The danger of making projections for the future is that clients then tend to live for the future, which creates anxiety and doubt. Advisors add stress when too much emphasis is placed on forecasting, which is why a client engagement tool that anchors them to the present can prove to be so valuable. It’s been said that, “Yesterday is history. Tomorrow is a mystery. Today is a gift. That’s why it is called the present.”
On this Elementality, Reese and Carl look at how Elements calms client worries by getting them more focused on what single task they should accomplish next, on what’s the next best decision. Clients gain confidence as you help them understand what part of their finances they can control today.
Podcast Transcript
Carl Richards:
Greetings. Carl Richards here and super excited to have a conversation with Reese.
Reese Harper:
How’s it going?
Carl Richards:
Good, how are you?
Reese Harper:
Happy morning.
Carl Richards:
Yeah, So.
Reese Harper:
It’s a crack of dawn. Carl’s been out skiing already a good 10 miles of hiking the top of Pfeiffer Horn, and now we’re getting into our recording.
Carl Richards:
Yeah, yeah, yeah, not today, but, we’re here to have a little conversation about the philosophy. We can think of it as the way, the thinking behind…
Reese Harper:
Dude, I’m so excited about this, yeah.
Carl Richards:
What went on with elements, and we’ve sort of picked out a group of topics we wanna cover, but the first one is this idea that seem to be really important to you. And it’s important to me too, but I’m curious to hear what you have to say about it. Anchoring To The Present Moment.
Reese Harper:
Yeah.
Carl Richards:
So often financial planning, in fact, so much of financial planning is about projecting into the future, thinking about the future, thinking about the things that go wrong or bad or good about the future and it takes us away from anchoring now and you’ve been very intentional and it’s one of the things that I was excited about being involved at Elements is because it was anchored to the present moment, so talk to me about the, the thinking and feeling behind that.
Reese Harper:
Well, thanks for taking the time today, to talk about this, Carl. It’s always fun to hear how you react to certain ideas. You’re… Spending time with you is one of my favorite things to do so, thanks. I remember being with my kids, at dinner, years ago and really struggling to just like be there. I remember worrying about like what I had to do the next morning, what I had to do that night, what I had to do by the end of the week, I started worrying about whether my son was gonna get good grades in his geometry class. You know, there was just all this stuff I started like worrying about, I’m like, man, I’m just spending too much time in this state, worrying about tomorrow.
Carl Richards:
Yeah.
Reese Harper:
Worrying about next week, worrying about a month from now. And it kind of dawned on me that, like, have I been doing that like my whole career in financial planning? Like why is money stressful? Because we associate it with the future and, and any time, and and I, for those of you who know me well I like theology from a lot of different aspects of Eastern religion, Eastern spiritual traditions, especially as like Buddhism, Daoism have like big… They’re big inspirations to me and those cultures, if you’ve ever read the Dao de jing, you’d see that the present moment is such like a common recurring theme in Eastern theology and the reason is that that’s where you find the most rest.
Carl Richards:
Yeah.
Reese Harper:
That’s when your body can relax, that’s when you don’t feel pain in your stomach or in your shoulders or in your neck or you know, your mind isn’t like wound up and your nervous system isn’t running at the highest pace when you’re able to breathe and get into the present moment and I just started wondering, you know, there’s obviously merit to thinking about the future, like going there for a minute, maybe wondering what the future might be like running a projection, you know, thinking about that. I find that people often stay there, they live in the future when you show them the future. If I put a projection in front of someone, now their whole orientation is about tomorrow and the next day and next year and five years from now, 10 years, 20 years from now and every time we, one of those variables changes and that future changes, now I have more turmoil because I have to re-angle that…
Carl Richards:
Which is all just made up anyway.
Reese Harper:
It’s all made up, I like made up a guess to this future.
Carl Richards:
It’s like guess anyway. Yeah, yeah, yeap.
Reese Harper:
I anchor them to this reality.
Carl Richards:
Yeah.
Reese Harper:
Then something changes and I have to reorient them to a new future that’s more accurate to the current input variables and it’s incorrect anyway. So rather than do that, I was like, is there a way to just sort of take the feeling of future and bring it into the present and keep people anchored to the present. And that’s where the idea of these ratios was sort of solidified. You know, can I, Elements is actually at its core just a simple scorecard of present day ratios that have no forecasting, that have no analysis about tomorrow. And if you want to, if somebody wants to wonder what it would look like 10 years from now.
Carl Richards:
Yeah.
Reese Harper:
Let’s take total term for example, it’s one of the ratios we look at. It’s just net worth divided by annual spending, if it’s a two, I can just say that’s where we’re at today, that’s great. You could go for two whole years on your net worth right now doesn’t that feel awesome?
Carl Richards:
Yeah.
Reese Harper:
If I were to put that into a Monte Carlo simulation for someone, I don’t actually know if that means we’re gonna be like good or bad 30 years from now. Like, I don’t know, but I also don’t know what this person’s job changes are gonna be, their income trajectory and their, the investment markets and inflation. I don’t know so why am I going to take someone’s current reality project it in the future if that is of little consequence today, I can just say this number needs to get bigger. And we probably are gonna want it to be, closer to a 25, closer to a 30 in order to really be healthy. But we don’t need to worry about that right now, what we need to be worried is that it has moved from a two to a three.
Carl Richards:
Yeah.
Reese Harper:
We’re gonna go from two to a three this year.
Carl Richards:
Yeah, listen.
Reese Harper:
It’s a little simpler.
Carl Richards:
No, and I think they’re so interesting to me because all the, you mentioned Buddhism and like, but all of the wisdom traditions.
Reese Harper:
Yes.
Carl Richards:
All the wisdom traditions share this idea of like the present is really all we have and we see so much of that showing up now in Western thought as well.
Reese Harper:
Totally.
Carl Richards:
Jon Kabat-Zinn and the whole crew Eckhart Tolle’s work.
Reese Harper:
Which I love, yes.
Carl Richards:
And to me, yeah to me, the problem always was yeah and then the set of tools I’m using and take me right out of the present and into the future. And then I get concerned about things that may or may not be that’s the big issue.
Reese Harper:
I may or may not be.
Carl Richards:
May or may not even be a problem and I call them problems and I say, I’ve got so many problems, and so I think the idea of, like, I used to talk about putting on a financial planning hat and making it a really ugly hat so that you want to take it off as soon as you could like I’m just gonna put it on once a month.
Reese Harper:
Nice, nice.
Carl Richards:
Yes, the projection, the thought of the future, all that stuff matters, but take it off quickly and live now.
Reese Harper:
I think as a wealth advisor, those tools, for me as an advisor, some of those tools are very helpful in unique scenarios. Kind of like when I’m gonna pull out my 10BII calculator, there’s a time I’m gonna pull it out, there’s a time for the 12c.
Carl Richards:
Is that the reverse polish one?
Reese Harper:
The 10BII is for the, this is the Gen Y calculator.
Carl Richards:
Whatever, I don’t even know.
Reese Harper:
You’re Gen X.
Carl Richards:
I don’t even, I haven’t even touched a calculator in so long.
Reese Harper:
And so you occasionally, as a professional, I’m gonna use different tools that I’m gonna put in front of my client and that’s okay.
Carl Richards:
Right, so having an interface, a client engagement tool that anchors you to, anchors you and the client to the present.
Reese Harper:
Yes.
Carl Richards:
What’s your thinking here?
Reese Harper:
Because all I wanna do is give them the single next action we’re gonna go complete.
Carl Richards:
Right, right.
Reese Harper:
Because that will keep them feeling like we are productive, we are successful we just, we accept the present moment as what it is. It’s not good, it’s not bad, it’s just what is.
Carl Richards:
And then we get to think about what’s the next…
Reese Harper:
What’s the next.
Carl Richards:
Local optimum.
Reese Harper:
What’s that next decision.
Carl Richards:
Like the next best step?
Reese Harper:
And I think that’s just how people’s brains are wired, we just…
Carl Richards:
Well, Reese here’s the thing that I get super fired up about, and we don’t have time to talk about it now, but it turns out that’s the only way to do this, we’re actually navigating a complex adaptive environment and all these tools that we have to pretend that we’re not are not based on reality.
Reese Harper:
Yes.
Carl Richards:
And so the only thing you can really do, which is what got me so excited about this methodology if you will, or the way is that, it gave me a set, a standardized set of measures to anchor myself in current reality to get clear about where I am today so that I can make, the only decision that I can make really is what do I do next?
Reese Harper:
Yeah, and I think, I think that’s at the core of this we’re trying to do is reduce someone’s financial stress, we’re trying to reduce their financial anxiety, we’re trying to help them feel great about their life so they can enjoy dinner at the kitchen table.
Carl Richards:
Yeah, so many stories about that, well that’s perfect, thanks brother.
Reese Harper:
Yep, carry on everyone.