Most advisors acknowledge that the more human side of money, the therapeutic side, is integral for building a client relationship based on trust. So how do you develop the skills needed to help people with the emotional needs that are tied to finances?
On this episode of Elementality, Reese welcomes Brendan Frazier, host of the popular “The Human Side of Money” podcast. Believing the therapeutic side of advice doesn’t get enough attention, Brendan explains why there is a critical tie between trust and understanding your clients on a personal level—a tie that begins as you pay closer attention to why that person is seeking advice. Listen to learn principles of behavioral psychology that can help you succeed at the more human side of giving advice.
Show Notes
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Podcast Transcript
Brendan Frazier:
Nothing is gonna create more motivation than channeling somebody’s most important things in their life. Nothing ignites behavior change like getting somebody to tap into what’s most important to them. And if you can highlight the gap and say that. Okay, this is what you want, which by the way, you’re doing them a favor by helping them clarify what they want because most people don’t spend time thinking about what they actually want. And then you highlight the gap and say. Hey, there’s a… You can do… There’s ways to get there, from where you are to this where you wanna be, then that’s gonna create… That also creates a little bit of an impetus to say. Alright, you know what, I need a plan to get there, I need to do something to get there. How can I get there? And if you paint that picture, it’s natural to go, here’s where I’m at, I’m here today. That’s where I wanna be. How can I get there?
Abby Morton:
Welcome to Elementality, I’m Abby Morton, CFP and producer of our podcast here at Elements. I love being a financial planner, but I know it’s a challenging profession as well, that’s why the number one goal of our show is to help you prosper as an advisor, as you better connect with your clients. We know your time is very valuable. Plan on a good return when you spend it here with us.
Reese Harper:
Welcome to Elementality everybody. I’m your host, Reese Harper, here recording from the Whitecap mountains of Salt Lake City, Utah, excited to bring a guest in from the south today. Brendan, are you in Nashville today.
Brendan Frazier:
Nashville, Tennessee that’s right.
Reese Harper:
That’s what I thought. I remember the last time we chatted, I think you were not at home, I was in Nashville, and you were traveling and had just left town.
Brendan Frazier:
Yeah, that’s right.
Reese Harper:
And I didn’t even get to say hi.
Brendan Frazier:
That’s right, I missed you. I heard you were coming when I took off.
Reese Harper:
Well, for those of you who don’t know, Brendan Fraser, he’s the host to the human side of Money Podcast. I was in Nashville, I think for… Hey, I’m trying to remember what that event was, what was I in Nashville for?
Brendan Frazier:
Was it the insider’s forum?
Reese Harper:
Oh, yeah. The Bob Veres conference.
Brendan Frazier:
Yeah.
Reese Harper:
I love Bob. He’s a good dude.
Brendan Frazier:
Yeah.
Reese Harper:
Anyway, I was in town for that conference and I was looking at my LinkedIn thread, ’cause all of you know how active I am in social media all the time. That’s a joke. But I was surprised to see Brendan’s feed, and I wasn’t like searching for big hitters, I was searching for people that I just didn’t know, and that had lived in Nashville. And I read one of his posts, and I could tell it was just so authentic and really caring, and he really put his heart out there, and you could tell he’s really passionate about the financial industry in general, client work, and the power that financial advisors have on client’s lives, and I just reached out to him. We had a good chat, and it’s been a long time since we’ve been able to meet, but we just wanted to let you guys know that’s how I met Brendan, and we’ve actually never met face-to-face, it’s just been a digital relationship, and…
Brendan Frazier:
Not yet, not yet.
Reese Harper:
Not yet. It’s coming up soon, so let’s… Anything you’d like to share about your background real quick so that people can get some context before we move on.
Brendan Frazier:
Yeah man, I think I always like to… There’s a story I like to tell that kind of… Well, I’m not gonna tell the full story. I’m gonna tell my… A little bit of my background, that colors to… Or I guess it helps pave the path to where I got today. So when I started in the industry, it’s about 10 years ago, I was in a role where we were consulting with financial advisors, so it was a good way to get in, you get a lot of experience, you’d go around, you talk to, you meet with advisors all over the country every single day. So in hindsight, the cool part about that is you get a lot of experience talking to different advisors and different business models that run different types of practices, for the most part, you sit there and you pick up on things that you know you don’t wanna do, but there’s also things that you see that you’re like, you know, one day I wanna do that.
Brendan Frazier:
So it accelerates this learning curve of, Hey, this is how I wanna do things, this is the things that… The things to be thinking about, but what it also does is that highlights gaps really, really quickly, where are we missing the boat? Where are we missing the mark? And so one of the things that kept coming up in conversations was, I would hear guys, guys and girls advisors used to say something along the lines of, “You know Brendan, sometimes I think I’d be better off with a degree in psychology than I would a degree in finance or economics,” or,”You know Brendan, sometimes I feel like I’m more of a therapist than I am a financial advisor.”
Brendan Frazier:
And so that kind of makes sense. I think everybody that listens… Everybody you mentioned that to, everybody listening kinda like nod their head and be like, “Yeah, I’ve thought something along those lines before.” So I kept hearing it so often and my next natural thought, I’m always the kind of a curious person. Curious person. So I started just thinking, Okay, I keep hearing this a lot, I know that there’s the CFP, I know that there’s all these technical designations and courses and curriculums that are out there to sharpen and hone technical knowledge, but I just thought I’d start asking if that’s so important, and some people would tell me that it was more than half of their job, I just started asking, Okay, so what is it that you do to focus on and hone that skill set? And it would always just be kind of like blank stares or crickets or the traditional like, “Well, I’ve read a couple of books and learned a few things here, or… I kinda just wing it. It just sort of comes naturally to me.” And I remember sitting there thinking, Would you ever just read a few books or just let it come natural to you when you’re giving investment advice and financial planning advice.
Brendan Frazier:
Well, no, of course you wouldn’t do that. So why don’t we do more? And so you come to find out, everybody knows it’s important. There’s just nobody really knows exactly what to do or where to go in terms of how to make that happen. And so that’s kind of where this idea came from to start focusing on the human side of money was like. Wait a minute, I can’t imagine that… If everybody acknowledges that this is important, I have to imagine there’s at least an interest in learning more about it, and there have always been people out there doing a good job with this kind of stuff and at least promoting it, and the Mitch Anthonys, Carl Richards, Bill Bachrachs, even like Michael Kitsis and his team do a great job. There’s always been, and I’m missing a lot of people in that, so I apologize, anybody that’s listening that I’m missing, but there are always been people that do great work, but it just hasn’t been mainstream. It hasn’t been top of mind. I think that’s changing. So anyway, that was the impetus for it was there’s a need, and it just feels like it needs to be filled, it needs to be… We need to know specifically practically, tangibly, how can I start applying some of these principles from Behavior Psychology and Communication into what I do day-to-day with clients.
Reese Harper:
Interesting. One of my favorite discoveries. And building elements was how important the human was in the financial advisory relationship. Initially… I mean I knew people were important. I read the Vanguard study and it looked important, I had this vision of what I had experienced as a financial advisor and was still experiencing so I knew clients were actually hiring me and they weren’t leaving me, and they were hiring me for a reason, and they could go manage their money somewhere else if they wanted to, but once you start talking numbers, especially to somebody like a dentist, it’s a very… We’ll call it like right brained, most of them artistic thinker, they’re not… You say numbers and they just don’t hear anything. It’s not like they’re confused by them, it’s just like they’ll just turn it off, it’s like you can say words to me as a person, but you start talking numbers at me, I don’t listen, and I think that’s why it’s really hard for advisors, like why my clients never enter their information, they never enter their data, they never put stuff in I can’t get my clients to use the tech. I think it’s a combination of both bad technology design, but also like they’re not gonna use it unless they know you need it.
Reese Harper:
These are emotional needs that people have, they’re not functional things, these are like… This is an emotional and a communication, it’s a soft skills, it’s the human side of all of this. And I was just really surprised that this was such an a emotional business, I always knew it was, but I think it’s a very, very high percentage of the reason someone hires an advisor, if not the only reason. I could argue that it’s the only reason. I could show you a lot of examples where you think they called you ’cause of a 401K. Let’s just say just… This is my last comment, and I let you respond. Let’s say you think someone called you, ’cause they wanna do a Roth conversion, ’cause that’s why they called you. They literally said, I wanna do Roth conversion. What I think happened is they went online or they look around or they ask a friend, they might not admit to this, but they went to research how to do Roth conversions. They saw that it was pretty pragmatic, and they probably even the most DIY person. Of course, 70% of people didn’t do this, but even the most DIY people that eventually hire you, they go look at this logically, this Roth conversion thing online, and at the end of the day, they kinda go.
Reese Harper:
I don’t know, I just wanna make sure. I wanna know that someone really… Who’s a little bit smarter than me, who’s got a little bit more depth, and what they’re hiring you for that… Hiring for a functional thing, like convert the Roth, or hiring you for the emotional satisfaction of you telling them it’s the right thing to do, like you’re giving them comfort and they’re hiring you for that comfort. They’re not hiring you to do the thing. Even if they call you and say. Hey, I’m just calling. They’re kind of rough around the edges. I’m just calling to try and get a Roth conversion done, it’s like they’re calling you because they hit like a brick wall emotionally, and they’re like. No, I need a human.
Brendan Frazier:
Yeah, yeah.
Reese Harper:
Even I think that’s… I’m not saying that no DIY-er hires a financial advisor, but I am saying even the most DIY people, I feel like if they hire a financial advisor, if they do, they’re getting to an emotional place, and that’s why they hired them not for a functional job. If they don’t need the emotional support, they don’t hire the advisor, like they’re able to do it on their own, so they just go and self-direct, you know, but… It’s really fascinating. Your thoughts on that?
Brendan Frazier:
Yeah, I’ve got about 175 thoughts on that whole thing. But I guess I’ll start. I’m gonna start with this…
Reese Harper:
That’s ’cause I talked too long, I’m sorry. I shouldn’t have went on.
Brendan Frazier:
No, no. This is part of my problems, I get so passionate about this stuff that it’s hard to contain all the energy and the excitement. So… Well, let’s start with this part, and the example that you gave, the Roth conversion is what is on top of their mind? That’s the reason that they’re calling. Well, I’ve got news for you, at the end of the day, in the bottom of their hearts, if you talk about their biggest needs and desires, nobody actually cares about Roth conversions. Literally, nobody cares about a Roth conversion, there’s something that they want the Roth conversion to do for them, but nobody really cares about Roth conversion, so… And your examples are great. One, because it happens all the time, that’s what you see is the presenting issue, we’ll call it. So you get the call, you have the conversation. They say that the Roth conversion questions. What’s on their mind?
Brendan Frazier:
What prompted this call. Well, I’m trying to figure out, is a Roth conversion the right thing to do? The problem is, you made the connection for everybody already, where you said. Hey, they call in about a Roth conversion, what they’re really looking for isn’t a Roth conversion, they’re actually looking for reassurance. They’re actually looking for the emotional piece of mind of talking to somebody that can at least give them the stamp of approval and say, This is what you should do, you’re not gonna completely blow up your entire financial plan, and financial picture, and in your family by doing a Roth conversion.
Brendan Frazier:
Right. But you made that connection, which is a 100% true, almost 99% of the… 100% true, 99% of the time. That’s a good math right here, it’s interesting math. But it’s true the majority of the time, right, what the best thing that you can do for somebody is first of all recognize that it’s never about Roth conversions and help guide them down the path to what it really is about, so they can clarify in their mind what they’re looking for, and once that becomes clear, now you have the map, they’ve given you the cheat code, they’ve told you what it is that they’re looking for, so that you can then tailor and describe your services and what you do exactly to what they want. So a typical conversation would go. Hey, Reese, I’ve been thinking about this Roth conversion, I wanna try to figure out if it’s something that I should do or if it makes sense, and the natural to immediate reaction that would be like. Oh yeah, okay. We’ll tell me a little bit about how much do you have in your IRA. Do you have a Roth? How old are you? What are your taxes now? What are you gonna pay in the future? How do we project those things?
Brendan Frazier:
And it’s so easy to go down this technical rabbit hole, especially when you have the information, but again, people don’t really care about that. Take a step back, take a deep breath and think, Okay, wait a minute. They’re calling about the Roth conversion. They could have called about the Roth conversion yesterday, they could have called about the Roth conversion two years ago. They could have called about the Roth conversion five years from now, but they’re calling today, so it’s just as simple as asking somebody guiding them down the path, and trying to figure out. I’m curious. Why now? Why not last year? Why not tomorrow? And guess what, Now it’s no longer about the Roth conversion, now they’re saying things like, Well, I’ve been looking at it, I ran some numbers, I think I’m doing it right, but I just, I…
Brendan Frazier:
I Wanna make sure that I’m not making a big mistake, boom! Now we’re talking not about Roth conversions, we’re talking about the emotional reassurance, a peace of mind that they’re actually looking for, and they didn’t know that. They thought it was a Roth conversion, you’ve helped them realize that what they need isn’t Roth conversion, they need reassurance and peace of mind.
Brendan Frazier:
You mentioned it at the very beginning of what you’re saying, that it’s just hard to get people to do the things that they’re supposed to do, it’s just really… Behavior change is just a really, really, really difficult thing to do, and the best example I noted to illustrate that is several years ago there’s a study done on patients… Of heart bypass patients, so I’m not a medical expert by any means, so I’m not gonna explain this well, I’ll probably probably even botch some of the terminology, but these patients would go in to have heart bypass surgery, so in heart bypass surgery, you’ve got a blockage in your heart, so they go and they put a stent in that opens up your arteries for more blood flow, so they open it up that way you’ve got more blood flowing and they solve the problem temporarily, but what they tell these patients is. Hey, this isn’t a cure, this isn’t gonna be the long-lasting solution in order to avoid another heart bypass surgery, which by the way, is super expensive and risky, or in order to avoid dying one day, you’re gonna have to actually change your lifestyle and change your behavior, you’re gonna have to eat healthier, exercise more, or smoke less, some of the things that lead to heart problems, right?
Brendan Frazier:
And so they took these patients that are part of the study that had a heart bypass surgery, they told them that if they didn’t change their behavior, their lifestyle, that it wouldn’t solve the problem. They followed up on them two years later, and what percentage do you think hadn’t changed a thing two years later after going through this expensive, traumatic life-altering experience.
Reese Harper:
A pretty big percentage I would guess.
Brendan Frazier:
90.
Reese Harper:
Yeah.
Brendan Frazier:
90% of people with their life on the line couldn’t change their behavior, so I think it’s just a good baseline to say, Hey, if people can’t change their behavior with their life on the line, we probably need to go into these relationships with financial planning clients, financial Vice clients, and assume… At least start from the baseline of, it’s probably gonna be hard to get them to change their behavior and build and design everything from that mindset.
Reese Harper:
Yeah, and you’re hitting on something that I’ve been exploring a lot as recently as this morning, I was actually writing a piece about the comparisons between the health and medical industry in the financial services industry, and the first thing I highlighted in this article is like if you’re sick and you wanna go to the doctor, or if you’re feeling sick, they’re gonna… They have a whole… If you wanna do a comprehensive exam, let’s say, if you wanna get checked out, they’ve got a whole host of elements or areas or content, like your feet, your head, your neck, your nose, your eyes, your heart, your lungs, your gut, there’s all these components. I don’t wanna be self-serving, but I’ll call them elements of health, physical health, and in order to assess those, they develop some kinda like ratio or number to track those things, like blood pressure is how they’re gonna measure your cardiovascular health at least one dimension or LDL cholesterol, and they’re gonna have areas where of risk like this is high, this is low, this is… If you’re at 140 over 80, that’s gonna be a very high risk blood pressure and you’re at risk for a stroke, and the challenging part in Financial Services is we don’t have yet, and I’m trying to work on that, that’s kind of the whole genesis of this Elements project is how are we gonna develop preventative measurements that help us anticipate behaviors in people, and that’s a really, really…
Reese Harper:
It’s completely absent right now with… We have a credit score, we have three to six months worth of them, we have the raw data, we have income, we have net worth, but we don’t have have ratios yet, and we don’t have studies that have been done on those ratios, and we don’t have… We have some very few, 4% withdrawal rate for example, I can think of as is kind of a ratio, a portfolio withdrawal is divided by total portfolio value, credit score is a ratio, but we don’t have ratios on liquidity, we don’t have good ratios on spending and savings. We don’t have good ratios on taxes, we don’t have debt to income ratios that are well understood, like a lot of these really important preventative financial measures, we don’t look at them, and the industry right now, unfortunately, works primarily with people who are healthy at the end of their life with lots of money, so there’s not a lot of money to be made in the place where no one has an AUM, and so early in our lives when we could have 10, 20, 30 years of compounding to sort of get ahead and try to build these behaviors, there’s not a lot of financial advisors working in that space.
Reese Harper:
There are… I mean XYPN is doing a good job, there’s a lot of small younger firms, but the majority of the financial advisors are waiting for the healthier people, we’ll call them quote healthy, then that if wealth is health in this analogy.
Brendan Frazier:
Financially healthy.
Reese Harper:
Financially healthy, we just don’t spend a lot of time early enough, I’d argue, even relative to the medical industry, we need longer.
Reese Harper:
We need decades of financial coaching and therapy and shaping because two years, you can clean up your act if you’re 60 and you’re like, LDL is high and you’re kind of a mess, you can recover with a couple of solid years of really discipline, daily exercise.
Brendan Frazier:
Oh yeah, yeah.
Reese Harper:
There’s just no way to do that with your finances, like you… It’s really hard, you have to start a little bit earlier in life, and it’s one of those things that just you can’t recover from real fast, and I’m just curious how you feel about that just general… I don’t wanna sound doom and gloom and I’m just… I feel like that is a problem right now where we’re not like anticipating… We’re not addressing and anticipating the symptoms that exist in a client, if they don’t have money, we’re not working with them, and that’s a challenge.
Brendan Frazier:
Yeah, right, right. No, I think that pretty much hits it on the head, which is, let’s suppose that… Let’s just flip the industry around for a second and say. Right now, predominantly the main source of revenue, the main fee compensation structure is AUM, AUM fees, right? And that’s how it is. It took us a long time to even get to that point, but here we are now, and that’s a whole another tangent. I bet, but here we are now, and that’s the predominant compensation structure, predominant fee structure for a lot of reasons. Let’s suppose that you’ve flipped it on a 10 and the flat fee, fee for advice, hourly project, whatever… This isn’t a fee conversation, we’re not debating the best way to charge fees, I’m just using a hypothetical example. Well, let’s suppose that we flipped it around and instead of AUM fees, let’s say AUM fees had the same market share, if you will, as the flat fee hourly fee model does now, and the flat fee, retainer fee, hourly fee had the market share of. Oh, was this popular as the AUM fee is?
Reese Harper:
Yeah.
Brendan Frazier:
Do you think that we would see more people getting helped and served earlier and more often, and we be catering to more people?
Reese Harper:
Yeah.
Brendan Frazier:
And I think the answer is undoubtedly, yes. I think, honestly, truly, it’s nothing more than a compensation structure challenge, you look at it and you’re like. Hey, these younger people are harder to serve because my revenue model isn’t just, I can’t be… It’s a business problem, I can’t be profitable, I can’t drive the revenue that I need to be profitable and serve people the way I need to if they don’t have a certain amount of assets to manage, and so I don’t blame anybody necessarily, we’re all here to… We’re all doing our…
Reese Harper:
We’re kind of stuck a little bit right now where subscription economy in wealth management still kinda early too, it’s tough and it is easier to… I’m still charging on AUM, I’m not saying that’s an evil model by any means, it’s an easy way to get paid, high hourly rates, if you want to classify it that way, it’s an easier way to get paid 500 an hour than charging 500 an hour. And it’s not any less transparent, if you’re being super transparent about it, it’s just clients would prefer to pay that way, like I prefer to pay indirectly for my Delta SkyMiles points through a credit card, that charges a slightly higher interest rate, but it just makes me feel great about it, and I’m getting a ton of SkyMiles and I can get cash back and probably do it through city or Capital One, and maybe that’ll be more efficient, but I’m motivated by this low-friction way to get this thing that I want, and that’s… I mean that’s happens with AUM, and it’s fine. My point was just like, if someone’s 35 and they’re about to buy a home, and they go into that home and they go get a mortgage, that’s 41% of their gross income, which I’d consider a high debt to income ratio for someone early in their life.
Reese Harper:
There’s not really any options. I can’t… I gotta tell them to move. Like what can I do? Tell them to relocate and take their kids out of school, they don’t… There’s no financial flexibility at that debt to income ratio, we gotta be down at 25-26%, I gotta be like sub 25, I gotta be in a normal debt-to-income range, or I’m not gonna be able to save any money, I’ll build no liquidity, I’m gonna have high financial stress, like I’m gonna struggle, and I’m not gonna be able to build any assets, I can’t pay down any debt ’cause I’m barely servicing a house. I didn’t know that. I’m just a consumer, I’m just a young family that’s going to get a house, and the mortgage broker told me I could do a 44% debt-to-income ratio. He told me I could buy a bigger house, that’s the legal limit, we don’t… If we can’t anticipate that, if we can’t give that person that information in advance of them buying that house, preventative-ly, then they’re gonna get stuck and then when they go meet a financial advisor, [0:24:10.3] ____ How money can you save? We don’t… I don’t think we can, that’s why we are here.
Reese Harper:
And he’s like. Well, and the financial advisor, is like… The financial advisor still doesn’t know what to look for necessarily. He’s like, Well, I don’t know, some people can save, some people can’t. I don’t know why you can’t save. You should be saving money. And they’re not really even looking at that 41% debt-to-income ratio on the house and going like. That’s a problem. We need to tell them to move. They’re just unaware of that. We’re not talking about anything unrelated to assets and retirement most of the time…
Brendan Frazier:
Yeah, yeah.
Reese Harper:
And so, I don’t know, it’s a concern for me just because America is not getting healthier financially, and what’s gonna solve that is if we preventative-ly can get out ahead of it a bit and get five or 10 years of down market advice to sort of get that next generation a little bit more informed around what a healthy savings rate looks like, and what is a healthy debt-to-income ratio look like. They just don’t know.
Brendan Frazier:
There is something I think that keeps popping up in my mind, it’s kind of along these lines that I wanna mention that I think can be of help.
Reese Harper:
Cool.
Brendan Frazier:
And it ties in from a psychological perspective too, with elements, for example, and by the way, this is… You didn’t even know I was on this, but I’m gonna use it as an example.
Reese Harper:
Thank you.
Brendan Frazier:
With elements, not only do you get the ratios, the numbers and the ratios, but doesn’t it give you an idea or doesn’t it sort of benchmark you compared to peers, or tell you where you’re at sort of relatively speaking.
Reese Harper:
Yeah, right now it’s in like… Like if… It’s in categories right now, so debt-to-income ratio would be atypically low, low, high, normal, high, atypically high. And that’s how we’re doing it right now. Benchmarking is something I’m doing at my own firm, but it hasn’t been built into the software yet, but yeah, the benchmarking would be like not just putting them in categories, but we’re gonna compare you to other people now, yeah.
Brendan Frazier:
Yeah, but there’s still an element of giving somebody an idea of where what they stand.
Reese Harper:
Oh, yeah, yeah, they’re in a category like, you are atypically low, or you are normal, or you are high. Yeah, that’s there.
Brendan Frazier:
So and I bring that up because while I do think that educating somebody on what a good debt-to-income ratio is like it’s 41% or 44% too high. Yes. Here are the ramifications of that. I think that’s certainly helpful. I think what we’ve also learned is that there’s also issues with financial literacy and financial education in that it doesn’t necessarily solve the problem. It’s not that it’s not important. It’s just… Yeah, exactly. It doesn’t change behavior. So if you’re sitting there going. Hey, I really love this house, and it’s 41% debt-to-income ratio, but there’s another house. It’s like 15 minutes further away. Kitchen is not as nice. It’s like 34%, debt-to-income ratio. I can promise you, I’m not thinking about debt-to-income ratio as I’m making that decision nor 99% of people that are in that position. Information doesn’t change behavior by and large or at least it’s not sufficient, I call it…
Reese Harper:
It’s minor. It’s very mild in what it can do. Yeah.
Brendan Frazier:
Yeah, so there’s… My favorite quote, I say it all the time, my favorite quote of all time is, if all we needed was information we’d be billionaires with six packs. Because there’s no shortage of information out there on how to get in great shape, right? Just eat less workout more, pretty simple. We all know how to have… How to have live in happy, thriving marriages, there’s plenty of information out there on how to be a good spouse and a great parent. There’s plenty of information out there on how to run successful businesses. We don’t have a shortage of information. It’s not an information problem, it’s an execution problem, and so then we think. Okay, and that comes back to the behavior change problem, so the reason I brought up elements is because it’s good to educate, no doubt about it.
Brendan Frazier:
What I think is even better is if you can use things to subtly change behavior, and one of the things that we know… I say this phrase a lot, things we know… When I say we, I mean really smart people have done research that I’ve basically just enjoyed reading, and so I’m gonna say we know, but what they know, what the researchers know and tell the rest of us is that social comparison, for lack of better term, is one of the better ways to be able to change behavior. So there’s a fairly popular study that was done out in California a few years ago, where they were trying to limit… Was it power usage or water usage? Anyway, see, this is why the other people do the studies ’cause they can remember the details. I think it was the amount of power that they were using. The point’s gonna be the same.
Brendan Frazier:
So they went out there, they’re trying to get them to conserve energy, and so they go out there and they tell the people in these houses. “Hey, here’s how much you’re using, here’s how much you’re spending, if you can drop it to this, this is how much less you’ll spend. So they tell them. Hey, in terms of money monetarily, here’s what it’s gonna look like if you change your behavior.” Well, it barely moved the needle. They told him. Hey, here’s what you’re using, here are the impacts that it’s having on the environment and the ways it could be threatening the environment in the future. Well, did it move the needle? Yeah, a little bit, but not a whole lot. So telling people the impact that the negative effects didn’t really work, telling people how much money they could save, didn’t really work which we would think that’d be a powerful motivator, right? But it worked, but it wasn’t that big of a deal.
Brendan Frazier:
The number one thing that made the biggest difference was telling them how their usage compared to their peers usage, to compare to the usage of their neighbors that were like them, so now they were given feedback to assess where they stood in relation to other people around them, that they could relate to. That’s what actually got somebody to change, so in the elements example, right? You may not be saying like, Hey, here’s what your neighbors and your peer group is doing, but you’re at least offering a place to know, you’re giving feedback, saying. “Hey, here’s where you’re at. Which is powerful, you first have to know where you’re at, but then also here’s how you stand and compare, and that’s gonna be more motivating knowing what other people are doing and where you stand than it is to say. Hey, you’re at a 41% debt-to-income ratio, by the way, that means you’re gonna have less financial flexibility, you’re gonna have a hard time savings, those are things that are all true, but they don’t move the needle, like a social comparison does.
Abby Morton:
Hey, it’s Abby. Are you on the hunt for ways to grow your book, speed up your planning process and better serve your rising star clients and prospects, then it is definitely time to find out how Elements is helping advisors like you all across the country, modernize their approach to financial planning. To chat with us, go to getelements.com/meet to book a demo. We’ll show you how Elements can help future-proof your business.
Reese Harper:
Let’s say your debt could be in five categories, atypically high, atypically low, low, normal, healthy, whatever, you got five or six groups. If I tell you you’re in the atypically high category, and only 4% of all people in the system right now are in the atypically high group, that has a different kind of pain, I think, associated with it, and like you’re atypically high. They’re like, I don’t care. Whatever like… I don’t know what that means.
Brendan Frazier:
No, you’re exactly right.
Reese Harper:
Even if I’d named them harsh names like you’re in a bad group, you’re in the bad category, they’d be like, I don’t care, and like. So I’m bad, whatever. It’s still like, Well, if you tell them, Well, that is only 4% of people are in the bad group, they’re like. Oh, alright.
Brendan Frazier:
Yeah, yeah.
Reese Harper:
It’s different, and especially the tighter it gets people on your street or people that make what you make, or occupations like yours. It does. Peer comparison is a significant component to motivation, we all use it every day that social media is driving social media, I mean, it is an important motivator, I think that’s why advisors with niche markets can leverage that, so well even if it’s just subtle, you don’t have to do a formal benchmarking group, you can just tell your client when you meet with them. I work with a lot of people like you, and I can give you advice based on what I see in situations like yours with people like you.
Reese Harper:
Alright, let’s go to the next question for you, which is, of all the conversations you’ve had in the last few years with your podcast and speaking and traveling, give me like…
Reese Harper:
I don’t wanna tell you, give me the number one. Give me like a handful of top one, two or three, I want you to tell me like biggest mistakes you see advisors making in their practices, it’s like some thoughts about it. You don’t have to rank them. Just things that come to mind off the top of your mind. I haven’t given Brendan any chance to think about these either, if you guys don’t know, so this is on the spot.
Brendan Frazier:
Yeah, so well, fortunately for you, I think about this probably too often.
Reese Harper:
Fortunately, you have a presentation prepared on that.
Brendan Frazier:
No, I’m trying to kinda like… In my mind, I’m trying to… I’m thinking through, Okay, so what do I boil it down to and not go for the next three hours on the… But they’re mistakes that everybody makes, so I’m gonna start with the first one being what we call what I call reverse rapport. Okay, so like… I think I’m gonna start at the beginning, I think it’s the one that plagues the vast majority of advisors and it’s basic… And it also boils down to… We’ll call it… We’ll put it under the umbrella of just communication mistakes, and so I call it reverse rapport, because what it is, is we’ve all been told so many times, over and over again, right, you need to create rapport, create rapport, create rapport. Get them to like you get them to… You want them to know you, know who you are, build some affinity. And all those things are good. Don’t get me wrong. You don’t wanna not do that. And doing that it’s not gonna be harmful. So for example, you’re in Salt Lake City, right? So are you a Jazz fan?
Reese Harper:
Big Jazz fan. My birthday is next week they’re playing the Mavericks game 3 of the finals first round. Tonight they’re in Dallas.
Brendan Frazier:
On your birthday?
Reese Harper:
Yeah. Next week Thursday. Tonight they’re in… I think they’re in Dallas tonight.
Brendan Frazier:
Yeah, and then so like what we could do there, and I’m not gonna do it for the sake of time and probably just interest, but I could go and ask… I say. Do you think Luka is gonna take over? Luka Doncic for anybody who’s not an NBA fan, plays for the Mavericks, right, we could go down the path of like. Oh, you’re gonna go to the game, so and so, but… And that’s fine, there’s nothing wrong with that. I think, again, is I wanna reiterate, doing that it’s not gonna cause harm, but when you’re sitting with somebody, this doesn’t apply as much when you’ve got a client that you’ve worked with for 20 years, at that point, you could probably afford to do that a little bit more often, but if you’ve got a new perspective client, new somebody you’re new to working with, that’s good, it’s fine, but what you’re really doing is kind of avoiding what they’re actually there for, they’re not actually there to know that you’re a fan of the jazz, they don’t really care that you know about Donovan Mitchell and you can name all the starters for the Jazz and you’re a basketball fan, they wanna know. Do I trust you and do I feel certain and confident that you can deliver the outcome that I want and solve the problems that I have?
Brendan Frazier:
And so the in an effort to try to create this… We try to create trust by talking about commonality and building affinity around certain topics, but that’s not where real trust is created, trust is actually created by getting somebody to talk about themselves, tell them why… Tell you why they came in and demonstrating through the great line of questioning that you’re the expert and that you know the questions to ask, and that you’re there to help them solve the problems that they have. And do that right out of the gate, but spending 15, 20 minutes on small talk and things that aren’t actually on somebody’s mind, isn’t moving the trust needle in the right direction.
Reese Harper:
I think what you’re saying is, in these meetings, man, if you can get to the heart of showing how you can add value and actually add a little bit of value, if you can actually add a little bit of value, it opens the flood gates of the person just say, and I’m just saying like our industry right now, we don’t do a lot of that, we don’t do a lot of that. We don’t do… I’ll give you a little bit of a taste of what it’s like to be a client. It’s like, I got this meeting I’m sitting with you, and you either gotta buy or we’re done and or I gotta move on, and that’s a very hard… That’s a hard decision to make. There’s a reason freemium software businesses are taking off out there, customers wanna try it out for a bit before they like go spend all the money, and it’s product-led growth, that’s what they call it, it’s product-led growth PLG. It’s like an official acronym in Silicon Valley and in financial advisors, if they just led with that, giving someone a little piece of advice, a little taste of what it’s like to work with them, I think it really would open the flood gates, man.
Brendan Frazier:
You’re right. I go to tech circles and all they talk about is how great freemium is. So you think about. Okay, let’s think about why is freemium effective because it lets you… Yes, it gives you an insight, it lets you experiment with it, get a taste of it, and lets you put yourself in that situation and see what it’s like to use it, but what’s happening when you have the ability to do that. Yes, you’re getting experience, but what’s really happening in your brain is you’re going. Okay, I had a problem, I thought that this was gonna solve it, now that I’ve had this inside look, I now know I feel more certain than I did before that this can solve the problem that I have, this will provide me what I need, so if we’re diving to the next layer. Yes, it’s the experience and getting the taste to see it and feel it, that’s a big piece, but what really happens is beforehand you… You’re like, I think this will do it. I think this will get the job done. I’m trying to think about something that I looked at recently, a circle to communities website. It’s a community web app, right where…
Brendan Frazier:
So I’m wondering like if I’m thinking about creating a community. Can I… Will Circle be a good way to do that. And before when I’m just looking at the website, I don’t really actually know. I kinda know based on their information that they’re giving me, but I don’t actually know, but how do I find out, how do I… Certainty creates buying decisions, so once I feel certain that it has the interface and the ability to build or host the community that I wanna create, now, I don’t have any hesitations around. Around using it, right. You know what I mean?
Reese Harper:
You know what’s hard dude, financial advisors don’t get that many opportunities to show like This is a personal sale man, like it’s you selling you to another person, if you don’t show them how…
Reese Harper:
I guess that’s been my big motivation to finish this software project, so I’m like, if you could get people to put in their own information without becoming a client, and having it be private. It’s like to them, and then say, do you want me to give you a little piece of advice? Just one, and then kinda feel that or experience that just once… I think your conversion rate goes up dramatically, but right now what’s happening is all of the advice we’re giving to get people to buy is prior to them giving us their real data. Right, unless you’re Northwestern Mutual, even though you and I both go back to the insurance days where they were hawking annuities and whole life like it was a 401K. So we both know you’re at Mass Mutual, so you got a little bit better, if I’m not mistaken, right? You have a little bit better culture than I ever had. I was at a very heavy insurance world, and…
Brendan Frazier:
That was my background too, so… Yeah, I’m with you.
Reese Harper:
Yeah, and back in the day, they made you take a full fact finder on people, right? Get all of their information, put it into a fact-finder, put it into the system, show them all this value, like do all this stuff for them. And that was actually really smart because it got people to see like. Oh my gosh, this is nice talking to this person, they know my data, they know my information, they got to feel like little pieces of advice you could give, it’s like this freemium experience, and I always was kind of bothered by that ’cause I end up doing all this work, and then the only way you get paid is if you sell like an insurance policy or something, so that kind of turned me off to the industry, but that was the… The flip side of that is we’ve gone to this fee-only model where it’s like, alright, you’re not gonna get a taste of it until you sign up. You’re not gonna get to experience it until you sign up. It’s an interesting combo. I feel like I could go for a couple hours. You definitely have a lot of rabbit holes you can go down and it’s very diverse thing.
Brendan Frazier:
I think the other thing to think about too is, Alright, so what else can you do in the beginning to try to set yourself apart to give them… To make somebody more likely to move forward, well, maybe one of the best ways to do it is to get somebody to go down the path of… Taking them down the path around a conversation of money that they’ve never had before, and so what does that mean? Well, that means instead of talking to them about the retirement plans and where their assets are and how they should be invested, and instead of talking to them about net worth and tax strategies, maybe zoom out for a second and have a conversation around what it’s actually most important to them in their life when it comes to money, and then identifying those things and starting to uncover like, Oh, for me, it’s freedom. Okay, well, what do you mean by… Tell me more about what you mean by freedom. Well, what I really want is I want the ability to walk away from my job when I’m ready and go start my own business, and you say. Okay, alright, great, so what would that look like? What it needs to happen then, and then you start getting them envisioning and dreaming about the things that they want to do in their life.
Brendan Frazier:
Right, so maybe for example. Hey, I don’t necessarily get fired up about retiring one day, but what I do get fired up about is being able to go spend time in the mountains with my family for a couple of months at a time, I think that sounds fun. We would be out there, we’d around the fire, we’d be roasting s’mores, cooking great meals, having great family time, and if you can paint that picture for somebody and then come back and ask where they’re at now and what they’ve done to start… To get there, if it’s that important to them, right? Get them to tell you vividly what that looks like. Well, nothing is gonna create more motivation than channeling somebody’s most important things in their life, nothing ignites behavior change, like getting somebody to tap into what’s most important to them, and if you can highlight the gap and say that. Okay, this is what you want, which by the way, you’re doing them a favor by helping them clarify what they want, because most people don’t spend time thinking about what they actually want, and then you highlight the gap and say. Hey, there’s ways to get there from where you are to this where you wanna be, then that’s gonna create…
Brendan Frazier:
That also creates a little bit of an impetus to say. Alright, you know what, I need a plan to get there, I need to do something to get there. How can I get there? And if you paint that picture, it’s natural to go, here’s where I’m at, I’m here today. That’s where I wanna be. How can I get there? And so that’s a non-numbers way to also give insight into the experience by tapping into somebody’s by getting them emotionally engaged and showing them. Hey, I know it’s about money, but what it’s really about is using money as a tool to fund the life that you wanna live. And so what is that life you wanna live, and let’s show you how to get there. And if you can tell somebody, if you can help somebody to figure out the life that they wanna live, they’re gonna ask how you can get there, and guess what? The good news is you’ve got the financial chops and acumen, the technical knowledge to bridge the gap and get them there.
Reese Harper:
Well, Brendan, this has been a great convo, man. It’s super insightful and it’s been cool to see how passionate you are with just this human psychology and helping advisors really motivate behavior and move… Move the needle. I want you to leave everybody with a last word today before we wrap up.
Brendan Frazier:
Yeah, I think the last thing I wanna say, this is kind of my parting words lately, any time I’ve been doing some speaking and stuff, and one of the things I always try to get out there, tell anybody and everybody is in financial advice, the ROI of what you’re doing, the ROI, in financial advice has three dimensions. We all think that financial advice is about. Okay, I’m charging somebody five grand a year, I need to make sure I’m at least delivering more than that. We’ve all heard clients that say like. Hey, I’m paying you 1% you better be able to out-perform that. It’s like financially, yes, it’s good to be able to provide a financial return on somebody’s investment, but there are the return on investment with financial advice, it’s not just financial, you’re also buying somebody more time in their life so that they can actually go and spend time doing the things that they love to do with the people that they love to do them with, you’re not just buying more time, but you’re also giving them an emotional return because you’ve now created the peace of mind, a reassurance that they can go do the things that they wanna do, so the three dimensions of…
Brendan Frazier:
The three dimensions of ROI and financial advisor, not just financial, but it’s also emotional and time, and the last thing I’ll say as my last thoughts on that is I challenge you to find another job, another profession, another way. Another industry that benefits somebody by giving them more time, more money and more peace of mind. I don’t think you can find a better bang for your buck, so if you ever question your value, if you ever question what you’re doing, if it’s worth it, if you’re making a difference, just you have imposter syndrome, just know there’s no… It doesn’t get much better than giving somebody more money, more time, and more piece of mind.
Reese Harper:
Thanks, Brendan, and that’s actually a really great, great framework. I couldn’t say it better myself, so. Thanks a lot, man. Look forward to having you here back soon. Enjoy Nashville.
Brendan Frazier:
Yeah. Thanks for having me, I really appreciate it.
Abby Morton:
Next time on Elementality.
Reese Harper:
Most clients, they want help knowing how to improve their budget and spend, and they wanna spend less. Everyone wants to spend less. Everyone wants that inherently. Even if they love spending, they feel guilty about it and they wanna try to spend less and they wanna figure out areas to cut, but if you attack specific things like. Well, it’s the truck, or, well, it’s the house, or, well, you’re just an idiot. Where just you’re eating meatball subs and Philly cheesesteaks all the time. If you just cut out your food budget, you’d be fine, if you go after the wrong thing, like it’s… Good luck having that conversation again, like no one wants to be criticized on the thing that they might love the most.
Abby Morton:
You can learn more about the Elements financial planning system at getelements.com/meet, and schedule a time to speak with one of our friendly financial planning experts. Elementality’s executive creators are Reese Harper and Matt Glazer. Elementality is produced by Abby Morton and directed by Jordan Haynes. Have a good one.