Kitces & Carl Ep 83: When The Big Prospect Doesn’t Want Your Financial Plan

***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

• Dan Sullivan: The Strategic Coach
• The One-Page Financial Plan: A Simple Way to Be Smart About Your Money
• Kitces & Carl Ep 42: Overcoming Objections By Asking More Questions To Truly Understand A Client’s Needs
• John Bowen

Kitces & Carl Podcast Transcript

Michael: Greetings, Carl.

Carl: Hello, Michael. How are you?

Michael: Fancy meeting you here today.

Carl: I know, crazy. I was just walking around, and boom, there's Michael.

Michael: You wander into a Zoom Room, and there's a person you know and serendipity.

Carl: Yeah, it seems like we should have a conversation then.

Michael: Turn on a microphone and have a conversation, because that's what normal people do when they wander around virtual rooms. Right?

Carl: Excuse me. Hold on a second. Let me get my microphone out.

Michael: So, we had this episode last week. I'm just jumping right in.

Carl: Please, yeah, let's do it.

What To Do When A Big Prospect Does Not Accept The Financial Plan [00:48]

Michael: We had this episode last week, or I guess a few weeks ago, of kind of these dynamics we go through where a lot of us...most of us, at the end of the day, we do this to serve people. And then the business grows, and then you start getting this tension of, "Well, I want to grow the business, which sometimes means kind of moving upmarket a little, but I don't want to forget the people that got me to where I am." And we start feeling all those tensions around serving the people that maybe drive the economics, the profitability of the business versus the ones we want to help, who may not necessarily be as financially remunerative. And so, I thought for this week, we could kind of flip this around, and talk about the other end of it. So, we had a great question that had come in from Twitter, as we kind of put the call, as we do from time to time, what would everyone like to hear us talk about?

And so, I love this question that came in, which is basically the reverso scenario. So, your core value proposition is...we do financial planning, we're trying to do financial planning for people with some more complex problems, and maybe can write bigger checks. And so, you get the big prospect, like multi-multi-million-dollar account. And they don't care about planning, but they're happy to have you manage the portfolio. So, you're now sitting across from a prospect, who's got...I think this example is $6 million prospect, $40,000, $50,000, $60,000 in fees, pending quote, where your breakpoints are in your fee schedule. And they just want you to manage the portfolio, "I don't want to go through your planning thing. Will you manage our stuff?"

Carl: Your planning thing?

Michael: Your planning thing, because I...for the folks who are not that into planning, I usually find that some version of...they usually don't quite say it that way, but you can tell that's basically the sense of it. Like, "Oh, how quaint, you're going to ask me questions. I'm here because I have millions, and I want you to handle them." I mean, there's somebody saying, "Nice problem to have." Most of us just...it's amazing when you get a big client, and just you can really be financially meaningful to get a big client, especially if you're not a really big firm yet. But it creates this tension of, "Okay, but I kind of pride myself on the quality of the planning work we do. And you're basically saying that you don't want that, but you are willing to bring $6 million, which is a lot of dollars and a lot of revenue."

So, I feel like there's the idealized answer, which is, "Well, of course, if you're a comprehensive financial planning firm that's focused on financial planning, you're supposed to say no, and usher that giant client with tens of thousands of dollars of revenue that could basically cover a year of college for your kids, right on out the door." But I just saw, let's get real for a moment. How do you handle this? And are you really going to ask...are you really going to walk them out the door? What does it take to walk them out the door? Do you have this conversation differently? Do you try to woo them on planning? Do you have a cool thing that you say to them, Carl, where you plant the seed so that you can ninjitsu them into financial planning in a year, and they won't even realize you did it to them? How do you handle this situation?

Carl: For sure, ninjitsu. That's for sure the answer.

Michael: Fantastic.

Carl: It's you ninjitsu them. That's exactly what you do.

Michael: Excellent. Excellent. Well, you have these wonderful questions. A year later, we're like, "Oh, my gosh, I got a copy of 'Financial Plan' by Carl Richards. I didn't even realize that was what I signed up for."

Carl: Exactly. It's a righteous trick.

Asking Questions To Find A Client’s Deeper Financial Purpose [4:39]

Michael: Yes, it's a righteous... But where do you go with situations like this? I'm sure you have had them come up over the years as well. Right? The business gets to a certain point, people actually start finally calling you to do business. It's great after grinding for so many years, trying to get prospects. And eventually you get to that moment. "I got a big prospect, but they're not that into the planning. I also do portfolio management," because a lot of us run the AUM model. What do you do? Do you say no? Do you say yes? If you say yes, how do you handle this?

Carl: I think, to me at least, it's important to get sort of clear about kind of the mindset behind this. So, the way I would think about it is, let's not confuse the method with the goal. And financial planning is just a method. So, I think what's interesting to think about is just... So, my answer is... And the reason I love this question is because I came at this from the reverse way. I was at the big brokerage firm that will go unnamed, with the bull as its symbol, and is owned by a bank. Everybody came there for investment planning, right? Investments. They wouldn't even use the word planning, it was investments. And so, if I was going to do any financial planning, why would I even do it? Because I got this investment thing, this is a pretty good gig. It's really fun. It's what all the cool kids do anyway. There's a TV channel named after it. You know what I mean? The Financial Pornography Network. So, I was like, "Well, why do the planning?" Well, planning to me was a solution to a problem that kept coming up. And so, I think this is where I started in my head, was like, "Well, yeah, of course, I take that client. But the dilemma is, that client...how am I going to know how to invest the money?"

And then maybe even more problematic for me was, let's assume I can figure out how to invest the money. Because back in the day, we would just have them answer 17 questions called the Risk Tolerance Questionnaire, and out would pop a portfolio. We'd just invest it. We didn't even have to worry about these fuzzy things called goals and plans. But what happened, I found, over and over and over, was if there wasn't some link to a deeper purpose, then what I was essentially selling, if you will, or at least...let's not use such a negative term in our industry. What I was offering as my value was portfolio construction, and security selection, let's just use security selection, broadly speaking, like product selection. So, I'm going to build you a portfolio better than anyone else has built. And I'm going to pick the best products to populate it. In my case, even if those are passive, that's a different debate.

The problem is, if you offer that as your solution, what's the metric by which you would show them that you did a good job? And the only metric you have left...if you don't have progress towards goals, because you haven't really defined that, because you haven't done any planning, all you got left is performance. And we know that if we win a client based on performance, we're going to lose the client based on performance at some point in the future. It's just almost inevitable. And so, to me, that's how I got there. I was like, "Well, okay." I thought...originally, I was like, "Oh, this is..." And this is actually really quaint looking back. "Oh, there's this behavior gap problem." It was all about investments...

Michael: I've heard about that. Yeah.

Carl: Yeah. It was all about investments is this gap between investment performance and investor results. And, "Oh, turns out, nobody knows." That's what I thought the solution was. It's just ignorance. "All we have to do is tell people," that's cute. So, then I was like, "Oh, if we get goals, maybe we can link behavior to goals." And it turns out, it's really hard to ask people what their goals are. And we've talked about that before. And then it was like, "Okay, what's underneath the goals?" And it's a plan. And to me, it even went one step further, more recently, which was underneath the plan is a sense of purpose. So, all that to say, $6 million client walks in, let's pretend...we could run scenarios where it's institutional money, like a small endowment, or we could say it's an individual. Let's start with individual.

Michael: I think the context here is individual.

Carl: Yeah, let's start with individual. But the answer is the same, right? You want me just to invest the money. Totally get it. And we're actually really good. I don't think there's any problem. I still feel like I can go toe to toe with anybody on portfolio design. Just sort of academic, evidence-based way to design portfolios. And then largely, if you give me 10 years, I'll go toe to toe with anybody on performance. So, there's nothing wrong with that, there's nothing wrong with feeling super good about. In fact, I would suggest we should. So, then the question to the client is like, "But I don't know..." The only right answer...why is the money invested the way it is? The only right answer is because it gives me the highest likelihood of meeting these things we identified called goals when we went through this process of planning. So, I don't know how to fix that problem, because I was really good at winning investment-only accounts, even on the institutional side. We were really, really good at it. And I actually quite liked it, it was fun. But you always ended with a problem.

Changing The Approach When A Client Objects To The Financial Plan [10:09]

Michael: In this context of planning core value prop as our core value proposition, so just where does this take you at the end of the day? Is the point that I'm still just supposed to take the client and say, "That's fine. We're just not going to do the planning anyways." Am I saying, "Okay, well, we don't have to do the whole financial plan. But let me still talk to you a bit about goals," and then you try to go there anyways? What are you actually doing at the end of the day when the client at some point says...I'm going to assume it for this person's question, it was something down to...they said, "Well, we look forward to working with you on our financial planning process." The client's like, "No, I just want to get the portfolio managed."

Carl: I really, really wonder if this is just a problem of confusing the method with the goal.

Michael: So, what do you mean by that?

Carl: The financial planning is a method. So, we don't have to... And I also think, just the language around... I have to do... No, actually, I don't really... I would be tempted to say to a client like that, "Oh, yeah. Don't worry about the financial planning thing." And then I would do...I would take them through the financial plan.

Michael: You realize this is exactly why I said you're going to ninjitsu them?

Carl: I know, I know.

Michael: This is where it came...right here.

Carl: A hundred percent. I would just trick them. I would just say, "Oh, yeah, I totally get it. We have plenty of clients that way. Why don't you come in, we'll have a discussion about how to invest the money." And during that discussion...

Michael: That's actually what you say, "Okay..."

Carl: I would literally say, "Yeah, no problem. Come in. Let's have a discussion about how to invest the money because we got to identify how to do it. There's... Believe me..." Right? And I would just say, "Look, part of our job is to have access to these products," I would use that word intentionally, almost in air quotes, "These products, we can scour the planet for the best product to apply to your situation. We got to figure out why. What's the goal here? Why is the money invested the way it is?" And then I would dive into first meeting questions. "Why is money important to you?" You could use the Dan Sullivan questions. The one that came to my mind right as I was thinking about it was like, "So, Michael, great. Let's identify what the goal here is. If we were meeting three years from today, what would have to happen with this money in order for you to feel like it had been a success?" And so, I would just be like, "Oh, yeah, yeah, yeah, whatever. Financial planning, whatever."

I don't care if people...I mean, look, I want people to know, but part of this may simply be, I don't know anybody that wants...that wakes up in the morning...it's sort of like waking up in the morning and going, "I want to go to the dentist." I don't know anybody who... Financial planning is not...at least the way people view it. And the reason they view it this way is because the way it's been done to them by the industry, speaking broadly. Not the people that are listening to this. But by the industry, speaking broadly, the way financial planning has been done to them is not fun. And they've heard those stories. I don't want to go sit and talk about what my utility bills are going to be 17 years from now. I don't know what my goals are. Leave me alone, I just need the money invested. I can feel myself feeling that way. So, instead of saying, "We do financial planning, you have to do financial planning," what if we just teach them what that means? Because what they're saying is not what we do. Of course, they want financial planning. If they knew what you know, of course they do.

Understanding Why A Client Objects To A Financial Plan [13:44]

Michael: I will say, that's part of what strikes me around this question, is to say my...as this, first of all, my core value proposition is financial planning. I'm sitting across from a prospect, who has a big portfolio and says they don't want to do financial planning. So, what comes to mind to me is I would really like to know how we got to this moment in the first place. So, on the one end, there's just a whole discussion here to me around, "Do we have a marketing problem?" If you say your core value proposition is financial planning, and then people come in who don't want financial planning, you might have a marketing problem around your core value proposition because, apparently, people literally don't get that that's your core value proposition. They came in and said they don't want to buy your core value proposition. I'm not trying to make fun of the person here, but just literally, if that's what you feel your core value is, and someone with a lot of money can come in and not want that, I have some questions.

Carl: How did they get there?

Michael: Yeah. What does my marketing say? What does my website say? Are my clients talking about me differently than I think they're talking about me? Because, apparently, if this was a referral, apparently my client referred me for asset management, not financial planning. So, do I have an issue with how my client sees me? If this came through my website or another referral, is there some problem with my website? Is there some problem with my COI, who apparently doesn't understand what I do? So, that could almost be a whole other conversation unto itself. But just to me, that does crop up as a question here. Where did this person come from that they thought I don't do financial planning, when my core value props is supposed to be that I do? So, that aside, when I hear this situation of just we are in the moment, someone has come in and is interested in working with me, and doesn't want to do financial planning. So, at some point, I say, "Well, we've been with the planning process," and they said, "No, no, no, I don't want that thing."

The next part of the conversation to me is like, "Cool. So, just curious, have you ever been through a financial planning process before with another advisor? Have you worked with a financial advisor in the past? Tell me about that. What worked well? What didn't work in that prior relationship?" Because that may take you down the road, Carl, what you're saying, like, "Yeah, I went through a financial planning thing before, they asked me what our goals are. We don't know, we're figuring life out. And I don't know what it's going to look like in the distant future." Because, as we talked, for some people, the goals question is actually a super hard, not good question to ask. So, maybe the reason they don't want to planning is because they've done planning in the past, they've done "planning" in the past, and they had a crappy experience.

Maybe they weren't comfortable with the questions, maybe it didn't actually get them to a good outcome. Maybe they had a planner whose sole goal was, "Well, the actual answer to every single plan is the products that my company manufactures," which they figured out, and now their guard is up, because anytime they hear financial planning, they just figure it's going to come to sell them something, so they're resisting it. Maybe there's some issue per…,"Yeah, the real reason I don't want to do financial planning, because I think I'm going to get divorced, and I don't really want to talk about that with you right now. Because this is the first meeting, and I'm not ready to go there yet. But my marriage is on the rocks, and there's a lot of tension with the spouse sitting next to me."

Carl: "And I've got a huge problem."

Michael: You don't know what people's baggage is. And depending on your financial planning process, and whether they've been through it before, what a lot of people discover when they go through the financial planning process is, if there's any baggage they've got as a couple, you're pretty much going to put all that right out there on the table. So, if they're ready to go there, great. If they weren't ready to go there...maybe the reason they're saying they don't want to do financial planning is not an offence to your personal value proposition. It's because I got some stuff going on at home, and I'm not ready to go there with you right now.

So, just to turn that conversation around, to me, it would start with, "I understand not everyone wants to go through a planning process. Happy to just start working with you on whatever terms you need. If you want to start with the portfolio, we can certainly start there. But I'm just wondering, have you ever actually been through a financial planning process before?" And they'll say yes or no. "No. Okay. Have you worked with the financial advisor before?" Just actually understand what their journey history is. If they say, "Yes, I've been through planning process before." "Tell me what that was like for you. What did they do? Were you happy with that outcome?" And just actually understand what journey they've come from, because, again, there's sort of two versions to this. Number one is, they so don't actually understand what you do because you have a marketing problem, positioning problem, your own client may not be thinking about you the way that you thought...

Carl: And to be fair, and an industry problem. Right?

Michael: Yeah.

Carl: We've created the problem, and it may not even be you.

Michael: Or maybe they do understand that you do planning. They're just not there right now for any number of things in their personal life history and baggage, or they've just had bad experiences. And that's an opportunity to open the conversation further, because, again, there's this fundamental disconnect. "My value proposition is financial planning, and you came to me for a meeting, and you don't want what I do." Option one is, I need to overcome this objection. And option two is, I would just like to understand how we ended out in this moment.

How To Entice A Client To Accept A Financial Plan [19:37]

Carl: To me that's...I love that idea. First of all, if we see that as an objection, which it is, we should take the approach we've talked about in another episode, which is the moment an objection comes up, you just...to me, it's a red light on the dashboard. It's a warning sign that says, "You don't understand..." me, the advisor doesn't...I don't understand something. I must have missed something. And so, it'd be so interesting to just take an approach, a posture of curiosity here, and just go, "Wow, that's really interesting. Tell me more about that." Not wanting financial planning, what does that mean? Because I would... And look, there's a whole bunch of...I remember when John Bowen did a bunch of research, like, "People with $6 million don't want financial planning. That's why people call it wealth management." And that was 15 years ago. But I think sometimes people think financial planning might be that thing you do when you have debt and school loans, and you need to figure out how to pay it off.

So, I don't think that...to be honest, I don't know that I...and I'm totally riffing here, I'm probably wrong about this. But I almost don't even know that I like the idea of financial planning being my core value, because, actually, your core value is delivering people on their dreams. Right? The financial planning is just the method to get there. So, I'm always sort of interested in maybe instead of doing financial planning to them... And we can go back to the Supreme Court pornography thing. The Supreme Court's definition of pornography was, "I don't know, but I know when I see it." Wouldn't it be interesting for you just to go, "Yeah. Got it. First, curiosity, tell me a little bit more about that. That's really interesting." And I would imagine...I mean, if people's experiences with financial planning are anything like the conversations I have, because on the plane, I know if I want to be left alone by my seatmate, if they ask me what I do for a living, I honestly do say I'm a financial planner, and they won't talk to me again. And the reason for that is what they hear is I'm a life insurance salesman. And so, I bet if you said...

Michael: Because they're translating back to their prior experience.

Carl: Or what they heard.

Michael: So, if you say, "I want to do financial planning with you," they may be translating back to their buddy from college, who right after college, sold them a life insurance policy under the guise of financial planning, because that was their prior experience. And now they build a business, and create a wealth, and have all this money, and they equate financial planning with their 24-year-old buddy who sold them a whole life policy, because that was financial planning 20-something years ago.

Carl: Yeah. And it's no fault of this questioner that the industry did that to people. Imagine if that's true, what somebody...I want to do financial planning to you, what somebody is literally hearing is, "I want to sell you stuff you may or may not need." And that's an industry...this audience particularly, these listeners, you didn't do this. It's the industry that did this, but it's the cards we've been dealt.

Michael: Yeah, but that's the environment we live in.

Carl: Yeah, I think, being curious, like you're pointing out, is awesome. Like, "Oh, that's really interesting. Tell me more about that." Then the second step I would go to would be, don't confuse the method with the actual goal. And then the last thing I would think about is, "Wait, this is an objection. I must have not understood something. Let's back up." And then, the last step would be ninjutsu, or whatever we're calling it, where we just say, "Oh, yeah, no problem. I understand you've got an acute..." And I also love the idea of you pointing out, you have to decide. There may be other things going on. The divorce idea is so beautiful to...divorce is not beautiful, but it's so beautiful for me to be thinking as this person is a human that might have some stuff going on.

"Whoa, you've got an acute problem right now. You got a pool of money you don't know what to do with. It's causing you stress, I can help with that." That's a beautiful thought, in my mind. Just, "I can relieve a little bit of stress for you. Let's forget about what we call it, but let me take you through a little bit of a process around the edges. We don't have to go deep. We don't have to George Kinder it. We can just around the edges, let's get some sense of why we're investing the money the way we are." Maybe after they tell you, you can say, "Hey, that's cool. I'm going to write that down. And if it's okay, I'll call that a goal." Just don't get them too nervous. Just tell them to call it a goal.

Michael: I imagine you would literally say it that way.

Carl: That's exactly what I would say.

Michael: "Hey, if it's okay, I'm just going to write that down. We're going to call that one of your goals."

Carl: Yeah, that's exactly what I'd say. And then I would say, "Hey, I want to put this in a document over here. And we might just refer to this as a plan." I would just...

Michael: No, you can't give away the righteous trick.

Carl: Yeah, just subtly, "We'll call this...we have a document, we'll call it an investment policy statement." Right? You just swap out because you're keeping the goal in mind. You're not obsessed with the method and what it's called. You just want to help the person. That's how I would approach this.

Michael: I do like it. Just that framing of, "Let's not confuse a method with the goal." The goal is not to give the client a financial plan. The goal is to get to the outcomes about clarity of goals, and purpose, and dreams, and what they're trying to achieve with their money that we get to through the plan. So, if they don't want a plan, don't give them a plan. Just start asking questions.

Carl: Yeah, I love that. And your thing about just being curious and realizing... I love...I remember hearing somebody say, "If we treat everybody as if they're carrying something heavy, we'll be right most of the time." And this is one of those things, I always wish I was an emergency room doctor because I could actually relieve suffering, or go on one of those Doctors Without Borders trips. And every once in a while, I get these moments where you're like, "Dude, you're really..." It happened to me the other day. I was down getting something for my Adventure Truck. And the guy who owns the shop was like, "We just had these financial planners in and they're trying to sell us all this stuff for our 401(k). And I'm so..." And he looked legitimately stressed. And it was like my Doctors Without Borders moment where I was like, "I have a skill. I can relieve some suffering right here." That's so beautiful. And the way you painted that is like, "Hey, yeah, maybe there's some other things going on. How can we help?" And let's gently lead them along the path instead of saying, "Hit the road, Jack." I think that's a beautiful way to approach it.

Michael: Awesome. Well, thank you, Carl.

Carl: Super good. Thanks, Michael.

Michael: Absolutely. Thank you.