Kitces & Carl Ep 145: Explaining The Value Of Financial (Life) Planning By Unlocking The Emotional Job To Be Done

***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 141: Creating The Space To Have More Meaningful Money Conversations With Clients
• Larry Swedroe's books
• "Unchained from the Chair" Whitepaper

Kitces & Carl Transcript

Carl: Michael Kitces.

Michael: Carl Richards.

Carl: Imagine...What? Come on.

Michael: Imagine meeting you here in our prescheduled Zoom room that we sent links around in advance. That was the weirdest. How do you start a prescheduled conversation?

Carl: So good. So good.

Creating Context For The (Higher) Fees Of Values-Based Planning [0:30]

Well, would be interested in your take on something. I got this really great email from, I happen to know incredibly thoughtful, young planner who went through one of the best programs, just really, really good, thoughtful planner, who we'll just call, which may or may not be his name, we'll just call him Tanner. And Tanner talks about how he's working his way through the Kitces/Carl episodes and he references a recent episode, which one was it? I can't...oh, Number 141, 141. Give us a quick update on...sorry, quick summary of 141.

Michael: That was recent. So that was the one where I think you had framed, we have clients who come in. You want to do meaningful money conversations with them. But no one actually literally comes in for meaningful conversation. They come in, I think you call it, the presenting problem. I came in because my elbow hurts. I want someone to deal with that. And then, you had kind of given this whole process of, okay, well, Mr. or Mrs. Client. I hear you. That's a real issue. But just to make sure we get to the best answer, can we back up a bit? Tell me about why this is important to you, and then you start pivoting in the direction of I think as you frame it, the righteous trick of I'm not going to sell them on life planning. I'm just going to start doing it to giving them meaningful conversations, letting them see the value. And if they find that meaningful enough, they'll be engaged and I didn't even have to sell that. So that was that episode. So what did you just say? What's our going name for this?

Carl: Tanner.

Michael: Okay. So what did Tanner ask about this episode?

Carl: Tanner said...here's a question for a potential follow-up. He said, "Based on Carl's hesitation to market that type of process, i.e. creating space for more meaningful conversations, based on Carl's hesitation to market that type of process as, "Just trust me, it will be different, should advisors..."

Michael: You're marketing...I'm a traditional financial advisor and you're marketing normal financial advisory services and then hoping once they come into your office, you do cool things and the client goes, "Oh, my gosh. This is amazing," after you got them in the office, not having marketed that.

Carl: Yeah. And I guess what Tanner's pointing to is it's kind of challenging because nobody really knows they have a meaningful conversation problem or a life planning problem or even a real financial planning problem. They've got a presenting problem, their elbow hurts. So we're going to show up as people who fix elbows. That's fine. Right? So my hesitation around marketing it, which is not really the point of his question, but he says "Should advisors or planners be very clear on their website social media marketing about their pricing?"

Michael: Oh.

Carl: Sort of making this connection. This is an interesting thing, I think, to unwind. I thought it was a really great question. There's a bunch of threads to pull on here. Tanner goes on. I just wonder if advisors will find themselves constantly having initial meetings with families that result in amazing conversations, but lead to no long-term engagement because the cost and investment of working with that type of advisor isn't even brought up until the 3rd or 4th meeting, because the first 1 or 2 meetings were focused on having those deep, meaningful values-based conversations. How would you suggest advisors avoid the temptation of marketing their planning style as sort of just trust me, we're different, while also not getting stuck in this trap of expending an excessive amount of time meeting with potential clients who simply can't afford to work with them? So it's very interesting question.

Michael: Because I guess, the flipside of this is, to me, reading between the lines, I do this super valuable meaningful money conversation. Clients love it. They're deeply engaged. I can work with some clients that are willing to pay a very meaningful fee because this is incredibly valuable. But if they don't know that's going to be the value and I put my big old fee on the website that I charge for creating this amazing value, am I going to scare them all away because they don't actually understand what the value is because I'm not saying what the value is. I'm just saying, trust me, I'm different and better, which is a hard proposition to sell if you put a big old fee on your website. But if I don't put the fee on the website and I bring people in and I start doing this, it's time-consuming to go through, and then when I get through and I find out they can't actually afford the service, which means I've got the Catch 22. I'm assuming that's where Tanner's going with this. I could put the fee, but then I'm not explaining what the value is and they freak out, or I can not put the fee but then I spend a bunch of time giving them the value to find out that they couldn't afford to be an ongoing client, which is worst of both worlds.

Carl: Yeah. And I'm so curious to see where you go with this, because I read it and while I have deep empathy for these types of questions, because I do, and I know I ask them and I know I worried about them a lot, my first initial response was, I don't see this as a problem that very many people actually have.

Michael: Meaning that advisors who are doing this in practice are not getting folks who can't afford their services showing up in their office in the first place?

Carl: Yeah. I still see this as a fundamental marketing...to me, it's the same question of, okay, I'm a real financial planner. How do I get people to show up for the work that I do? And to me, my answer was, in fact, I even shared this, I responded to this email that came in. I called it distributed permission-less marketing. And...

Michael: What the heck does that mean? Distributed permission-less marketing.

Carl: Yeah. Essentially, and this goes on. Provide a spark and fan the flames. This is me being as vague as possible, pointing to the moon.

Michael: Is this what people actually get when they email you?

Carl: Yeah. That was literally the...provide a spark. Sometimes you just get boom, boom, bacon emojis. That's the whole email, right? So my point is...

Michael: Good lord. All you have to do is end it with a verb and you can just literally be Yoda for everything.

Carl: Yeah. So here's what I mean. I think we split this out a little bit. So question number 1 is how do you market that type of planning. And to me, we've talked about this before. and I think you could sum it up in a show, don't tell. Give people the experience.

Michael: To be fair, that's still not marketing it. That's doing it after they're in and hoping that it turns out that they can pay for it.

Carl: Okay. Paying for it...I just want to set that aside for a second because I think, to me, I had to pull on these threads separately. You're going to have a different take, which I think is going to be awesome. Give people a remarkable experience worth remarking about, right? So they've now experienced that. They're going to go tell someone else about it and they're going to say something like, "I don't really know how to explain it. Just go talk to them. We don't worry about money anymore. We went to him because our elbows hurt and now we're healthy. This is really cool. And the coolest part about being healthy is I don't worry about things anymore. Man, we don't feel any sense about money anymore." They're going to start saying those sorts of things, but they're going to say, "And by the way, my elbow works now. I have life insurance. My budgeting feels great." Whatever. And then, more people are going to show up that way. I think the best way, and the provide a spark, fan the flames idea, and distributed marketing and permission-less, letting other people share the conversation was just give people a way to spread the news. And the only way I can think of that is tell those stories, right. I had a conversation and I'm doing this in a way, a compliant way, right. I had a conversation with a friend today and maybe you don't want to use friend. I had a conversation with someone today and the conversation started because they were worried about how to invest their money. And I have deep empathy for that. That's a really important question, something we talk about all the time. But the conversation quickly led to why were they investing their money? You just sort of describe the experience that the person had in terms that...and I learned this first from Larry Swedroe. That's what Larry's books have always done, right? So you describe that and you make those stories easy to spread, either in the form of podcasts, some form of content, it's easy to spread. So people get to see the experience and be like, oh, that's what real planning is. Oh, man, I've never had a conversation like that. So they get to see...so that's 1 version of the marketing question that Tanner's asking. Now but still, I'm still super curious about the question of and how you would view this, there's a separate question being asked here. How do we get people to show up and know that this is going to require a pretty substantial investment on their part, not just there to have beautiful conversations and leave and that's the part I get to. I'm not seeing that as a problem. I'm not getting a lot of advisors saying, "I have lots of people coming to my office and 90% of them can't afford, 50% of them can't afford me." I'm not hearing that. But I just might not be hearing it. So where does your mind go with Tanner's question?

Using Fee Minimums As A Tool To Ensure "Viable" Prospects [10:35]

Michael: Similar. I start going down a couple of different threads. The first, to me, the most straightforward and kind of tackling the issue head on is put a minimum on your website. You don't have to put the full value, our average client pays us $9,000 a year or whatever it is, but it could start at our minimum fee is $3,000 a year. So you're not necessarily putting the ideal client fee. You're putting the absolute minimum to be able to economically viably service fee, which presumably is a good bit lower than your average or ideal fee, just bare bones minimum. So you can put that. If that is just a flat out deal breaker for them, if they're so unable to even get to your minimum or comprehend that you might provide enough differentiated value for your minimum, this probably was not going to be a great fit or be borderline in the first place. I'm making up numbers. If your average client is a $750,000 client who pays you $7,500 at 1% and your minimum is 3 grand, a person who has 750 and isn't quite sure what you do exactly is not going to freak out at a $3,000 minimum fee. Because anybody else they talk to is also going to charge them 1% on 750. So your minimum is clearly much lower than what they can afford and what others charge. And so, for better or worse, you can put the minimum, which eliminates people who just flat out can't or don't want to pay $3,000, but you're not going to scare away your average client or your ideal clients at that point. So to me, the most straightforward, just tackling Tanner's question, is even if you don't want to say my, our typical clients pay us this, which maybe is a number that the typical client won't understand the value of until you get further into the process and show, don't tell, but a minimum shouldn't be scary except to people that probably really weren't a good fit or just were very unlikely to be a good fit, spend more of your time with people that are not balking at your minimum.

Carl: Yeah. Don't forget where you're going. Yeah. Would you feel the same about maybe even the description of an ideal client? I work with people like this and this and this, this level of complexity, this, this and this, or does that get us to a similar spot?

Michael: Yes. Yes. I think it does. I'm still ultimately a fan of some kind of fee minimum.

Carl: Why not? Why wouldn't you put a...okay, so a minimum fee. Why wouldn't you...

Michael: Who's realistically getting pissed off about your absolute minimum fee who was really going to be an amazing client that would have paid you great money for a long time. But that was their deal killer?

Carl: Yeah. No, I agree. Especially...

Michael: Presuming your minimum fee is a good deal lower than your typical or your ideal client fee. There should already be a gap. It's hard for them to be your ideal client when they can't even get over your minimum.

Carl: Yeah. I think that's particularly effective if it's part of a description of who you work with. We do this...the place where we typically add the most value in client's lives is a client like this. Duh, duh, duh. And typically, our minimum fee for working with that kind of client is this.

How To Present Life Planning As A Solution To A Prospect's Existing Problem [14:14]

Michael: So yes. And then, the next path that I go down is, okay, but if we're describing the ideal clients, let's describe a person who actually maybe does care about these conversations in...

Carl: How would you do that? How would you do that? How would you start...because I feel like you're starting to weave in some righteous tricks here. How would you start weaving in pointers to this is a little different?

Michael: I think in the purest sense, I'm thinking of this basically, there's a Venn diagram out there, 2 overlapping circles.

Carl: Careful. You know about the Venn diagram police.

Michael: Yes. I'm probably going to do this wrong. I mostly just feel self conscious because you draw them for a living and I'm making hypothetical examples...

Carl: This will be so cute, Michael. Go ahead.

Michael: ... and I'm sure I'll get called out by people who're watching this on YouTube. To me, there's some overlap of people who have this problem for which, meaningful money conversations solution, and people who can afford to pay you the fees in the first place. And I'm looking for the overlap between the 2. So for example, my ideal client is a doctor who's been practicing for more than 20 years and has made enough money to not want to work anymore, but doesn't know what they would do with their life if they didn't work and is trying to figure out what might come next.

Carl: I see. Yeah. That's actually a really nice pointer at it's about the money and there's a typical competence and there's this other piece here.

Michael: Yeah. You're looking for...because I know you're financially qualified because you've been a doctor for 20 years. I'm presuming if you're looking for what's coming next, I know you've got enough to leave what you're doing behind, which means you're definitely going to cover my minimum fee or even my ideal client fee unless you really work with bajillionaires. But now I've got a way I can market this. I can now start a podcast for doctors where I have these conversations and do it in public, as you were saying, do it in a place that can be seen and spread. And now, I'm going down a road of I know who I'm going after. I know where their issues are. Now I know where they gather. I can go give a speech about this at the doctor conventions. I can run a podcast for them. And I know I'm speaking to a group who definitely should have a financial wherewithal to afford what I charge and has this problem where they need meaningful conversion about money. They don't literally say, "I want meaningful conversation about money," but they really might say, "I know deep down I don't really need to be working, but I help people for a living and I don't know. I'm a doctor. What would I do with my time if I'm not doing that? I don't want to sit around. That's not fulfilling. I help people for a living. I'm a doctor. So I can't figure out how to separate the money and the purpose and the meaning," which basically means you need all the life planning conversations and you're probably going to end out traveling 6 months a year, 3 months on vacation and 3 months doing Doctors Without Borders or something amazing, none of which involves earning money because you don't need to anymore. That might be the transformation that I'm going to get you by the end of this life planning process. Who knows. We'll see. But that's where I go to.

And look, there's a lot of people, lot of people, that would be meaningfully impacted by the kinds of conversations that life planning evokes. But I got to come back to my Venn diagram of has the problems and can afford my services if I want to grow and build and scale my business. So I got to pick a segment who's got this problem that intersects with some kind of financial wherewithal to be able to afford the kinds of planning fees I want to charge to grow and scale and have this focused practice where I have these wonderful conversations. So I'm sure there's lots of versions of this. But my brain then immediately then starts going to it's probably folks who have made a certain amount of money and found a financial success in their career or procession or business or whatever it is. And they're getting to some point of saying, "I think it's not about the money anymore, but I don't know what to do next."

So maybe that's business owners. Maybe it's doctor, lawyer, whatever, pick any profession where you can practice for 20 years, make great money, and then be so tied into your profession that you wouldn't know what to do with yourself if you didn't practice your profession, even though you literally don't need the money anymore. There's a version of that in probably a dozen or 2 dozen different profession verticals that you could go after. And business owners with liquidity events have another one and there's a whole bunch that spin off of that as well.

I'm not literally selling life planning. Life planning's the answer to a problem. And so, there's 1 version that's just I sell investment management and financial planning when you show up in my office, I have these amazing conversations and your life is transformed. And yeah, awesome. But to the extent that Tanner's talking about this from a marketing perspective, or you pick a particular target ideal client that really, really has this problem, not just I work with people who have at least a million dollars, want to retire and to delegate, which is 90% of our ideal client personas. I go 1 step further to speak to someone that has that kind of life planning oriented problem with enough specificity that I feel like I can really relate to them more directly. I work with doctors who've been practicing at least 20 years and gotten to the point where they don't really need to earn more money in their profession, but they wouldn't know what to do with their time if they retired. And they're maybe feeling a little bit lost in trying to figure out what comes next. And we help them figure out what comes next and build a meaningful life that leverages all of their skills as a doctor without needing to be tied to that hospital that you know you don't want to work at anymore. Whatever it is.

Carl: I think it's really important to sort of break down what just happened, because it's really smart. And I've found that any time we give an example, I found this in "The New York Times" column that any time I gave a number, people would want to debate the number and they would miss the point. And I think here where you gave a specific example, I want to make sure people understand what actually happened is not the example. Because I think where you pointed to is really, really cool and it gets easier to identify one of these sort of value-based behind, underneath, real financial planning. We could just label it, let's just use the catch phrase, life planning sorts of conversations, it gets easier to identify the specific type of language you would use if you're talking about a specific, let's just use the word, niche.

Michael: Oh, you said it first. I got this far without using the word.

Carl: Niche. I know. I know. That's a drinking game, I think, at some point. So a vertical. A specialized vertical. So my only point is if you start to think about we could probably riff pretty quickly, it may not be... I'm going to slow down working. I don't know what to do so I'm going to do Doctors Without Borders. That was so easy for you because it was specifically to the doctor. It'd be very easy with entrepreneurs or sudden money.

Michael: Yeah, look, there's a whole other wave of people who get 7 to 10 years into a career, make some decent money and then figure out that they really don't want to do this for the rest of their lives and are having their proverbial quarter life or 30-something crisis now of okay, I made some good money. I could probably career change to almost anything. I have no idea what to do and I'm trying to give my life new direction. I made some decent money because again, I do need people who could afford the fees that I charge for the service and that I offer. But maybe it's a 30-something that spent 7 to 10 years climbing the corporate ladder, or if I really want to pick and be like oh, 7 to 10 years climbing the corporate ladder at Exxon, just to pick a random company that I think has 10,000 employees so they're presumably have a decent-sized market. Exxon employees that have been grinding it out for 7 to 10 years and have realized that this isn't what they want to do anymore and they're not sure what to do next and where to turn. And we'll help you unwind your Exxon benefits and your stock and whatever, I don't know what Exxon does these days. I'll help you unwind all that stuff so I got some company-specific benefits, expertise, knowledge. And I will help you figure out what comes next because all you know is it's definitely not continuing to do what you're doing. The number of people out there that can say something to the effect of, "I'm making more money than I thought I would make and I'm miserable and I don't know what to do." Those people are out there in a lot of places and they definitely have the money to afford our services by income or asset, subscription, AUM, whatever your model is. They can afford a meaningful time-intensive life planning process because it does take time and cost money to provide this service and speak to them very directly. I'm not selling life planning. I'm selling a solution to your problem...

Carl: To the problem.

Michael: ...pain point that you've got some money and you're realizing it's about more than the money and you don't know what the heck to do next.

How Advisors Can Present Life Planning When Marketing To Their Niche [24:24]

Carl: Yeah. I think that, to me, is a very interesting unlock that's been generated from Tanner's question and it may be tangential but I think it's really important. Often when we think about specific client verticals or a client niche, we think about the functional problems that that client may have. I'm a S-corp anesthesiologist. That means I can have a profit-sharing plan with just my spouse and I. Oh, that's a functional...oh, we know that. That's amazing...

Michael: And the taxes, dial your wages down, take the rest.

Carl: Functional, functional, functional. What you're pointing to here is really interesting. There are also very specific emotional jobs that those emotional...and I'm going to use the word "problem" here. And just by problem, we just mean thing to be solved for. There's also very specific emotional problems within a niche that point you more towards these conversations that if you can learn to use their language, the language they would use, like if I'm not at work, I'm not making any money. I'm getting sick of that. I feel chained to the chair. The dentists said that over and over and over when I interviewed them.

Michael: Oh, yes. Dentists get chained to the dental chair. That's a saying.

Carl: I'm not making money...

Michael: That's a saying in the world.

Carl: That's why my...

Michael: We'll help you get unchained from the chair.

Carl: That's literally why the white paper we wrote 20 years ago is called, "Unchained from the Chair."

Michael: There you go.

Carl: That's not a functional. I mean, there were same other functional stuff in...What?

Michael: You're not still doing that. I can make that paper again to market now?

Carl: Do whatever you want. I still have it. We share it all the time. But my only point is I think this is really important that we kind of tangentially got there. And I have never really thought about it this way and I don't think we've ever put language on it. Niches have emotional jobs to be solved for. And if you can start talking about the emotional job in their language to a niche that you already know has the money, you're already pointing to, hey, we're going to help you plan for that. We're going to have that conversation you've been looking to have. You're pointing now to Tanner's and some people would call that life planning, but we've done that without even using the phrase, because nobody...what I promise you a dentist has never said is, "I have a life planning problem."

Michael: Nope. Nope.

Carl: They have said, "I feel really chained to the chair. I kind of feel trapped." And you can say, "We can help you plan for that. That's the type of conversation we have." And you happen to know that those dentists can afford that. And now we've used dentists, doctors. What was the other one you used? Exxon. So I just want to be clear here, it doesn't have to do with those specific examples.

Michael: There's a whole other one. I know a couple advisors that do a version of this with business owners doing big exits. You're selling your business for $50 million. You can do anything now.

Carl: What next?

Michael: So what are you going to do next? Because for anyone that's ever worked with business owners that have big exits like that, they're completely thrilled when they get the giant opening rush of the money, and then a month later, a lot of them are like, "I am so miserable. I won. I won. I won capitalism and now I have no idea what I'm going to do with the rest of my time on this earth." And they crash into depression.

Carl: Yeah. And I think that's the point here is we could spend a half an hour riffing on those specifically. But all it is here, what's happening here, what you're listening to is unlocking the emotional job to be done for a specific niche. And then, trying to use that language and that language helps solve for Tanner's question, which was how can I point to the idea that I want to have these conversations and be paid for them?

Michael: I was saying, I think it addresses both. To me, Tanner had 2 related questions. I want to market the service but no one understands what that is, and I want to put my fee minimums out there, or I want to handle the pricing conversation so I don't talk to a non-qualified clients. And to me, you solve both here because if the group you're speaking to, if I'm working for dentists who feel chained to the chair for 20 years and want to sell their dental practice and exit... definitely going to have at least $300,000 investable assets at the end of this. I don't even have to say my asset minimum or my fee minimum or whatever it is. If you fit that persona, you are definitely going to cover my $300,000 minimum without ever saying it. And now I don't have go explain life planning and how I'm different about life planning and why life planning is so impactful and all that. I'm just going to help you figure out how to get unchained from the chair and what on earth you do with your time on earth after you get unchained from the chair, and if you're actually feeling that anxiety and you're trying to navigate through that, you're signing up for life planning and you're going to pay my fees. And I never said I do life planning and I never told you what my minimums are. And you're definitely going to qualify.

Carl: Amen. I feel like we need to put one last caveat on this. If you are doing traditional hardcore life planning and you're marketing it that way and you're having success, there is nothing wrong with what you're doing.

Michael: Oh, yeah.

Carl: Please, there are people who are able to do this.

Michael: There are some people that just want to walk right through that front door. Now getting to word of the day: that to me is a niche. It's like, I do life planning and people seeking out life planning.

Carl: And here's what it means.

Michael: But there are people that just know they're on that journey and bless folks like George Kinder that have put this out there enough, there is a segment of consumers that have some awareness of what life planning is and realize that is what they need and they go on the internet, they find their way to their local or desired life planner. So I do think it's pretty nichey. There are not a lot of people up in a cold sweat saying, "I need me some life planning." But there are some people that have enough of this pain that they start their own consumer journey, and eventually figure out the answer in our industry is this thing called life planning and they may find their way to you. And if you only need 50 great clients to be wildly successful with your hyper-focused practice, there are probably 50 people on the internet who can Google their way to you. So yes, totally valid as well but I feel like Tanner, like a lot of folks, is feeling more concerned about marketing that outright. And to be fair, it is challenging, so.

Carl: I agree. I agree.

Michael: This becomes your other way to go about it.

Carl: Yeah. Amen, Michael. Super fun.

Michael: Awesome. Thank you, Carl.

Carl: Cheers.