Host of Elementality, Jordan Haines, CFP®, explores the natural human tendency to compare ourselves to other people and how advisors can lean into that tendency to produce positive outcomes for their clients. He identifies things an advisor can focus on to help clients compare themselves to something that is productive and will produce positive results.

Transcript

Jordan Haines: Welcome to elementality everyone. I’m Jordan Haines, 

financial vitals expert here at elements. I’m excited to bring to you some thoughts I’ve been having. Right. After a webinar that we just hosted, the title of the webinar was ditch projections in favor of peer benchmarking. I actually don’t know if that’s the right title. I probably should have looked that up before because I just hosted it. 

But it [00:01:00] was a webinar that Reese, Harper and myself hosted to talk about. The value of peer benchmarking in driving behavior, change of helping people. Judge success. There’s one takeaway that I got from that. And that’s why I wanted to record this separate episode to help you take that away next week. 

I will, um, share that full webinar with you in audio settings. So you’ll get the full thing if you want. If you’re too eager to, to wait, then just hop on over to our website. You can go look in our archives. Sign up for that. And you’ll get a copy of that webinar recording so you can see the visuals and everything with it. To start off for those of you who won’t listen to that, or won’t wait around until next week. Um, I want to share a story that I also shared in the webinar about my parents. Uh, my parents are retiring they’re in their mid to late sixties. Um, my dad’s been a public employee for about 20 years, 25 years, maybe even longer. 

I don’t even know. I’m young. So I don’t remember half the stuff from when I was a kid, but, um, he, he works for a, um, in education as an administrator. And he’s made a good living for himself. He’s done. W well, now I would describe my dad as someone [00:02:00] who’s financially conservative has really good financial habits saved enough. 

Did really well, did not spend too much. Um, He also is someone that is very risk averse. He’s going to look for excuses not to take the next step. That’s generally who he is. He also is someone that doesn’t really have a lot of hobbies nor knows my mother. Um, they don’t necessarily know what retirement’s going to look like for them. 

And so it’s kind of scary. The unknown is a scary place for them. So that context is really helpful because they have a financial advisor. They’ve had this advisor for, I think, seven, eight years. I referred them to a great financial advisor. I trust with my parents, fantastic work. Um, and this financial advisor has been doing the traditional thing that many advisors do, which is the probability of success with a cashflow forecast to help my under my. Parents understand what their financial future is going to look like. 

Now my parents started the retirement conversation probably three years ago was when I first started listening to them. 

They said, Hey, Jordan, we think we want to retire. What do you think about that? I said, that’s fantastic. I love it. And by then I had access to the elements [00:03:00] framework. So I plugged them in elements. Everything was looking good. They, I think they had like a 33 total term score, not phenomenal, but nothing terrible. 

They were going to be fine. And I said, okay, this is great. I like this. Let’s go talk to our advisor. We’re going to let them know that we want to retire soon. So I went to their advisor, the advisor ran a probability success. I think it came out as like 68. Well for someone like my parents who are, uh, financially conservative and really risk averse. What are they going to make of that number? 

I can tell you what they’re going to make of that number, because they told me. If they have a 65% chance of success. That means that they have a 35% chance of failure. And what does failure look like? No money. Bankruptcy. Sold house. No memories. That is a very, very scary thing. 

So, what I did with them is, is over the next couple of years, they said, that’s not good enough. 

We don’t want to retire. I said, okay, that’s fine. If that’s your choice, go for it. They continue to make more [00:04:00] money to save even more of their income. They got it now to about three months ago, they approached me and said, Hey, we’re thinking we want to retire this year. Um, they said, our probability of success is now at like 86. 

My dad says, but it’s still scary because what if that 13% chance that we fail happens? And so I, I played with him a little bit on that. I said, Okay. What happens? What happens if market goes down? If you lose value in your portfolio. Something terrible happens in your life. What are you going to do? Well, We’re going to probably dial in our spending. 

We probably won’t go on as many vacations. We probably won’t buy as many things. Probably won’t pull down as much from our investments. Is that exactly. And the words of Johnny Polson came into my mind. He’s the CEO and co-founder of, uh, income lab, who I think we did a podcast with him recently. You can go back and listen to that or go to our webinars that we did with them. I think that was in April or may. 

I don’t remember. Um, but one of the things that he said really stood out for me, he said, clients don’t fail. Their financial plan. They adapt. And so I shared that with my parents. It didn’t really [00:05:00] drive it home. I thought it was like this. This was going to be the emotional appeal of the century. My parents would love it. 

They’d retire next month because I know that they could. It didn’t land. So I said, let’s try something else. Have you ever wondered how you compare to other people? I said, yeah, we’ve never known. I said, okay, well, I have access to, um, uh, proprietary data dataset. Uh, people similar to you that we can go and look at your information now, because I’m here at elements, I’m privy to some really awesome things. 

We have an anonymous data set that we’ve used internally. Um, and that we are working on building into our products. So those of you listening, if you’re interested in finding access to a proprietary dataset of all client information, we’ll say thousands and thousands of different people in there, then just stay tuned. 

There’s gonna be more to come. 

So I pulled up the dataset. I said, let’s just run some filters in here. So I filtered out by age. I said, Hey, I want to see people in their sixties. I want to see people that are couples. I don’t want to see a business owner. I want to see someone that has a net worth between these ranges and I hit search. 

And I think we came up with 30 to 40 different records [00:06:00] and my parents were on average or above average in most of the elements. Now for those, I was looking at total term, TT. Liquid term LT and cutie cutie, which has qualified term. Now I’m not going to say take time right now to define what those are. 

If you’ve been listening to this and you don’t know what those are, shame on you go to our website, get elements.com, scroll down a little bit, and you’ll get the scorecard there that will tell you exactly what these scores are. So they’re above average and doing great and do what my parents take away from that. 

Oh, We’re fine. We’re doing good. We’re doing okay. 

Now I want to share that the reason I share this story. Is because as human beings. We naturally judge our success in lots of different areas, not just in finance. We often judge our success. In comparison to something else. I’m potentially being broad with that. Because historically how we judge our success. Is we compare ourselves to our future self. Let me say, I’m not that person, there’s a [00:07:00] gap there. 

I’m not successful yet. I need to work so that I can get to that point. It’s all focused on the future. Think about how you do financial advice, financial planning, most, most likely. Many of you listening to this will do a projection, a forecast, a cashflow model. You might do a Monte Carlo projection. 

You might do some probability of success things. And all of those all are very similar. But when we work towards the future, what are our clients going to, to make of that? They’re going to compare themselves to the future. We naturally are comparing creatures. We want to compare ourselves. We want to compare ourselves physically by weight. By exercise by food intake. 

We want to compare ourselves by our career. We want to compare ourselves by our houses, by our kids, how well they behave. We compare ourself. In so many things. 

Now it doesn’t naturally have to be a comparison to other people per se, but we are comparing ourselves. That is how we define and judge success in many, many situations. 

So, what are we providing our clients to compare themselves to think about that? What are you. [00:08:00] Giving to your clients to compare themselves to, to help them understand how successful they are. If they’re actually doing the right things, if they’re on track, if they’re making the right decisions, how do they compare themselves and what do they compare themselves to? 

If you’re a traditional financial advisor. Who does future projections of any kind, if you’re pointing to the future and comparing client’s existing state to their future state. You are setting your clients up. Four. Successful. Present moment. Because if I’m comparing myself to what I could be 30 years from now, I will never feel like I’m measuring up. I will never feel like I’m being successful. So instead, what can we compare them to? 

We can compare them to a current reality. We need to compare what they are doing. To what they could be doing. 

Ideally it is right now. Savings rates. Spending rate. Debt rate. Tax rate. [00:09:00] Equity allocation, liquid term. All of the things that you see in elements are present day calculations. They show people their reality today. And what that sets us up to do is then to compare them to other people. In that situation or to what I recommend them to do. 

Historically, I worked with dentists. Business owning dentist should have a minimum in the vast majority of situations of 20% savings rate. 

They should have a minimum of a one L T score. Uh, to, if they want to hire a new dental dentist. Because I have these standards, I can go to the client and say, Hey, you have a 12% savings rate and you should have a 20% savings rate. Is that client successful? They’re not going to feel successful until they close that gap. 

Can they close that gap today? Yes. Could they get $10 million before they retired today? No. That’s the difference between comparing yourself to a future state versus comparing yourself to a current state now in this podcast or in this a webinar that we go through, I spent, we spent a [00:10:00] lot of time talking about, um, Pure benchmarking social comparison, because that is naturally where our mind goes. 

So can we leverage that natural inclination as human beings to compare ourselves to our peers and actually make that a really valuable experience where they’re on the, Hey, you’re doing better than you think, or you’re not doing as well as you think you are. That’s that’s a conversation for a future episode, stay tuned for next week. 

And we’ll we’ll air that, that, uh, that full webinar conversation. So you can kind of get more. Uh, tangible action items from that, but the big takeaway from this conversation, this thought, the reason I wanted to share this is I want each of you to think about today. What are you giving to your clients to compare themselves to. Is that setting themselves up? 

Meaning can your client look at that and say, I have direct control to change that and become successful. 

Because if I don’t have direct control, It’s going to feel out of control. And it’s going to be anxiety filled. And with that, I’ll leave you to it. [00:11:00] We’ll talk next week.