architects, knock yourself out, right? If it works for them, it works.

I think the one caveat to it that I would articulate from the other end, is make sure you actually think about what the term means to the end client that you're working with. The one I'll probably actually pick on a little bit is, I've seen a couple of advisors now trying these labels, like, I'm your family CFO. I work in a business with the CFO. The job of the CFO is to handle the daily cash in and cash out of the business, make sure we can pay our bills, and make payroll, and handle our regular billings, and invoicing, and AR, and AP, and all the things that go with a business that actually has a CFO.

And if you work with affluent folks in business, when you say CFO, they're thinking actual CFO. So you tell me you're my family's CFO, I think you pay my bills, because that's what the CFO does in my business. They make sure all the bills are paid, and that we make payroll, and that the cash comes in when it's supposed to come in, and goes out when it goes out.

And that's not what most of us do when we want to use the fancy label like, I'm your family's CFO. You are not CFO in my household unless you're in my bank account, and you're making sure my bills get paid based on when my partner distributions come out.

Carl: Yeah.

Michael: That's what a CFO would do. So be careful with some of these labels. I think there is such thing as getting so fancy with the label, that the image you create in the minds of your clients is not actually what you do, and now you're just setting yourself up for a problem, because their expectations of your services are not what you deliver.

Carl: Yeah. Yeah, I think that one actually did come up with a couple of people, a family CFO, legally. I think there were some challenges there. Because I still think it's a really great descriptor, but I think to me, the most important thing about what you said was own it. Because I could never do any of those. I couldn't do. I just couldn't. There is no way I could walk around saying, "I'm a financial coach."

Now, I say, look, I want to be careful about the way I just said that. I said that really facetiously, that's because that's how I would feel.

Michael: Right.

Carl: I know people who own it and do great. And so if you do...

Michael: Because is if you own it, you'll say it proudly, and you'll say it comfortably, and you'll say it for real, because you really feel it and believe it.

Carl: Same thing with finance architect, or financial physician. That one would be, I could just never, but I know people who do. So I think that's the important part. It's just own something. That's why it's so frustrating to me. We started this society of real financial advisors. I don't go around calling myself...and we made a decision. We thought...

Michael: You called yourself a real financial advisor?

Carl: Yeah. Back when I was doing it, if somebody said, "What did you do?" near the tail end of it before I sold my business, that's exactly how I'd answer. I'd go, "I don't know, I'm a financial advisor, but not what you're thinking. I'm a real financial advisor." That's what I would do. But I wouldn't put that on my business card, and I wouldn't walk around at a cocktail party, I don't go to cocktail... But if somebody said, I would never say I'm...

Michael: I feel like you actually could own this on your business card, though, to put real financial advisor on your business card. I know some regulator is going to have some issue with that. I feel like they might, I don't know why. But it opens the conversation. You can't put "Real Financial Advisor" on your business card and hand it to someone and not have them ask.

Carl: "As opposed to fake, or?"

Michael: You're inviting them to the conversation. Yeah, well, let me tell you about how I'm different.

Carl: I agree. Michael, we should put a pin in this and remember to do a whole elevator pitch episode, because this is getting really close to that whole piece. Because, yeah, I agree, it opens the conversation. So I think that's the important part, though, is owning it. But we thought carefully about this society, should we name it Real Financial Planner, or Advisor?

And in the end, for our purposes, it was advisors seem to be broader. I know really great people who do amazing work that I would send my mom to, that don't call themselves financial planners. And I know some really great financial planners who sort of bristle at being called an advisor, but most of them will accept the idea that they're in the advisory space, right?

So, own it, I think is our lesson. Whatever you're going to call yourself, make sure you don't get yourself in regulatory trouble, and then own it.

Are We An Industry Or Profession? [16:57]

Now let's talk about, because I want to keep this tight, let's talk about the dreaded industry/profession. By the way, if you're going to send me an email about this, I've already gotten that email, you don't need to send it. I've already gotten it. Because I often say we're part of the traditional financial services industry. And I normally find myself having to pause when I'm doing a webinar, or speaking at a conference, I'll say, "Look, I know. I know. I know. Like, I'm preaching to the choir. You're not part of the industry, you are trying, striving. You are a professional, and you're hoping that you belong to a profession. But nobody loved that.

Michael: I don't think they're mutually exclusive. I think this is one of those things that we put on ourselves. Like, have you ever met a doctor in the healthcare industry? Are they not a doctor because they're in the healthcare industry?

Carl: Or does it make them dirty, because they refer to themselves as being part of the healthcare industry?

Michael: They are part of the healthcare industry. Now, doctors are a profession that are part of the healthcare industry. Nurses is another profession in the industry. There are also drug companies that are part of the industry. There are hospitals that are part of the industry. There are insurers that are part of the industry. There's a whole lot of things in the industry, the professionals that deliver the services happen to be one of them.

Carl: Right.

Michael: And there's nothing wrong with that. And so as I look at it, yes, we all work in the financial services industry, which takes away nothing from the fact that you can be a financial planning professional that works in the financial services industry.

Carl: Yeah, amen. And the way I came to that from was, I always like to think of how humans think of this.

Michael: Yeah.

Carl: And nobody, I don't know anybody out there that knows the difference between you, and the insurance salesperson, and the bank teller. They don't know. It took me five years to figure out the difference, from the inside.

Michael: Well, and I do think it's a fair point to be frustrated and lament that when you're serving your clients as a real financial planning professional, your clients may not actually understand how you are distinguished from the rest of your industry that has a lot of bad stuff associated with it, right?

I still remember going through the financial crisis and needing to explain why our advisory firm is not the same as Lehman Brothers blowing up. But like just, "Okay, let me explain to you, financial services is big. What we do in our financial planning firm is not the same as what Lehman did." But that conversation came up more than once, and just explaining to people the whole ginormous landscape that is the industry, and our tiny little professional piece of it.

So I think sometimes we get a little too wrapped up in industry versus professional. We are both, we are professional in an industry, because the industry is more than just the professionals. It's all the other products, and services, and providers, and vendors, and ecosystem, that exist around it. I am very particular when I use the words. Like when I say industry, I mean industry, and when I say professional, I mean it. Because I do try to use the terms in what I would consider the proper contextual use.

But as you said, I know a lot of advisors that get all up in arms when they're called being part of an industry instead of a profession. And I get all up in arms when you say you're not part of the industry.

Carl: Right.

Michael: We are, and it's broader than us. The healthcare industry takes away nothing from doctors. Acknowledging you're part of the financial services industry doesn't take away anything from being a financial planning professional.

Carl: Yeah, with the awesome caveat that we understand the frustration, because we both felt it. Yeah. I mean, why do you think we have the Society of Real Financial...? Only because it's a cheeky way of saying, "Hey, there is a difference. Just because you haven't run into somebody who does this as..." There are actual...

In fact, this is where this came up a lot for me, was during the financial crisis when journalists that I knew, I would tell them the work that a real financial planner or advisor was doing, and they would say to me, "Oh, that's quaint. Like the butcher, the baker, the candlestick maker." Like it was a fairy tale. And I'd be like, "No, no, no, no. There's actually real, professional, honest, full of integrity, technically rock-star, sharp people, in this business. I know them, you just don't ever hear about them because they're quietly doing their work over there." Right?

So I guess what I'm saying is we get, you and I both, get the frustration. And I just decided that that's a battle to fight every once in a while. I want to be involved in that battle every once while, and I'm glad they're big organizations fighting that battle for us. And in the meantime, you and I decide what to call ourselves. Own it, give somebody a professional experience, so that they know the difference. We don't have to go back to the Supreme Court definition.

Michael: And likewise, a challenge that still lingers to me, again, industry and profession, I think, have some concrete definitions, some concrete labels. We can use them in the proper context, but we live within both. It's the individual title that I don't have a good solution for. Industry and profession are some concrete terms. Advisor planner, wealth manager, consultants, all those labels, all those titles on the business card, I don't know how we reclaim those, short of maybe a regulator that steps in and just tries to clarify.

I'm actually a fan of title reform. If you really want to clean up the industry, just tell firms, "If you use any title that in any way, shape or form possibly implies you're going to give advice or management services, you're a fiduciary."

Carl: Right.

Michael: And then let anybody who doesn't actually want to be in the fiduciary advice business, walk their own titles back, because they don't want the liability. I think that actually is probably the best way that we can at least start to separate them. Because to me, the real distinction is who wears an advisor hat and who wears a salesperson hat.

Carl: Right. Right.

Michael: And having titles that clearly delineate those. But in the advisor world, at least, I don't think we ever conquer the giant list of different titles, frankly, because we're always looking to differentiate ourselves. Hopefully, not just overstate our position, which, unfortunately, a few people do, but we're always looking to differentiate ourselves.

Carl: Yeah.

Michael: So I think titles would be difficult to ever standardize because someone will always want to pick a different version to differentiate and distinguish themselves. And that's why I think we've evolved, consultants, advisor, planner, wealth manager, whatever comes next.

Carl: Totally. It's just really interesting as you're talking, to think about the difference between that and other professions. If you call yourself this thing, like if you call yourself a CPA, you don't wonder what that means. I mean, obviously, there are some difference in tax, and personal, and all that stuff, and audit, and all that, but you know what it means. And it's a little different than just a designation.

Michael: Yeah.

Carl: And the same thing with a doctor. I mean, you don't know that you can trust a doctor just because they have MD by their name. You don't know that. But you do have some expectation that they went to medical school.

Michael: Yeah. Well, and they do have some fairly clear defining terms like "neurosurgeon." I know you operate on brains, it says it in the title, if you want to deconstruct the Latin. There are a lot more, I think, concrete and consistent titles in other professions, you have a good point around that. But it's because either they share anchor points, right? Everybody who is a CPA went through that accounting degree and the CPA license. Everyone who says lawyer, passed the bar exam. Everybody who says MD, has their medical degree, unless you're a financial advisor, planner, wealth manager, etc., in which case you may or may not have passed the two-hour regulatory exam.

Carl: Yeah, and we've all heard those stories. Like, yeah, somebody was trying to tell me, it was taking their...one of their children was studying as a financial advisor, and one of them was becoming a hairdresser. And the hairdressing licensing requirements were more stringent than the financial advisor one.

So the one thing I want to be clear about, though, is this is a big global fight. That's a big global fight, and I think, at the end of the day for individual advisors it's like, "Okay, great, either pitch in on the global fight, volunteer your time, your money, your energy, whatever, to some organization, CFP, FPA, wherever you think it would be best served. But in the meantime, while that global fight is going on, in the meantime, let's pick a title. Let's not expect the title to do much for you, right? Don't expect the title to become some marketing thing. Do really amazing work, so somebody looks at you as a professional. Let's just give one-by-one-by-one.

Sometimes we get so caught up in this global fights that we forget the only way this is really going to change is if every single real financial planner/advisor in the world, wealth manager in the world, acts as if, whether they're regulated this way or not, acts as if they're a fiduciary, gives fantastic advice, gives somebody an amazing experience, a remarkable experience, like Seth Godin says, "Worth remarking about," so that somebody else will tell, and slowly, one by one, by one, by one, we grow, right? That, to me, is the only way that we sort of compound influence around this.

Michael: Except if this works, then you won't have a way to turn off your airplane seatmate.

Carl: Yeah, I'll come up with a new...you're going to be a urologist.

Michael: Well, I'm glad to know you have Plan B.

Carl: Yes. I'll have to lie. Cool, Michael. That's a good place to end, lying. Always a good place to end.

Michael: Lying and urology, fantastic.

Carl: Yes, exactly. Awesome.

Michael: Awesome. Well, thank you, Carl. Another good conversation.

Carl: Yeah, thank you. Yeah, talk to you later.