Kitces & Carl Ep 54: Showing Financial Planning Value On An Ongoing Basis After The First 6 Months

***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 53: Using Financial Plan Proposals To Show Planning Value To Prospective Clients
• #FASuccess Ep 127: Creating A Stewardship Report To Show Your Ongoing Value To [401(k) Or Other] Clients, With Jania Stout
• The Wealth Management Index: The Financial Advisor's System for Assessing & Managing Your Client's Plans & Goals by Ross Levin
• Crafting An Annual Client Service Calendar To Illustrate A Financial Planner’s Value To Prospective Clients
• Structuring Client Reviews To Focus On What Matters Most

Kitces & Carl Podcast Transcript

Michael: Hello, Carl.

Carl: Greetings, Michael. How are you?

Michael: I'm doing well, I'm doing well. Are you enjoying your time back in the U.S. now?

Carl: Yes, for sure. And speaking of backdrops, what's the deal? Your backdrop changed too.

Michael: Yes. Change the background. Starting to just rearrange the office space a little bit. Unwittingly truly, it wasn't for this setup, but I do have one of your drawings in the background here that I've actually had in the office for a long time. We got it a little more visible.

Carl: You're just cleaning out the closet and trying to figure out what to do with that thing?

Michael: No, no. It was out, but it was on the other side of the room. I can put this in camera view. It's much better than my messy whiteboard and all the other stuff that was back there.

Carl: Yeah, it's perfect, perfect.

Michael: Trying to set it up a little bit better, right? I figure nine months into a shutdown working from home, I can finally figure out how to finish getting my home office space rearranged.

Carl: It's crazy.

Michael: We're not done yet.

Carl: Yeah, for sure.

Michael: Last episode, we were talking about financial plan proposals, and how we try to both, I think, set new clients in a more financial planning frame of mind and not necessarily have the conversation be so investment centric, as well as just literally, if you're trying to get a client to hire you for advice, what do you bring? What do you show? What's the tangible in that approach meeting with a client? We had another question that came in that I thought was great, because it's the bookend of this issue. What happens later? I feel like a lot of financial planning these days, it is all about The Plan. We set up to The Plan, capital T, capital P. We've had our discussions about the value of The Plan and what's it worth to have the big book that you thunk down on the table. Financial planning software is all built to make The Plan and now we even talked about making financial plan proposals as part of the setup to The Plan. I don't actually want to talk about The Plan today. I want to talk about what comes next.

The average advisory firm is like a 90 something percent retention rate. Bad firms or problematic firms have like 92%, good firms have 95+%, great firms often have 97% retention rate. If you do the math, your average client at a 96% retention rate has a 4% attrition rate. That's equivalent to the average client being with you for 25 years. So much of the financial planning process is basically here's what you do to make The Plan over the first, whatever it is, two, three, six months of the planning process, and basically nothing about what do you do to add and show financial planning value for the next 24 and a half years after the first 6 months in The Plan. At least what I feel like I learned early on, which is every few years you do another plan. And I know at the end of the day, I know why I was taught that, because I started in the insurance and product world. A plan was how you set up a product sale, because you would demonstrate a gap or a need and then say, "I can sell you the thing to fill the need." So we did a plan update every couple of years because it was a chance to sell a new product into whatever new gap we found. It wasn't actually an ongoing advice process, it was a find-a-new-sales-opportunities process. I feel like even financial planning software today is still built for that, right? It's not a continuous evolving plan, it's like, you do a Plan and then you duplicate it and change the inputs and make another Plan. It's very one Plan at a time because that's what we did in the sales world to find the next sales opportunity. How do you think about…. if “planning” is a continuous process, how are we supposed to create and demonstrate value over the next 24 and a half years after the first six months, if we're not just making a new Plan every X years. Or maybe we do and that's your prescription, but how do you think about showing ongoing value with the plan?

How Can Advisors Demonstrate Ongoing Value After Delivering A Financial Plan? [05:23]

Carl: I love that question. It reminds me of that old story where the guy shows up, he dies and he shows up at the pearly gates and Saint Peter's there and he [St. Peter] says, "Hey, it's your lucky day. Today you get to choose." And the guy, being smart, says, "Oh, can I get a tour of both before I make a decision?" Take him on a tour of Hell and it's like, people eating wonderful food and all this...there's sports games on the TV. Everything, there's motorcycles and fast cars, all of that stuff. He's like, "Wow, this is pretty cool." Then, he takes him on a tour of Heaven and it's just people sitting around on clouds playing harps, it looks really boring. He's like, "You know, it sounds strange, Peter, but I kind of want to go to that Hell place." They're like, "Okay." They press the button and the elevator goes down and he gets off the elevator and everybody's chained up, and it's fire and brimstone and they chain...he's like, "Wait, wait, wait. What happened?" He said, "Last time you came, you were a prospect. Now you're a client."

I recently had to buy a new car and the place was so good, right up and down until the time I bought it. And now they won't return my calls. Obviously, we need to avoid that. That letdown, it seems to me, depending on the complexity of client situations, it seems to me a 3 to 12 month...there's just a lot of heavy lifting early on. You might be talking often, and then suddenly go to this "regular servicing model", and how do you keep people happy about that? We can get into specifics about what I've seen that really works, but I think the way to handle that is consistency. That people get to know...and here's what I've seen and here's what we did in the firm I had and what I've seen other people do, is we literally picked. Every client had a day of the month.

I remember, some of my favorites clients, Dan and Barbara Ford, as I recall, their day was the third Thursday. So on the third Thursday, there was, like, six clients. And we had a service model that I was taught years ago, it was 12/4/2. It was 12 monthly contacts… a contact once a month. It was four of those were a little more in depth, and two of those were in person, which I think is overkill now. I don't think two in person needs to happen, but whatever. You figure out the depth of client. That should be something you think carefully about, the specialty you picked and the niche you picked, maybe you do need to meet quarterly. Other people, you may only need to meet once every three years. You pick that out, but whatever it is, you build a consistent model around that.

And so, literally, on the third Thursday, Dan and Barbara's folder would appear on my desk with six other folders, and depending on what type of "contact" it was, often it was just we reviewed, I'd open the folder. It looked like those folders that the doctors had. I went out and specifically bought them. They were those cool folders that when you go to the doctor's office, they're all color coded, and they had multiple dividers. And the first divider was called, we called it, because I'd name things, we called it the 17 Point Wealth Management Audit. This was specific. Because clients have no clue what we're doing. After we get through that heavy lifting thing, they don't know. They just think we're sitting around.

Michael: Waiting for them to call.

Carl: Largely, often our advice is do nothing. You know what I mean? They're like, "Wait, I'm paying you to tell me to do nothing and you're doing..."

Michael: No, no, no. “I'm paying you to sit around and wait to answer the phone so that when I call you, you tell me to do nothing.”

Carl: Yeah, and I think it's really important to understand that, to get to the point where you can, professionally, give somebody the advice that they should do nothing... is a lot of work. That's different than the goofy people who just collect fees and deny claims or not return phone calls.

Literally one day, I was like, "You know what? This is crazy." I said to my team, I said, "Will you please write down everything you do for clients?" We wrote down things like, "Make sure that they can log in. Make sure their accounts are householded," I don't know if we still call it that, but householded correctly, so they all appear when they log in the way they want. "Are they reinvesting dividends. Do they have beneficiary designations correct? Do they have life insurance? Do we have an articulated life insurance plan?" The whole thing. You will be shocked at the list if you literally say to your team, "Tell me everything we do." Then, I made a list. Do the assets need to be rebalanced? The whole list. We literally made a list and I saw these, when you go into the bathroom at McDonald's or at the airport, there used to be those checklists of the cleaning things that need to happen, and the person, when they came in, had to initial them. We built a printed out, the first page of that folder was their one-page plan. The second side of that was the 17 Point Audit. It had, every month, it had the list of the things that have to take place, and it had a column for every month, and my assistant would initial the first 10 things. Are dividends reinvested? Did their check get mailed? Did their automatic investment happen? She would initial everything she checked. If there was anything out of order, she made a note. Then, I would initial and then I would call and say, "Hey, we just did your 17 Point Wealth Management Audit." This was a way to communicate value without saying, "Do you know how much we do?" We just did your 17 Point Wealth Management Audit, everything's fine.

I did that for two years. (I'm almost done with this story.) I did that and we had a client advisory council. The calls were always the same. In fact, most of them were voicemails. These days, they'd just be emails. “Hey, we just performed your Wealth Management Audit. Everything's fine. If anything's changed in your life, let us know and I'll talk to you next month.” I was like, do I really need to be making these calls? I asked the client advisory council, I'm like, "Hey, we do this thing. We call you every month. We tell you..." I'm like, "I don't think we need to do it anymore." And they were like, "No, you have no idea how amazing it has been to know that somebody looked at our stuff." To just get that message and some of them had caught on. I didn't tell them, I didn't tell Dan and Barbara that it was the third Thursday. Now I probably would, I'd probably go, "Your day is this and this is what happens on this day. We pull up this folder." Then, when they came in, when they come in for their annual meetings, guess what the first thing they see? They see their one-page plan, they see this audit with initials all over it. Look at all this stuff that's happening without us every saying, "Look at all this stuff that's happening." That's how we handled ongoing client service.

Using A Stewardship Report To Communicate Ongoing Value [12:48]

Michael: I love it. It reminds me a bit, we had an advisor on the podcast a ways back named Jania Stout. She had a version of this. She works primarily in the 401k institutional space, so little bit more institutional clients than call it, "retail clients," like individual consumers. But a very similar thing. In the fiduciary 401k world, there's a giant list of all the different things that you need to do to very literally demonstrate you have fulfilled your fiduciary obligations to clients. Not only would she just capture all this in the CRM, as we're ideally doing anyways, but she hired a developer to build an integration in Salesforce to yank all this information out, and essentially to dump it into a standardized report template that was really nothing more than here is every service thing we did for you over the past year.

Carl: It's amazing.

Michael: She produced what she would call a stewardship report.

Carl: That's awesome.

Michael: The stewardship report was this, just one-pager that had line item after line item. We did this, we did this, we did this. Date, timestamp over and over again. If you get really meticulous about everything that we do for clients, all the way through every service call, every background thing, every bit of shadow work, a lot of stuff can actually end out on that sheet over the span of a year. They would even count the internal due diligence...did you diligence on this particular investment manager, or fund that they hold. That goes into every single client's record because every client that holds that, I did that work for you as part of my ongoing work. What I thought was brilliant about what Jana did was not only that she made this stewardship report to pull out of the CRM, but even that she just took it one step further and automated it, wasn't terribly expensive because you can actually get a lot of stuff out of Salesforce. It's built for that, particularly Salesforce. She automated it so it wasn't even to hard to produce. They could do it in a nice, polished manner every year for every annual review for every client, and they did it in the 401k context. I don't know any reason why you couldn't do the exact same thing in the individual client realm. It would be the culmination of what you're talking about for what you were doing for your 17 Point Audit. Although, I love that you went one step further of a monthly call check-in, which on the one hand, I imagine calling every single client every month is actually a lot of phone calls. But on the flip side as you pointed out, it sounds like a lot of these, these were not planned scheduled calls. These are drop-in calls which you actually know most clients aren't necessarily going to answer. This is 20 minutes every morning of just smile and dial your half a dozen clients, leave a few voicemail messages. Maybe someone you get onto the phone, but the rest are just voicemail, move on, but you communicated it.

Carl: Let's think about that real quick because I built a big spreadsheet to figure out how many clients, and the number was 96. I was like, "Okay, based on how many weeks I want to take off, how many days I want to work and this idea of making quick phone calls and meeting..." Now I probably do it 12/2/1, 12 contacts, 2 of them in depth, 1 in person. That opposite six months the one in person would be a scheduled phone call that we would say, "Hey, this will probably last half an hour. If we need it, I just want to get an update." But I can't remember what that number was, but if I have to contact 96 people and most of those...now I would just automate most of those with an email.

Michael: Would you still do it with a phone call? Do you think it works if you do it by email?

Carl: I think I'd do it in email. Literally what I would do is insert, you'd have a template email and the default would be everything's fine. But you would clearly still do the work. This doesn't work if you lie. You clearly do the work and then you would make the changes, but I would also input...I wouldn't just automate those emails, I would input something like, "How's Jimmy doing? I remember last time he was playing..." I would just check in on those things too so that they know you actually took the time...

Michael: Your sentence or few of personalization at the top, rest is pretty much templated.

Keeping Score To Track And Demonstrate Value [17:27]

Carl: And clearly, if something is changed, to the investment piece, one of those things on the audit was review specific investments. Check due diligence. Anything going on there. If any of that stuff's changed, hey, we've got our eye on this. Just a little bit of context, but I love that. You know what else this reminded me of was Ross' amazing book that changed my life, "The Wealth Management Index." Just having an articulated life insurance philosophy, just the fact that it was articulated. Got you a score. I love that idea of being able to track, which leads us back to, okay, servicing clients for a long time. Outside of that ongoing service model, what else do people want to see? I loved where Ross' books were appointed us, which was here was your beginning score and as we've worked together, your score has improved. I also love, we've talked about it before, that people want to see progress towards goals. They don't want to see performance, they want to see progress towards goals. They've substituted those two things because we've taught them to substitute them, but we can unteach them and wouldn't it be cool if that Monte Carlo line, not only did you have, I think we talked about this, having a confidence interval and that you saw their actual line building over time. I'd use that, whoever that was, wealth care, somebody had that line for awhile, and it was so great to be able to go, "Hey, based on the last three years we've worked together, look at this line. Here, when we got down to 72%, that's when we made the decision to increase your equity allocation plus add a little bit of money. And here, where we got to 92%, you took that trip." That kind of stuff.

Michael: The one other version of this that, I guess there are two other things that come to mind to me, of just other ways I've seen advisors tackle and handle this. One is what I've taken to calling the client service calendar, which is actually a version of what you just described, although I've seen it used more in the context of in-person meetings, but it follows the same idea of just make a calendar all the way through the year of both what we do for clients in person and all the stuff that happens in between. In January, I'm preparing a capital gains summary report for your accountant. In February, I update your planning projections. In March, we do a rebalancing review and I send you the quarterly newsletter. In April, I send you a performance report. In May, we do an educational event. In June, we're going to either review your insurance or your estate documents. We're going to alternate every year, so 2021 June is going to be insurance review, 2022 June is going to be the state review. I can go back and forth. You just start laying out, “here's what's going on that we're adding value to you, every month of the year.” There's something where you can easily structure to be something all the way through. Some might be big things, like we're going to meet in person, do a review. Some might be small things, like “I'm going to help you with the tax projection, I'm going to send you your report.” Some might be in between, like “we're going to do this webinar, we're going to do this client event, we're going to do a little end of year tax planning report.” Whatever it is, you schedule it out for the year, which both shows the client, in case you're wondering what we do for you all year long, here's literally what we do for you all year long. It shows there's stuff going all year long instead of just the feeling of “what have you done for me lately because I haven't met with you in X months?” I think one of the things that becomes powerful for it as well is it just shows clients how much stuff is happening. When you do it on a calendar basis like that, you can start standardizing it for the firm. “Okay, this month, the newsletter's the big thing. Next month, the report's the big thing. The next month, our educational event's the big thing.” You can be building up to that and knowing what that is because you've planned it out in advance and it lets you systematize.

Carl: Totally. That reminds me of just a slight twist on that was just topically, having a topic for every month or every other month. Life insurance, investment planning, estate planning, a family meeting, the investment process. You literally just every month, we're going to...so if this month is estate planning, we just go through and say, back to Ross' book which I just love, is “what's each client's articulated philosophy based on this. Okay, great. How does the philosophy compare to actual, what do we need to change.” The philosophy could be “I don't need any of that stuff,” whatever that stuff is. “Oh, cool. We've got a 10 there.” Check. Then, that's how you communicate. “Hey, this month, we've reviewed your thing. We're all good here. There's nothing to do.”

Michael: I think that's part of what makes the story you had just told around the 17 Point Check list so powerful. I think sometimes we overestimate how important it is that we do something and find something and underestimate how important it is to just show that we were looking.

Carl: Yeah, and what I loved about that story you told was, all the stuff you're already doing. It was just funny, let's just put this down what we're already doing.

Michael: Yeah. Instead of trying to invent all the new things we could do for clients, and I'm all for that as well, but let's just make sure we're at least getting credit for what we're actually doing.

Carl: Let me just bring up one last thing I think is important, is I loved setting up in the very early meetings, we always called it, we had a name for it because that's what I do. We called it the Financial Pornography Detox Program. We would say to clients, after they had signed up as a client, maybe the third meeting we're working out some stuff, we'd on the way from the meeting to the door, we'd joke, "Hey, you know what? It's funny, you guys have now entered our Financial Pornography Detox Program." They'd be like, "What?" Say, "It's kind of a joke, but the way it works is our goal is to get you to the point where you don't even think about us anymore and you don't even...that our goal. Our goal is not to be involved in your life all the time." I want to set up in their minds, our goal is to get you to the point where you don't even think about us anymore, so that I no longer feel like I have to be calling you every week and going, "Did you see the worksheet?" Proving my value. Actually, we are the most valuable when we fade into the background. We would set that up early just by saying, "Financial Pornography Detox." We'll know you get there when some of those things that you used to think about all the time, you might still see them and you'll chuckle and go, "Oh yeah, yeah, yeah." Especially the news. In fact, we'll know you get there when the "USA Today" money section you start thinking of it as the "USA Today" funny section. That's when we know you got there.

Michael: I feel like you've actually said that to a client at some point.

Carl: I've said that 500 times. Of course, I have. We'd set it up that way. We were particularly trying to plant the seed. We're different from the person who wants to coordinate your social calendar, have you to lunch every other week, call you at the market, send you invites to seminars, whatever. We're different. We want to fade into the background. That's the whole goal, give you your life back. Anyway, great topic.

Implementing A Meeting Agenda To Focus On What’s Most Pressing In Clients’ Lives [25:23]

Michael: One thing I think I would add to this as we wrap up, just because I have seen some advisors get in trouble by swinging too far in this direction, so much structure around what they're doing that the one asterisk to this all is the number one thing I've seen for what gives advisors most impact on an ongoing basis in servicing clients, is that before every client check-in meeting that they're having, they send an agenda and the first thing is, “is there anything you want to add to this agenda? What do you want to be talking about?” When they know what's coming, because you do it regularly and you built a habit around it, they start getting much more responsive about putting things onto the agenda and saying, "I want to talk about this." When we just do the check-in in the meeting, "Hey, is anything been going on?" You're like, "Let me think." They don't always come as prepared as giving them some time, a few days in advance, "Hey, here are the things we're going to be talking about, but most important is that we cover whatever's on your mind. Is there anything you would like to add to the top of this agenda?" Whatever they want to add is always at the top. Our stuff comes later because when that happens in practice is, if they've gotten anything going on, it's at the top of the agenda. Then, you talk about it and if you talk about it a lot, A, it's valuable to the client because you're solving their issues, and B, guess what doesn't end out happening on the agenda? You don't get to the, "Oh, and let's talk about your portfolio performance for a while, even though I don't really want to but there was nothing else to talk about, so now we have to talk about to fill the hour that we put on our calendar because we scheduled an hour meeting and we're trapped." We set up these traps for ourselves sometimes. Even as you create some structure around this, don't miss that part, that giving the client that opportunity to say what they want to talk about and doing it in advance so they can...because some people need a little bit of time to germinate that. You always having the conversation that's relevant to the client, whatever is going on in their world.

Carl: I love that. I had a friend who was super successful and he still is. He's one of the most boring people I know. He has lots of ties but they're all maroon, drives the same Toyota Corolla. Nothing wrong with that but...

Michael: I hate people that just wear the same thing over and over.

Carl: Yeah, yeah, over and over. Incredibly boring, but he's built this amazing business. But he doesn't send Christmas cards. He doesn't have events. He doesn't do any of these things. I was like, his name's Kevin, I was like, "What..." He's like, "Look, we are focused on consistent service," like we talked about, "and rapid response to problems. If something comes up that's out of this consistent thing, we are on it. We return the phone call, we jump on it, we drop everything and it almost never happens. But when it does, we are on it." And I think that's a really good reminder. The agenda, your life is not a disruption to our process.

Michael: That's powerful. Your life is not a disruption to our process.

Carl: Twitter, go, hurry. Who's going to get it on Twitter first?

Michael: Someone tweet it out, someone tweet it out. Awesome.

Carl: Very cool, Michael. Thank you.

Michael: Appreciate the conversation, Carl. Thank you.

Carl: Amen.