Talking About The True Value Of Financial Planning


Executive Summary

One of the biggest challenges comprehensive financial planners face today is that “everyone” says they do financial planning. Yet in practice, what they actually do, whether it’s really comprehensive financial planning, or even what constitutes “financial planning” as opposed to just ad hoc financial advice, has no clear and consistent definition within the industry. And if we can’t figure out what the differences are within the industry, then it’s almost impossible for the public to understand the differences between the services offered (including any potential conflicts) by a whole bunch of people who do different stuff (frequently playing by different sets of rules) yet say they all do the same thing! Not to mention trying to help the public understand the value (both financially tangible and intangible) of the financial planning choices available and being offered to them.

To explore this issue, we’re introducing you to a new experimental (but possibly recurring if you like it!) content format we’re simply calling “Kitces & Carl” here at The Nerd’s Eye View, where Michael Kitces and financial advisor communication guru Carl Richards sit down to discuss industry topics from their own unique perspectives. And in this inaugural episode, Michael and Carl talk about the Value of Financial Advice, efforts to quantify that value, and why we may need to move past the asset-based model in order to define and communicate the real value of financial planning to our clients and the public in general.

Fortunately, both Morningstar, Vanguard, and Envestnet have done some research to try and quantify an answer to this very question. Their studies suggest that, even when we ignore any potential excess investment return, the advice that advisors provide around the dollars that they are managing can amount to an additional 1.5-3.0% over what a client would have likely gotten had they “done it themselves”

But, outside of “helping clients avoid big mistakes” by re-allocating their portfolios or talking them off the proverbial “ledge” when volatility ticks up, there’s arguably another aspect to helping clients that transcends the “quantifiable” aspect of the profession. Because most clients don’t have anywhere else they can go and feel safe talking about this topic of money, that is so important yet remains a taboo topic of discussion, and for many carries an enormous amount of baggage. And those hurdles only expand geometrically when it’s a couple that’s sitting across the desk.

In fact, perhaps the greatest problem of trying to explain the value of financial advice, especially while the industry is in the midst of such rapid change, is that we are still tying all our value conversations back to the portfolio-based model… to the extent that, even when trying to quantify the behavioral aspects of planning, industry studies still scale them to a percentage of assets. Even though an increasingly amount of the value of financial planning advice is specifically about the advice that occurs outside of the portfolio!

Alternatively, perhaps instead of trying to put a dollar value on the advice we provide as advisors at all, we might just consider framing it in terms of the real-world outcomes for clients. For instance, what if we as advisors simply said to a couple having stressful arguments about money that, “We help couples have better conversations about money, so they’re not as awkward”? And then let them figure out if it’s valuable enough to them to pay for it? Because, if an advisor can help reduce marital stress and reduce the number of marriages that end out in divorce because of money issues… then clients might consider that a whole lot more valuable that we might have ever imagined anyway!

Ultimately, then, the key point is to recognize that as financial planning continues to expand beyond just building and managing diversified asset allocated portfolios, the key task as an industry is to figure out how we can frame that value beyond the context of “investable assets”. Because if we want to better communicate our value to prospects and clients, especially beyond the portfolio, we must first be willing to fully embrace and acknowledge that value ourselves.

Kitces & Carl Video Transcript

Carl: Greetings and welcome to episode one of what might be episode one of one.

Michael: One of one so far.

Carl: Yeah. What I’m calling, and we may have to argue a bit about this, but I’m calling it Kitces and Carl. And since I’m talking right now, Michael can’t. We promise not to interrupt each other in the first 30 seconds. So what we’re…conversation a couple months ago about how fun it is. We had the chance to present together I think just once. And it was so fun because of the…we’re both after the exact same thing, but the approach we take to get there, I don’t know that it could be more different.

Michael: We have slightly different, I was going to say views, like, “views” is the wrong word, it’s perspectives. Just very different perspectives in how we look at issues.

Carl: Yeah, yeah, yeah. I think between the perspectives and then the tools that we use to get it out, I think there’s a difference. And it’s really, really…it was really fun for me to explore that. And then when I was on your podcast, that was fun as well. So we just thought that it would be fun to have a conversation. We’re going to pick a topic, have a dialogue, and we’re going to try and keep it to one topic, relatively narrow focus if we can. I don’t know if it’s possible for either one of us to do that.

Michael: You know, it might branch out a little, but we’ll see what happens.

Carl: Right. So before we dive into today’s topic, I just want to give a couple of disclaimers, right? So there are a couple disclaimers, at least on my end. I want to be clear that I am often wrong, and I’m completely aware of that, but I’m never in doubt. So don’t confuse sort of what…at least what I’m thinking of this Michael is like a conversation between you and I at a coffee shop that we allow a few of our friends to listen in on.

Michael: Absolutely. Absolutely. Yeah, it was the vision for our podcast as well when we launched it. Just like, “Here’s the conversation we’d had at a conference about, you know, the business, we’ll just record it and then share it out with some people afterward.” So we never seem to actually get to talk at a conference because I’m on the podium or you’re on the podium or, like, we’re, like, high-fiving as we trade off at the podium. So we get to have the chit-chat we never get to have at a conference, and we’ll record it and share it with a few people.

Carl: Amen. So that’s really the vision behind what we’re doing today. And let me just tell you, we’re thinking about doing more of these. So if at the end of this you enjoyed it and you would like to see more, we’d love to hear from you. And we’ll make sure you’re aware of how to get in touch with either one of us. And even we’d love to…although we’re both pretty opinionated, so I think we have a long list of topics, it would be…I would be interested, I think we’d both be interested to hear topics that you might like to have covered.

Michael: Yeah, let us know. You know, there’s comment sections below pretty much any place you could possibly be seeing this, so put some comments, we’ll see them. Let us know what you think.

Carl: We’ll see what you think. Yeah, yeah. Amen. So with that, I guess I have to give one last disclaimer because it might even come up in this conversation, and we’ll probably have a show dedicated just to this, but we use different words in our world. See, I can’t even talk about it without using words that gets me in trouble sometimes. So would you please forgive us, like, no emails about advisor, planner, industry, or profession. Right? No emails, at least today. Like, just forgive us with this conversation. We may have that as a separate conversation…

Michael: So I think that might end out being episode number two, go beyond one of one.

Carl: Yeah, yeah, right? But the topic today requires that disclaimer. Because here’s the topic today, we want to talk about…like, what I’d really like to talk with you about and get your perspective on and see if we can have a conversation about it is the value of advice. And the reason for the industry profession disclaimer was that I think whether we like it or not, we are…real financial planners or advisors are part of a large industry. People inside the industry have a hard time figuring out what the difference is, but people outside have no clue, right? So when we think about our value, we’ve got to think about it in the…we can’t play inside baseball, right? I want to talk about our value from the perspective of somebody outside, what is our value, right? And we’ve got to think about it in the context of we exist, unfortunately, the, you know, Certified Financial Planner that is absolutely a professional at their job exists within an industry, the traditional financial services industry, where no one knows the difference.

The Modern Paradox In The Industry [5:00]

So let me just introduce this paradox that I see. Never before, and I don’t know what the percentage would be, I put the percentage somewhere really high, like 90%, I don’t know what the number is, so don’t hurt me for this, but a huge majority of the participants in the traditional financial services industry who are giving…I’m going to just use a really broad term, “giving advice”… I was going to say pretending to give advice. But a huge majority…

Michael: Well, let’s give them a bit of credit.

Carl: These are, like, the giving advice. I think there is no value in their advice. Right? Like, the vast majority, the problem is, the paradox I see, never before has there been less value in the industry’s advice and never before has there been, in my mind, a higher value in a real, you know, financial planner or advisor’s advice. Like, I’ve never seen such a disconnect between those. Does that make sense to you? Is there a place to start there?

Michael: Well, I think so, but I feel like, and maybe, like, you’re going right off the roller coaster of the emails out of the gate, but, like, I feel like you’ve got to define, like, this no-value financial advisor, financial advice thing from what you’re calling real financial advice.

Carl: Yeah. So here’s what I mean.

Michael: Like, where’s the disparity here?

Carl: Yeah, yeah. If you think like…and here’s what I’m thinking, and I really wanted to try and get all the way through this conversation without using the word “robo,” but all the automated investment services where you fill out a 17-point risk tolerance questionnaire and out of the bottom pops a portfolio, right? Like, if you still think that job has value, I think you’re in trouble. Right?

Just like I remember sitting in early 2000 when that job did have value, right? Like when the risk tolerance questionnaire was like new novel idea. If you were sitting in a chair next to me and you were a stockbroker, right, and your value then was access to information and transactions, right? Like, many of the people listening to this won’t even remember, but there was a time when you could not get a stock quote unless you called me.

Michael: Yeah. And there was a long period where you could not get a mutual fund unless you called a broker to sell it to you. And there were no ETFs. Like, that was the only way you could literally get access.

Carl: Yes. So at that moment, that group of…for years, I don’t know how many years but decades, there was a group of people that that was their value. And then we saw this shift. I think we saw the shift into like asset allocation, you know, a move away from security selection and access to information and transactions into like portfolio design, early days of portfolio design.

Michael: I mean, I think it was technology that did it to us. Like, you know, we were the gatekeepers with access to stocks and bonds and mutual funds, and then this internet thing showed up and E-Trade started running commercials that said, “You can get access to all this stuff. It’s so easy a baby could do it,” right? Remember there was, like, the E-Trade baby in a crib. And all of a sudden, like, “Why am I paying a broker to buy a thing that’s so easy to buy on the internet a baby can do it?” And we had to move on. And I think where we moved to was like, “Sure, any baby can buy a stock or a mutual fund, but I will create for you an asset-allocated diversified portfolio.” And, like, that was our value proposition that went beyond, you know, the security selection, stock-picking, even standalone fund-picking.

Like, I started in 2000, similar to you, and, like, the guy next to me crushed it in his first year selling the Munder NetNet Fund. And, like, that was his fund and that was his baby and he sold the heck out of it. I forget what the numbers were… it did, like, 100% in 1999 or something crazy just buying all the dot-coms indiscriminately. But, like, he sold that fund. That was the thing. And then all of a sudden we said, “Well, wait, you can buy that fund, never mind whether you should buy that fund, but you could buy that fund without him.” So we had to do something more and we said, “Well, now the value is I will make for you this diversified asset-allocated portfolio, and I will fit it to your goals.”

Carl: Right, right, right. Like, even that word “goals” is like really early, right? It was like timeframe and a little bit of risk in the risk tolerance questionnaire, out popped the portfolio. And we were…I think at that point, that was valuable. Right? The idea of portfolio design and… But now I want to fast-forward because we’ve got to get to it, which is, I feel a little bit like if you’re hanging on to that, and I know, like, we’re preaching to the choir, like, the people most likely to see this are going to be like, “Yeah, of course.” Right?

But that’s the other dilemma that I always have. Like, the people most likely to see this are living in I think, like, a 5% to 10% bubble. The rest of the industry still doesn’t understand. Because you’re running around at conferences, I’m running around at conferences with people really scared about what is their value in the age where Betterment and Wealthfront can do that thing we just described I would argue better, faster, but certainly cheaper than we would ever do. So in that environment…there’s a really small pocket. And the reason this is such a hard conversation, which I think is so important for the paradigm, you know, just to understand these two populations, is you and I hang out with the people who’ve been for 10 years saying, “What are you talking about? Like, my value really is…” What is that? What’s the value of a real…and I’m just using that word, what’s the value of a true professional? What’s their value in today’s world?

Quantifying The Value Of Advice [10:47]

Michael: Well, so, you know, of course, I have to start with this from the nerdy perspective, being, you know, the research nerd that I am.

Carl: Of course, you do.

Michael: Absolutely. Right? So we start with the studies like Morningstar’s Gamma, Envestnet calls it Sigma, Vanguard calls it Advisor Alpha, right? We can start saying like, “Let’s start quantifying the stuff we do and the value we can add.” Like, let’s go beyond the security selection stuff. We’ll wash that out. You know, active versus passive I think is a discussion for another day. But, like, I can do tax-loss harvesting. I can help you with asset location. I can help you with optimal decision strategies. Heck, I can just make sure that at least you get the stinking index return and don’t, you know, mismanage yourself lower. Obviously, I don’t have to tell you about the behavior gap phenomenon. I think you’ve heard of it.

But, right, we can start taking those pieces and say, “Look, forget excess investment return, like, I will give you other advice around these dollars that start lifting up the value beyond just what you would have gotten on your own.” And, you know, fortunately, at least when you look at the studies like Morningstar’s Gamma, you come up with a number that’s higher than what we charge. You know, thank God, value greater than cost, this is good for our business. You know, Morningstar pegged this at 1.8% is the value of the advisor in those categories. I think Vanguard’s Advisor Alpha brought it as high as about 3%, depending on sort of what things you put into that bucket, particularly how much weight you give to what behavior gap the client would have inflicted on themselves without the advisor.

Carl: Yeah. Totally. Totally. And I think that feels to me like…but all that’s true, right? Like, I have no problem with any of that. I have no problem with just purely saying, “Look, I’m going to help you avoid a big mistake.” Right?

Michael: But, like, there’s a but coming here.

Carl: Yeah, yeah. And again, like, that’s all…to me, that’s like meat and potatoes. The value of a real true professional does that. I think there’s another level here. And it’s…but, like, where I’m really curious to hear your perspective on it, and that’s the people crying in my office, right? Like, that’s the people that…and I think the vast majority of people, what I mean by that is I don’t have a safe place to talk about money. I don’t have anyone…I don’t even know how, let alone, “How do I sort through like…?” Again, I can give you…you could give me 100 examples, I can give you 100 examples, like, just…and then when you add a couple to the mix, right?

Like, let me give you this great example that I saw. I think it was Courtney Pullen who told the story. It was really good. It was about this couple. He got called by an advisor. Courtney does all this consulting with high-end advisors, and particularly on, like, maybe a marriage that they’re not quite seeing money the same way. Surprise, surprise, that happens. And the couple came in… Actually, let me tell you a different…Courtney’s story is amazing. Let me tell you a different story. A friend of mine just… He said his wife forever was always, like, wanting a car. And he couldn’t…this is like a decade worth of conversations. And I could tell the exact same story about my wife and I and the remodeled kitchen which I wrote about. But she wanted a new car. And he was telling us like, “I just don’t get it. Like, she doesn’t seem to be concerned about, like, image or…you know, in any other area of our lives. Like having the newest clothes and the fanciest house, like, none of that matters. And she just won’t stop bringing up getting a new car.”

And I was thinking…I mean, just because of my training I was like, “Oh, I’m really curious about that. I wonder why.” …down and he said, “Hey, we can’t really afford a new car. I don’t understand.” And she said, “No, no, no.” And he said, “Tell me, what is it with the new car?” And she’s like, “No, no, no, no, no, no, it’s nothing about image, my dad always drove beat-up cars and they were totally unreliable. The car broke down one day in front of the school in sixth grade. The car broke down out on a rural road and we had to walk home. The car broke down at the mall. The car…” It’s like, “What I meant, I’m sorry, what I meant was reliable.” Right? And that’s just a really dramatic…couple that you run into education planning, like, where the couple look at each other like, “Heck no, they’re going to earn their way through school.” And the other spouse says, “Oh, wait, I thought we were going to pay for Harvard.”

Michael: Yeah, I thought we were paying for it. Yeah.

Carl: And you’re like, “Wait, this is the first time you’ve had this conversation?” So I’m thinking empathy. Right? Listening, goal clarification. Like, I think, “What are your goals?” is quite possibly one of the worst questions we could ask, versus like, “Nobody knows?”

Michael: Nobody knows?

Carl: And I know… here’s the dilemma for me, no one walks in the office and goes, “Hi, I’m here for you to help me clarify my goals.”

The Challenge Around Valuing Behavioral Conversations [16:02]

Michael: Well, and that’s my challenge around this discussion. Like, I don’t see a lot of people that come in and says, “Hey, I’d love to have a conversation where you help me clarify my goals. You know, I’m fighting a lot with my wife about money, can you help me with that?” They don’t tend to come to us. They may or may not end up in marriage therapy. Maybe we could have helped if they’d come to us. But that’s not the thought I think most people get. Like, “Oh, I’m fighting with my wife about buying a new car, let’s call my broker.” Like, that’s not the connection point for people. And so, like, they don’t even think of us in that context, much less figuring out, “How do I frame value?” And especially like, “How do I quantify it? Like, compared to what?” That to me is always the challenge when we get into the value of behavioral conversations. Like, I can’t prove how much you were going to screw up your own financial situation without me so that I can say, “Here’s how much money I saved you or created for you by doing this.”

And so that’s always been my challenge around the… you know, like, I don’t disagree with the value that we create around a lot of the behavioral discussions, because any of us who’ve been doing this for any period of time have seen clients blow themselves up or they came to us because they blew themselves up, but it still doesn’t mean they’re willing to say like, “Yeah, I’m so hopeless that I’m just assuming I’m going to be a train wreck, so I’ll pay you whatever your fee is just to take this off my shoulder.” I mean, few clients do that because they’ve so blown themselves up so many times they’re just willing to throw in the towel. But for everyone else, like, this has always been my challenge around our value is all this behavioral stuff. Like, I know it is, but I don’t know how to quantify it. And even beyond that, just, I don’t know how to convince someone that that’s a value because it requires us to admit to ourselves we’re going to screw this up. And we don’t like to admit those things to ourselves.

Carl: So good. This is exactly why I want to have this discussion. Because I think the directions and the angles at which we look at these two things or a lot of things are going to be just like this. So I think we have to table one thing. We have to table, “How do you talk about it?”

Michael: Okay.

Carl: And we’re going to…because I’m enjoying this, I don’t really care what other people think. We’re going to go a little longer than we planned. Those of you who are still…is to talk about value, which is quite…I know you want to because it’s one of the most requested emails I get. Like, “How do I communicate my value?” Shoot us an email, you know, whatever. Let us know in the comments section, whatever. But let’s table that for a second. And let’s just dive into this because I think it’s so good. You’re right, like, we can’t quantify it.

I remember when I was focused just on the behavioral stuff, the way… and talking about this is going to require me to open the cookie jar a bit about how I used to talk about it, which was just to say…I would say to clients, “Look, let’s talk about my fee, da, da, da, da, da.” And then I would walk them through all those Advisor Alpha sort of stuff, right? Like, yeah, tax-loss harvesting. And then I would end with…be like, “And by the way, you know, most people don’t even get the returns that they deserve. Let me show you the data.” And I stopped showing people data because everyone already knew about the data. I just know it’s true because I’ve seen it.

So I had to end up saying something. It was often…you know, actually, it was never uncomfortable for me, but I couldn’t prove it. And I would say that, like, “I can’t prove this to you. But once every three to five years, you are going to be tempted to make a mistake. And the reason I know this is because you’re human, right? Like, I did the same thing, as publicly, you know, it’s public knowledge at this point. I just say like, “You’re human, you’re going to be tempted to make a mistake, and I’ll be there.” And I would almost paint that as like, “And that’s kind of cream on the top.” Because we’ve got all this other stuff that we can almost quantify. But I feel like we’re moving another level that we can’t even…we can’t talk about, we just have to do it.

Why Our Anchors To The Portfolio-Based Model Might Be Hindering Conversations Around Value [19:54]

Michael: Well, and frankly, I feel like part of our challenge is still, we’re so anchored to the last model, which is the portfolio-based world. And, like, I’m not going to bash AUM, our firm runs on it, it’s a nice profitable business. Like, I’m not trying to poke at the AUM model per se, but it’s so how we frame our value that even when Morningstar and Vanguard and the rest do a study, like, it’s still quantified as a percentage of the assets. Like, we’re trying to convert our value into a percent of AUM, and the reality is a lot of the value we provide just doesn’t tie to AUM. I mean, it could be simple because it’s just things like, you know, “Well, heck, I’ll help you with the debt side of your ledger. So, like, calculate your interest rate savings on your mortgage relative to your assets.” This is going to get weird really quickly. I don’t know how you quantify a value relative to assets to say, “I’ll help you make better spending decisions as a couple.” Right?

Like, the value of like, what’s the percentage of AUM value of helping that couple buy a cheaper but more reliable car? Like, it’s clearly a value to them. It’s going to have a material positive impact on their marriage. But to try to convert all this back to a percentage of the portfolio because that’s the model we’re anchored to in the way we charge, like, I think that’s part of how we’ve gotten ourselves stuck. I mean, what if you simply said like, because those are the kinds of conversations you have with your clients, like, our value proposition is, “We will help you and your spouse have better conversations about money so they’re not awkward?” Because that’s the value you really just articulated. And if you just put that value out there for people who are having stressful conversations with their spouses about money, like, let them put their own value on how would it feel to not be stressed about money with your spouse. They will probably price it a lot higher than you think.

“I Think The Value Comes From Diagnosing First” [21:48]

Carl: Yeah, yeah. And I don’t even think, and I wouldn’t be really clear about this, like, I don’t…I think there is a…I think of it as a righteous trick, it’s not a bait and switch, that we still have to recognize, people come in the door, they’re not going to ask, “Well, will you listen to me about money?” They’re going to say, “I just sold my business, I’ve got a pool of money.” Heaven forbid, “My spouse just passed away, I’ve got life insurance. My 401(k) is getting bigger. I’ve got college debt.” Like, they’ve got an acute problem. And I think we meet those people at that spot with empathy. And we, this is where the righteous trick comes in, we absorb that with empathy and we say, “Yeah, I understand.” Like classic one, sitting at, you know, places I used to work, people would walk in just with this look on their face like, “What have you got for me, kid? I want the best investment…you know, I want performance.” And I used to like be, “Well, that’s a really dumb thing. Like, da, da, da, da, don’t you understand?”

And then I realized, “No, no, no, meet them there with empathy.” “I understand how important investment performance is to you. Right? I understand that, and we’ll get there. Before we get there, could we back up a little bit, all right? I’ve got to understand.” Sort of like, “For what?” And that gets just…then we take our way towards these goals. And it’s never that I say, “I’m going to help you have better conversations.” It’s that you walk out of that meeting, the first meeting, and you are scratching your head. Client couple walking to the car scratching their head going, “Oh my gosh, what just happened to us?” Right? Like, “We just had the best, most clarifying conversation about money. And it was totally different.” And in fact, at the end of that meeting you’ve said, “Go meet with other advisors.” You walk into the other advisors’ meeting and they go, “You don’t like green, I’ve got blue. You don’t like blue, I’ve got purple,” right? Like, just tossing prescriptions. I think the value comes from diagnosing first.

Michael: But the value you just defined for that couple is the couple that’s driving home saying, “I’ve never felt better about our shared relationship goals as a couple than today.” Like, why can’t we say that’s the value?

Carl: We could. And I don’t know that they would put words on it, though.

Michael: I don’t know. Like, how many…money is what, I think technically the number one leading cause of divorce. So, like, what would happen if we just started saying like…assuming, you can actually deliver on this conversation, of course, like, you know, “Our value is that we’ll help reduce this stress with your spouse around money?” Now, that’s a bold statement. But that’s…you know, I mean, if you want to do the math, like, “Here’s the deal, my fee or 50% of your wealth when you get divorced. Do that math.”

Carl: One of the reasons I’m so excited about this idea is that you come…and you bring it up, like, the whole industry is working on this model where we have to quantify our ability to outperform somebody else. And by outperform, I don’t even mean investments, but we just somehow have to win the race. And there is an alternative…

Michael: Well, I do want to get the client. I don’t want you to get it. I have to win…

Carl: Yeah. What I’m saying is that the real true professionals I know and you know, there is no alternative to them. Right? Like when I used to have a client…I had a client who’s also a good friend, his name was Dave, and I remember he called me one day after somebody cold-called him, you know, from wherever. One of the traditional financial services industry places. And he said he remembers hanging up the phone and just going like, “How do I even explain the relationship I have where you know,” like in our terms, “You know my goals and dreams? You know what keeps me up at night. You have taken that and put it…built a portfolio that matches that, and now for seven years, you’ve been helping me manage my way through when I’m scared of that and reminding me of what I said was important to me. You have been taking what I say is important and my use of capital and you’ve been aligning that.” Right? To me, that’s the value.

Now, again, we’ve got to table the discussion about, “Well, okay, great, how do I say it?” But I think in those moments where we realize like there is no algorithm for that. There’s no algorithm for the client that wants to pay off their mortgage. You and I have both seen this. “We’ve got the spreadsheet here. Your cost of capital is 3%. Your investment portfolio has done 6%,” whatever. Like, “Why would you want to pay off the mortgage?” “Because I do.” And, like, I’ve been to a mortgage not to pay off party. I’ve never been to an efficient portfolio allocation party. Right? So that doesn’t…to know. Like, Michael, I know how you think, and the ability to say to you in the eyes like, “Hey, what I’m about to tell you, you may fire me for it, but if I don’t tell you, you should definitely fire me. You told me last week you want to coach your daughter’s soccer team, this week you want to buy a new Tesla. What’s the disconnect here?” But like, those kind of conversations, is that ringing true to you?

Michael: Yeah, it is, but again, like… So, you know, Moira Somers did a great book a little ways back, we wrote about it on the blog, called “Advice That Sticks.” You know, all about, like, how do you give advice that people will actually be more likely to take up and connect with and use and implement? And, you know, she has this fantastic section in the book about, you know, what things actually drive people, like, to get advice. And, like, it’s not math and numbers stuff, it’s personal pain points. It’s personal discomfort. It’s some feeling of being unsettled about something that you want to resolve. Like, that’s what makes today the day you finally decide to contact an advisor and schedule a meeting and not any of the other days for the past weeks or months or year.

You know, that’s why I always start every meeting with a new prospect with just, “What brings you to this conversation? Like, why are we talking and why are we talking today? Just what’s going on and what’s the pain point?” But, you know, I think, again, to me, our challenge, like, I worry now we’ve just gotten too stuck in trying to figure out how to connect all these value propositions back to a portfolio. So I guess if you want to say, you know, “I’ll help your spouse come to common shared financial planning goals so that you don’t lose 50% of your portfolio. So do you think my fee is worth less than half of your assets?” Because that’s what happens when they split. Like, that’s the level of what happens sometimes with good financial planning relationships. So I feel like we’re scared to say that.

Carl: Right. Well, listen, I….this has been everything I had hoped it would have been. Right? And we’re so close to wanting to jump to another topic, which is, let’s talk about how to talk about it. And given that we’ve been chatting….amazing, Like, real true professional financial advisor, planner, whatever you call yourself, please understand, in a world where you’re getting hammered, right, like, in a world where… I feel like, to a large degree, we both share one little slice of our job, I feel a little bit like the “Lorax,” right? Like, I feel like part of my job is to protect real planners and advisors’ sense of self-esteem and confidence. Like, there should be a line outside your door, and I hope there will be soon, because you do all that Advisor Alpha stuff. I am for the wraparound, but then you do all this other stuff that we’ve got to here at the end.

And please, please, please, please don’t forget it because I get those emails every week from the “The New York Times” column. I get the email saying, “My husband and I know how to talk. Like, we [inaudible 00:30:54] about it yesterday. We opened the American Express bill, where do I go? I’m scared to death. I don’t know what to do. My grandma just died.” Like, all these things. And I want to be able to say, “Search in Google ‘real financial advisor’ in your area.” And we know how that’ll work. So we need more. Well, let’s wrap up. You get your closing statement, Michael.

Michael: My closing statement. So, I mean, I think my closing statement is we have to start figuring out how to frame value outside of the portfolio. Like, not just outside the portfolio, but stop even trying to bring it back to the portfolio. And, like, look, if what you ultimately still do as a part of this holistic service is also manage the portfolio and that’s how you get paid, like, fine. I’m not trying to criticize the AUM model here, it’s a conversation for another day, but the more we keep trying to bring our value proposition back to the portfolio, like, I think that’s the beginning of all the problems that we start creating for ourselves.

Because, aside from a small subset of people who are actually anxious about their performance and want to talk about the portfolio, for the rest, like, the portfolio is a means to an end. And trying to frame your value based on the means instead of framing the value based on the ends is, I think, what gets us into this trap where we can’t figure out what the value is, and we certainly can’t figure out how to explain it. Which, given how many times you’ve cued us up, I get the feeling that’ll be the comment we get. Like, “Okay, now you guys have to do another one to talk about how to talk about the value.” But, like, what happens when we start unhinging the value conversation from the portfolio and give ourselves more freedom to explain value in more ways?

Carl: So good. Amen. Now, listen, for those people who’ve been living under a rock, where’s your favorite place for people to follow what you’re doing?

Michael: So Michael Kitces,, K-I-T-C-E-S. We’ll add a little label to that at the end here because that’s a little hard to spell. But that’s got all of our stuff. That’s the best place to find us. And what about you? Where do people find you these days?

Carl: Yeah, I think the work…you know, the work specifically for advisors, we’ve moved it all to So I’ve devoted almost all of my interactive time to email versus Twitter or anything else. So email me at and I will read it and I will reply. So look forward to that.

Michael: Awesome.

Carl: Cool, Michael. Thank you.

Michael: Thank you. I hope everyone lets us know what you think. Like, put comments down below. We will be looking at them. Let us know what you think and whether you want to see us do a few more of these.

Carl: Amen. Thanks, Michael.

Michael: Awesome. Thank you.

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