Kitces & Carl Ep 66: Helping Clients To Stop Maximizing Their Wealth And Set Goals To Enjoy It Instead

***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

• Bill Bachrach
• #FA Success Ep 241: Scripting A “Values-Based Financial Planning” Business Development Process
• George Kinder
• Money Quotient
• Kitces & Carl Ep 48: Why Goals-Based Planning Doesn’t Work And The Possibilities-Based Planning Alternative

Kitces & Carl Podcast Transcript

Michael: Well good afternoon, Carl.

Carl: Greetings, Michael, how are you?

Michael: I'm doing well. I'm very excited, Carl. Do you know why I'm excited?

Carl: I don't know.

Michael: Because I think this is going to be the last episode that you don't have the blue couch. Next episode, I think the blue couch is going to be here. Like we're getting close. I know it's been shipping in. It's almost there, other things in the shipping crate got damaged, but the blue couch is okay, like, I think we're going to be there next episode.

Carl: The question is, I've been told since we last talked that the blue couch is going in my daughter's bedroom, that she's claimed the blue couch. So I don't know how, I may have to record from her bedroom, at least once just for you.

Michael: I think that would be fine. Obviously we need to get her permission and acceptance for that, but I think that's fine, as long as we get the blue couch on.

Although I would point out like in the most extreme and dire of circumstances where like the blue couch is in her room and she has refused to relinquish it, you know, because it is part of this podcast experience, I believe that purchasing a second blue couch may even be a legitimate business expense at this point.

Carl: Oh it is for sure, especially if I put at the office, is for sure. And she's 16 years old and has figured out how to charge interest on everything. So I'm like, I can already imagine...

Michael: So she could rent it to you.

Carl: Sure, there'll be a hefty fee for use of her studio is what it will end up being called.

Michael: But at least it's a tax deductible expense. That's a great way to build her Roth IRA card.

Carl: Oh yeah, of course, of course. Yeah. Perfect.

Michael: So conversation for today. I've been hearing this discussion bubbling up...It's one of these things that crops up, well, frankly, when we get into environments like this where like crypto millionaires are being made, people can have like sudden appreciation of their wealth. Although I don't really want to make this specifically about crypto or hot investments in general. But more broadly, this phenomenon I've watched for a long time. People set a goal, they invest towards a goal, they accumulate towards a goal. They get to the goal, and then they reset the goalposts.

Carl: Mm-hmm.

Michael: Right. And a lot of us do this for a lot of reasons, right? Like coaches and trainers do it to keep trying to get you to the next level. Sometimes we just do it because we adapt to our circumstances and we want something more, something different, or just we get to the goal and realize that wasn't the goal. And we want a different goal.

So I don't want to be dismissive of resetting our goalposts; sometimes there's some very good reasons for that. But what I want to talk about is there's this particular phenomenon that I've seen over the years for some types of clients where I'm like, I'm just going to call them like the Maximizer clients, who just really like to maximize stuff, set goals, maximize, achieve them, set goals, maximize, achieve them, right, like, some of us, I think as advisors are wired that way, we often end up working with clients who are wired that way. Frankly, I think maximizers often hire advisors because advisors can help them maximize.

How To Manage Maximizer Clients Who Just Can’t Stop Maximizing [03:21]

So here's the phenomenon. Here's the challenge that I see that starts cropping up with clients like this. It is that sometimes they get so stuck on the game of maximizing that they reach numbers that more than covers the goal they said they wanted and pretty much any goal they've ever articulated. And they can't stop maximizing and playing the game. Like they can't get themselves off the treadmill. They can't figure out how to reset or even just like they can't figure out how to come up with a different goal. Like the only goal is sort of a money oriented goal, and the more, more, more goal, because goal by definition has to be further than wherever you already are.

And they get stuck. And you know, it can be hard for the relationship, because they like just to keep maximizing beyond the point that it's really helpful. Frankly, I think for some of them, it does not exactly contribute to their happiness because they're essentially perpetually unsatisfied and trying to reach towards something further.

And so I'm just wondering, like, how do you handle these clients where it just seems like it's a never ending treadmill to their detriment, sometimes to our detriment as the advisor? How do you manage these clients? It's like we make goals but we never get to the goal because they always reset the goalposts to something else. That's just more, more, more.

Carl: That's a super fun question. I think it might...at least in my head, I want to narrow it just a little bit. And you pointed at it. Let's pretend like there's something unhealthy about it, right? Because there's nothing wrong with saying, "Hey, I've got X and I want to X because I love playing the game." But to me, and this is happening, right? I've got a friend who has more than he'll ever need, like 10 times more than he'll ever need and more than his kids or his grandkids or his great grandkids will ever need.

And he says when you ask him what is the most important thing to him... So to me, let's circle back to like, I think real financial planning is about aligning people's use of capital… and when I say capital, I mean time, money, energy and attention. So time, money, energy, attention, and I'm thinking of this as a Venn diagram. For those of you who are just listening, like it's a circle, there's one circle and says use of capital. The other circle says, "What's important to me?" and it could just be to simplify, it could just be money and values. And there's no overlap between the circles. Right? That's where like most humans are, right? Like, there's an occasional overlap. It's like orbiting, orbiting, sometimes they move in...

Michael: What are the two circles again? I'm trying to mentally vision the Venn diagram.

Carl: Yeah to keep it simple, let's go a circle, and it's labeled money. And I like to expand that and label it 'use of capital.'

Michael: Okay.

Carl: Money, time, attention, energy. But just money, and the other circle is labeled, 'What's important to me?' or we could label it 'Values.' Money, Values, right? And there's no overlap between the two.

Often, for many of us, like when I look at the way I spend my time, because I know what's in my important to me circle, it says, “time with my family, mainly outside, serving in my church and community.” If I go look at I spend my time and my money, often, there's huge chunks of my day that there's no overlap, right?

Like, so to me, it's helpful to frame it in terms of like, there's a discussion, the discussions going on with the client, the client has said, like, in this case of my friend who is not a client of mine, because I don't have clients, but if he were, let's pretend like he was, and let's just call him Bill. You know, Bill has told me like, "I'm retired," you know, he turns 50 actually, on the day we're recording this, I won't mention the day, but he turns 50, and I'm going to his party tonight. And I know his kids, and his kids hang out, in some cases, with my kids. And he has a bunch of goals that have nothing to do with money. I mean, they're funded by dollars, but...and yet, he's still just working, working. I mean, like grinding, you know, like traveling and traveling and traveling and grind, never see him, his family never sees him, when they do see him he's grumpy.

And so how do you handle that? You know, and I have a circle, I have a statement of financial purpose. Or at least I could write a statement of financial purpose for him using his words of what's important to him. Time with the kids… I won't get into any specifics in case somehow he stumbles upon this, but you know, I know what's in that circle. And there's no overlap. In fact, it seems to be getting further away in the time that I've known him, and he's just got more money than he had. Health is struggling. So to me, like that's a perfect example, like, how do we handle that?

And I think it always comes down, and it's a question of like, how do you handle influencing anybody, you know, and I always think in terms of empathetic hug or a punch in the nose, and sometimes a mixture of those. And I'm legitimately thinking about this, because of this birthday. I'm legitimately thinking about doing the punch in the nose type, like, “Dude, you gotta fix this. Because you tell me, these words come out of your mouth.”

So I want to make sure we're getting like that space between those two circles that's not a Venn diagram, because they're just two circles with a gap. No one has permission to enter that gap. But who's going to do that? Your spouse? Like try that sometime, like pointing out inauthentic behavior of your spouse. Like, “Wait, you told me this was important, now you're acting this way.” Now, in a good relationship, you can work your way into that and I think that's the definition of a great spouse and a good friend, but most of us have a strong disincentive for not going in that space.

Michael: Right.

Carl: Like I know when my wife's going there because I can see her tiptoeing very carefully. And I want it, like I've said like, and I...

Michael: I just have a vision of like between the two circles in this space, there's a big arch and like emblazoned on the arch is like "Here there be dragons. Tread carefully."

Michael: Yeah, for sure. For sure. And so I love, like I told my financial planner when we hired her, like, "You need to be a drill sergeant. If you don't tell us when we're doing stupid things, we will fire you." And so that gets me to like one of my favorite sayings to start this conversation. And you can go there gently, or you can go there punch in the nose, is "Hey..." let me tell you a quick story.

I had a client who told me he wanted to coach his daughter's football team, soccer team. And that was in the circle that said, "This is what I really want to do. Right? This is what I value, more time with my kids." Oh, great. How would that show up? Frame it, call it a goal. "Oh, you know what would be great is if I could coach my daughter's soccer team." "Why don't you do that?" "I got to work too hard right now, I got to take overtime and all this stuff." Comes in a couple months later, wants to buy a new car. The new car would require a lease. He had some boring car now, like whatever, a Honda Accord. Works great, was paid for, but wanted a new one. As I recall, it was an early Tesla. And I knew that it would require a lease.

So there I was...use of capital was not matching what you told me. What do I do? Nobody has permission to go there. So I did, I just said, look... and here's my favorite line. And I think people hire us to go there. And they don't know that, but that's what they really want. And the empathetic hug, you know, we can do it over time. But I just love like, "Hey, I pulled up my notes, and I was reviewing what you told me last time we met. And in fact, you told me the first time we met too." And this is my favorite line. "You may fire me for what I'm about to say. But you should definitely fire me if I don't." Right? And then, "You told me you wanted to coach the daughter's team. And here we are having a discussion about a $400, $500 a month lease payment. If you didn't have to make that lease payment, how much time could you not work? Would that be enough to coach the team?"

And again, it's not judgmental. “You're the one that told me this goal. It's not my goal. It's yours. And maybe your goal’s changed? Maybe the car is more important than coaching the daughter's soccer team? I don't know. And I'm not being judgey about that. That sounds very judgy. But I'm not. But I feel like it's my job to have this conversation. How do we reconcile this?”

If you don't know that there's something else, and again, like we get all sorts of problems that most people think like, "Oh, I can work my tail off for 40 years and then retire and it's going to work." It doesn't. We all know it doesn't. But if you've already had the discussion where you know there's something else, a desired future state, then it's just up to you to figure out how do you empathetic hug, punch in the nose, how do you help them work towards that desired future state? Is that at all where you wanted to go with this?

The Root Causes That Put Clients On the Goal Treadmill  [13:03]

Michael: Yeah, well, I think it all helps. It sure reminds me, like we had a client like this many years ago. She had, I forget what the portfolio was, but like, she had something like $7 or $8 million and lived on like $50,000 a year or something. I mean, just like she was not even spending 1% of her portfolio and was never going to and was absolutely like fixated on growing and adding and making more money. And it was just like..."You can't even figure out how to use the money you've got, like why are we so focused on this like, grow it, grow it more and more and more, what's like the next hot thing to grow." Like you can't even find a way to use all the money that you've got.

Her name was Julie, so where the conversation I got going with Julie was a version of the old Bill Bachrach question: “What’s important about money to you? We have such this focus on growing the dollars, you're not necessarily using a lot of the dollars right now. So I'm just wondering what's important about this money to you?”

And what ultimately came forth was Julie came from a family that had a lot of money problems, like parents went through a bankruptcy when she was a teenager. You know, all the additional social angst that brings in in teenage years. And so money for Julie was essentially, like security and safety that she didn't have young and basically had never felt since. And so it came down to this conversation like, “Well, like, what would it...like, I'm just wondering, how far do we have to grow this? How much do you actually need where maybe that feeling would change for you?”

She sort of reflected, like it actually wasn't about the size of her portfolio, it was about the size of her bank account. She didn't keep a ton of cash beyond like, you know, we send distributions every quarter to top up so she could do her spending. It's like, well how much cash would you need in your bank account for this to be okay? And it was $500,000. I mean, she spends $50,000. It was like 10 years of spending in cash.

But she had $8 million, so like in the grand scheme of things like, right, she's going to be fine, we did not really need to be like fully maximally invested for optimal growth tier, she already had more than she needed. And so, we sent $500,000 to her checking account and she completely chilled out and relaxed, like just everything changed with her going forward. Because at the end of the day the unarticulated piece was essentially this, like, you know, "I need to have enough money to feel secure," but we weren't having a good conversation about what it actually took to feel secure, and what it took to feel secure was not actually growing the investment account at all, it was growing your bank account, but we never talked about putting in your bank account.

In fact, we were you know, patting ourselves on the back like good advisors that kept her fully invested to the extent possible, and were probably making the problem worse without realizing it.

Carl: That's a great story.

Michael: Having not gone through the conversation. But to me like what it really got to was like, the goal wasn't the goal. Like there was an unstated goal. And once we had the conversation and figured out what the actual real goal was, it turned out that goal was very solvable.

Carl: Yeah, that's such a great story for so many reasons. And I mean, particularly for like the, you know, conflict of interest, you know, like, we're not billing on that account, the emotional balance sheet, that's totally inefficient. Like and realizing, like, actually, it was the most efficient thing we could possibly do if we were measuring quality of life, right? Like, and ultimately the outcome of our work, hopefully, is happiness and fulfillment, right?

But here's what's interesting to me, too, is I think there's like, so we've covered a couple like, the person I'm talking to you, I think we call them Bill, Bill had a set a goals. He wasn't doing them. That's an interesting discussion. Julie had this concern, and you just hadn't uncovered it. So that's an interesting discussion.

There's two more sets that I'd love to just spend a little bit of time on. One is I thought where you were going to go with Julie is, realize for most people, if you're insecure around money, more money will not solve that problem. That's a different type of help.

Michael: Yep.

Carl: And we have to be aware of that, like I was thinking through this, because I've got other buddies that are like Bill, and one of them just sold his second venture-backed firm. You know, basically, pretty close to...it's certainly airplane private jet money and he is broken. A broken human, you know, could barely walk by the time he was done with this, getting on planes, you know, every day to build this business, CEO, founder, the whole thing, and was going to go do a third, you know, like, he's already talking about doing another one.

And it had to be a complete intervention. You know, like, it's bad. I don't want to quite compare it to a heroin addict, but it's like, you know, it's like, can't even unwind from it. And yeah, that's a different set of skill.

So those people need different help, like and I think our job there can be like, "Look, I can tell you this is not a financial problem. Because look, look at this line, "I'm not even saying avoid costly mistakes. I'm saying you could even have a couple costly mistakes, and you're going to be fine." Right? Like, that's a group of people that I think need...our job there, to me, is to help them understand it's not about the money. It's not about the money, and maybe there are some books, there's some amazing work being done, you know, George Kinder, all that other stuff. There's some amazing work being done, financial therapy, like all the stuff going on there. That's amazing.

Helping Clients Refocus As They Transition Into Retirement [20:04]

And then the fourth, that's third, and then the fourth one, if you want to comment on these is like, "Okay, what if they just don't know, they just literally are boring people...I don't quite mean it that way...myopic. Like, they don't...they haven't even thought about like, "I'm retired, I don't have anything else I care about." How do we handle those people? Like, how do we teach them how to fly fish or go golf? Like, what do we do there?

Michael: Yeah, that's the other group that fascinates me. It's just like...you need a hobby. I guess view it at a high level, like, “You need a goal.” And I don't know that I have all that much expertise around this, I don't know that I've really figured out the conversation well beyond just trying to start having it with some clients. And even especially, I'm finding, I'm having this conversation more with people who are approaching retirement and the retirement transition of like, "Hey, just curious, like, any plans about what you're actually going to do with yourself when you retire and check out of all the things you've been doing and like kind of have to find some new hobbies and things to do? Like, just wondering, given any thought to where you going to focus your time and energy going forward?"

And like just trying to start planting that seed of like, you know, “You're going to be a lot happier if you're retiring to something and not just retiring away from something. And so if you've never given any thought to what you might be retiring to, maybe start giving a little bit of thought to what you're retiring to?” I don't know if you have any strategies or conversations that you use around this, but you know, that whole perspective, like, what if they just really don't know? Like, they don't have a goal, right? So it's like the dog that catches the car. It's like I've been chasing it so hard, actually catch it, "Well, I don't know what to do with it now."

Because they don't actually know what to do when they get there, they've only ever had one type of goal. So if they hit the goal, they just go and do the next goal. Or another version of the same goal. Right? “Build a company, succeeded. Guess I'll go make another one. Succeeded even more. Guess I'll go make a third one, try to make it bigger than the first two. Like I don't really have any other goals. So that's going to be my goal.”

So how do you find people who...how do you get your clients to start setting some new goals?

Carl: Yeah, I've thought a lot about this. And I think because it's very similar to...I'm always kind of taught...like, on the behavior gap side of my life, we're continually talking about, like, do your thing, like, everybody's got a thing, go do the thing. And you know when you connect to it, because there's like this sense of energy and passion and tailwind, and, you know, so I've spent a lot of time, I've got a whole manuscript for a book on it.

And I get the question all the time, like, "Well, what if I don't have a thing? What if I don't know it?" And that's a very similar question to me. And I think it's a function largely of like, remembering, and placing small bets.

So I'll take you through the steps, I think. Like, you just, I believe we're all placed...I believe we all have something other than work that we could be contributing to, right? And whether that's gardening, learning how to hunt, you know, build a house, volunteer, we could make a long brainstorming list. So that's kind of where it starts.

Like, step number one is like, "Well, what have you thought of? Like, I love your question, "Have you given any thought to this?" "I haven't?" "Well geez, can we play a fun little game for a minute?"

First of all, like permission to relax. I always use my wand, my permission granting wand.

Michael: Right, for those who are listening and can't see the video, he is literally like dubbing you with a wand.

Carl: Like knighting somebody. Granting permission. I'm the self-declared King of Permission Granting. So first, we grant permission to like relax, is the game. Can we play a little game? You could say, "Could we do a little thought experiment?" Reach up, wipe off the whiteboard? You know, like clean slate. What are some of the things you've enjoyed in the past? What movies have you watched? What things have you gone, like, "Oh, that's interesting." Like just noticing the...I have a face I make, it's called the 'huh' face. Like that's interesting. Like that's an interesting thing.

And you could write down like, you know, man, I used to ski all the time. Oh, ski. Right? What magazines? This is another one I like. In your free time what magazines do you read? What podcasts do you listen to? Like, "One time I read this great book about a guy who builds wagon wheels for old fashioned wagons," like I don't know. Or knife making, you know, build a canoe.

Michael: I had a client who like retired as an engineer, and like the retirement hobby she ended up going into? She did window treatments. She loved working with her hands and making window treatments.

Carl: So awesome, right? So you make a list, and to me that feels like a brainstorm. And then all you do is you just place small bets. And I think maybe the better word is you try small experiments. Right?

Well, what would be the next step? If you were going to get into making knives, like, what would be the next step? Well, I'd probably Google it and just sort of search. You know, why you spend a couple hours next week doing that? And if you notice tailwind, let's talk again, if you don't notice any tailwind, like, let's go back to this list. Like, I think you can teach people what it means to have a goal, right? And what it means to have a hobby, what it means to have an interest, because, look, they're not going to be happy. Like we know this thing doesn't work, this retirement thing, without something else in its place. And normally, it's not golf, but it might be.

How Advisors Can Refocus Themselves To Create Their Own Values Overlap [26:33]

Michael: It reminds me of a conversation with actually an advisor friend who went through a version of this as an advisor, like build a successful practice, you know, was making all the money he needed, was very goal oriented, needed new goal. Was basically like, built the practice, so he could spend more time with his kids, because he had fairly young ones. And then got to the number and then was like having trouble getting off the wagon of just building the practice bigger. And you know it led to this interesting conversation. Like why did you do this? Because he was a career change. Why did you launch an advisory firm? First he says, "Well, I wanted to grow to a certain size so I could spend more time with my kids." Like, "Well, how much time did you spend with your kids?" Not all that much."

Carl: You're there, brother.

Michael: Like what the conversation turned into was like, how could you optimize your practice to spend more time with your kids? And like that became the new game, that became the new metric, the new...

Michael: You can measure it, you can...

Michael: Yeah, the new goal for him, he was very spreadsheet-y, like, it turned into a spreadsheet of like average hours per week and like kid school activities and PTO, and like a three year chart of how it grew up and to the right.

Carl: So awesome.

Michael: And just like, in the truest sense, he just needed a new goal. And once he got a new goal, he had no problem like optimizing and cranking towards...he was a super goal oriented dude, he was really good at it. But like, he needed a new goal. And for him at least, just getting back actually to a version of the, you know, the two circles conversation that you had, of just like, you know, "What was the values thing that led you to start your firm?" And like, okay, now that you did that, like what would be the next goal that fits the values? Not the next goal that just grow, like what's the next goal that moves you another step towards the thing you wrote in the value circle, because the value circle thing was family?

So launching the firm was a step towards family but the next step towards family is not make the firm bigger. The next step for his family is like start outsourcing things in your firm so you can actually spend time with your family now that you've got the income level that you want.

Carl: Totally.

Michael: What's the next goal that moves you closer towards your values? I didn't have a very structured way to have that conversation. But that was where we ended up at least.

Carl: No, it's very, very cool. And I it's funny, because this discussion can always feel like that, like little trite, dismissive statement that we make where we're like 'first world problems.' And I, you know, I bought into that little dismissive statement for a while, and then I realized, because I you know, these are real issues, right? And I live in a town that people often move to when they've achieved the goal, and they move here thinking they're going to be ski instructors or ski patrol men or women, and they do it for like one season and then I get the phone call. And I've literally had this conversation 20 times. I know the exact coffee shop we always meet in; I know the table we sit at, and they lean across the table and they go, "It's killing me. Because I can't just be a ski patrolman."

And I don't mean to like...because you can do this with a teacher or a fireman, like, I don't mean to downplay that at all. In fact, ski patrolman's not...what I meant was ski instructor. And that too, is skilled, highly skilled, but people are like, "It's killing me to be like a mountain host where I ski around and point people in the right direction. I gotta..." It's a real problem among successful people who have met goals, and then don't know what to do next. And I think it can be a hugely helpful thing to do what you did with your advisor friend, is just say like, "Okay, you know, what's the value? Why did you do this in the first place? Are there any other things we could do? Could we sink our teeth into it?"

And again, it might be that starting the third company is the right idea. But could we do it differently? You know, because we all know those people, too, are like, "Look, I'm going to still be involved. But I'm going to be involved in my terms, because this overlap's gotta stay here."

Michael: Yeah.

Carl: "But the thing I'm uniquely qualified to do is start a third company. But I'm only going to do it this way." Or maybe you can't start a third company, maybe you can advise more companies, like so that you can keep control.

But the idea of figuring out like, "Okay, what do I do with my time?" Super valuable thing for advisors to be thinking about how to do that with clients.

Michael: Love it. I love it. Again, some of that, to me, we talked about this a couple of episodes ago as well, but just, you know, we talk so much about doing planning, helping people get to their goals. And to me, this just reminds that sometimes the real problem is, they actually need help figuring out the goals, or new goals, or what the right new goal is, so they don't just get stuck in the same goal cycle they've been in.

Carl: I think you could put a finer point on that. Like, I think it's not sometimes, it's like almost always. The problem is for everybody, we don't know what our goals are. We've got all this mimetic desire. We're living other people's goals, Instagram goals, we don't know.

And so I love to call this goal clarification, which is not a term I'd use with clients until after I'd done it. I'd say, "Hey, you know what we just did?" But goal clarification is massively valuable. And it's valuable early on in a relationship and it's valuable at the stage we've been talking about for sure.

Michael: Awesome. Well, thank you, Carl. Appreciate the discussion.

Carl: Pleasure. Yeah, super good, Michael. Thank you.

Michael: Absolutely.