“Holistic.” “Comprehensive.” As an advisor you know these words are used … a lot. Have they been so overused and abused as to render them meaningless? Helping a prospective client understand that planning is comprehensive is crucial to defining what you do. Elements speaks to the idea of holistic right from the start showing prospective clients how an advisor monitors all aspects of financial planning.
On this Elementality, Reese and Carl look at how the Elements scorecard gives a client a glimpse at the big picture of financial planning. By using the scorecard, prospective clients can better comprehend the terms holistic and comprehensive as it helps them visualize the wide range of financial jobs you do as an advisor.
Podcast Transcript
Carl Richards:
An open loop is much bigger than the event itself, right?
Reese Harper:
Exactly.
Carl Richards:
It’s just an open loop suddenly gives you lack of confidence in every other part of the system because you know there’s one failure point.
Reese Harper:
Yes.
Carl Richards:
And it’s smaller than, oh dude, that’s not a big thing, don’t worry about it. Like, where’s your bank account? Who cares?
Reese Harper:
Yes.
Carl Richards:
No, actually that little failure point now spreads to the whole system because I’m like, oh no, the whole system’s not airtight, right? The loop’s not closed.
Reese Harper:
Totally.
Carl Richards:
It’s incredibly important to you as well.
Reese Harper:
That’s philosophy number one.
Abby Morton:
Hey, it’s Abby. Looking for a way to demonstrate your full value and get more clients? Elements is here to help. In fact, we’re so confident we can help. We’ll guarantee it. That’s right. Starting today, if you sign up with Elements and don’t get a new client in the first 90 days, we’ll refund your money. Don’t wait. Act today. Go to getelements.com/demo. Can’t wait to hear from you. Welcome to Elementality. Each week, Reese and Carl, share their philosophy about financial planning as they explore the emotional and functional jobs that need to be done with a focus on the Elements financial monitoring system, Elementality will show you how to deliver a modern client planning experience and help you revolutionize how to grow your business. Enjoy.
Carl Richards:
Greetings. Carl Richards here. So excited to continue this conversation around the way with Reese Harper. None of us are sure what that’s about.
Reese Harper:
It’s a fantastic of mixed of Fox.
Carl Richards:
Well, we know, but…
Reese Harper:
2014 edition.
Carl Richards:
Super good.
Reese Harper:
Shout out to George Clooney and Crew.
Carl Richards:
Super Good.
Reese Harper:
Should have got an Oscar for that, but they didn’t. And we’re gonna keep offering awkward little introduction moments.
Carl Richards:
Well, that’s a perfect segue.
Reese Harper:
Teachings… [chuckle] That’s a segue. [laughter]
Carl Richards:
Into what we wanted to talk about today, which is this term that gets thrown around all the time.
Reese Harper:
Okay.
Carl Richards:
Oh, I’m holistic financial planning or comprehensive financial planning.
Reese Harper:
In air quotes.
Carl Richards:
In air quotes. But we actually mean it. Like there’s something really important about this idea of holistic or comprehensive.
Reese Harper:
Yes. This is so important.
Carl Richards:
And maybe this is a cover, the entire financial life of somebody, and do it in a way that’s easy to understand, a new language beautifully designed. All the things that we’re gonna continue to talk about, but just tell me a little bit about your thoughts around this term, or at least what it’s pointing to.
Reese Harper:
Like, I have some strong thoughts on this and I want to hear yours, because I think I could learn something from you in this. Before I share my feeling on it, Why for you is the idea of holistic and comprehensive actually important? Because this is one you and I… I mean, we’ve talked about this a bunch. I’ve had some recent thoughts on it that I know are new. But I want to catch yours because we haven’t actually hit this with a hammer very hard.
Carl Richards:
Yeah. Look, I think the concept’s really important. My problem with it always is that the term has been abused to the point where it’s meaningless. It’s similar to like trust or fiduciary or any of those terms that we want to use to the public. They might as well comprehensive, like whatever. But internally it’s really important for us to realize that, look, if, because financial planning writ large is continually about trade-offs, right? And there’s always, not always, but almost always tension between these decisions I’m making. And the second piece that’s really important to me to understand is that the financial planning is done in an adaptive system. So if your interaction with your financial plan actually changes the system, right? Like if I decide not to save as much here, that changes something over. If I decide to spend more here, it changes something over here. So being able to monitor, know, for lack of a better term, having a comprehensive system for being able to manage those trade-offs is really, really important. If we left, if we did that in isolation, what happens a lot is you see people win maybe a small battle over here and lose the war ’cause they weren’t paying attention to the rest of the system.
Reese Harper:
Yeah. Yeah. And in principle, I think there’s several reasons why this is important, both to the client and to the advisor. I’ll give it a short analogy. One of the management skills I tried to develop a few years ago was really developing a project management philosophy or a life planning philosophy for myself to keep track of multiple businesses, a small non-profit initiative I’m working on and a bunch of personal life stuff that’s going on. And I was like, you know, I don’t feel like I’m as organized in terms of prioritizing all my activities on a daily basis. I need something that I can really depend on that moves me confidently in the right direction. And so, I read this book “anything’s done” by David Allen, that you’re aware of. And I reached out to a consulting group, I was like, can you help, like consult me, make sure I actually implement this methodology through this piece of software that I really like? I use things, it’s just a really basic like super stupid, simple project manager for myself. It’s not my corporate management thing, but it’s like the first principle that this person taught me was I was trying to quarantine, I’m just using this for this for work, I’m just using this for these things. And I I’m gonna keep personal over here or I’m gonna keep nonprofit over there, and he’s just like, look, it’s never gonna work. It’s either everything or nothing.
Carl Richards:
I’ve tried that. Yeah.
Reese Harper:
Like he’s like, if you are worried about booking, like reservations on Friday night for you and your wife to go to the theater, so that if that’s floating out here, it’s gonna affect your ability to show up to the board meeting and finish raising that venture round by your deadline. You know, these are not things you can like bifurcate. You’re gonna be less effective and you’re just gonna feel scattered and kind of like open loops. And in the same sense, that’s what happens in a financial planning relationship with an advisor. If your advisor’s claiming only a couple of the functional jobs saying like, I’m your investment person but I’m not really your 401K guy, or I’m your financial planner but I’m not your implementation person. I’m not this, I’m not that, I’m not this, I’m not that. Then you start to decrease your value, decrease your value, decrease your value. Because someone, the client, still has this heavy weight of monitoring that’s still on their plate. Like they’re monitoring, like they still have to monitor even if it’s only one thing like health insurance, if they’ve gotta go do that, it might be a stupid simple thing, but like it’s still this thing that’s not in the system. It’s not part of…
Carl Richards:
It’s super important to understand that it’s just one little thing.
Reese Harper:
It’s tiny.
Carl Richards:
What’s funny is like the difference between that one little thing and 100%, like everything but that one little thing being covered and 100% being covered is not one little thing. An open loop is much bigger than the event itself, right?
Reese Harper:
Exactly.
Carl Richards:
It’s just an open loop suddenly gives you lack of confidence in every other part of the system because you know there’s one failure point.
Reese Harper:
Yes.
Carl Richards:
And it’s smaller than, oh dude, that’s not a big thing, don’t worry about it. Like, where’s your bank account? Who cares?
Reese Harper:
Yes.
Carl Richards:
No, actually that little failure point now spreads to the whole system because I’m like, oh no, the whole system’s not airtight, right? The loop’s not closed.
Reese Harper:
Totally.
Carl Richards:
It’s incredibly important to you as well.
Reese Harper:
That’s philosophy number one.
Carl Richards:
Yep.
Reese Harper:
Philosophy number two to me to remember is that the first contact you have with the client telling them what you care about. Like they remember that, is like I show my clients that scorecard first thing, because on that scorecard, it says, I look at investments, I look at insurance, I look at your spending, I look at your savings, I look at your taxes, I look at your retirement, I look at your qualified plans. I’m looking at your liquidity. I’m seeing your real estate. If you own a business, I see it, like it contains all of the open loops, that sometimes in a lot of financial planning systems, there’s the visual, the visual of a retirement simulation doesn’t give me the closure of like it’s everything. It’s like, okay, that was a retirement conversation, but what about my whole system that I’m worried about? Which is monitoring all of the things, this big picture that I’m worried about. So even if it’s a small thing, we’ve tried to really include it. Here’s the dirty little secret. There are probably 300-plus functional jobs to do with your finances. By a functional job, I mean, connecting, allocating the expenses from your personal checking account into the correct categories, so just categorizing expenses would be one.
Reese Harper:
Group reviewing expenses for trends would be another functional job. Changing banks to lower your transaction costs or increase your rate of return on your savings account might be another functional job. Like I could list you hundreds and I promise none of you out there who are listening to this podcast, who call yourselves comprehensive are doing all 300. You’re just not. So like get off your high horse. There is no perfect comprehensive and there’s no perfect holistic. And the minute someone sends me a plan that says it’s totally holistic, I will send you back an email showing you one, at least one job. You are still leaving on the client’s plate. That’s fine. You’re doing great. You’re doing great. If you’re doing one job for someone, I applaud you. If you’re a life insurance, broker that is doing a good job servicing that one functional job, I applaud you. Like I’m not angry, I don’t have any resentment against you. Be not comprehensive. I just want all these jobs to get done. And Elements doesn’t do a perfect job of helping accomplish all the functional jobs in the universe, but what we’ve tried to do is at least speak to…
Carl Richards:
Be thoughtful.
Reese Harper:
That this is holistic, right from the start. We’re not leaving out insurance, we’re not leaving out business interests, we’re not leaving out off your personal financial statement, a holding company that you have that has a real estate asset in it. Like we’re really trying to say, we’re looking at everything here. And I would just encourage people to think about that impression you’re leaving with someone because it’s the feeling of you’re getting it all, is also a different problem, an emotional job you’re trying to solve. And the reality of you’re doing it all, that’s we’re gonna be working on that for the next 20 years people. Like it’s actually implementing and accomplishing truly comprehensive planning would require significant amounts of improvements to our AI, to our data modeling, to the communication we use.
Carl Richards:
Sure.
Reese Harper:
Like sequencing the right decisions in the right order for the right person, given their personal balance sheet, net worth, financial IQ, goals, values. It’s hard, but like we can do a much better job, at least at these two things, which is actually make an attempt to not leave open loops that the client actually has in their life. Give them a vision of being holistic and making sure that we’re actually continuing to work towards true comprehensive planning. I just think that we shouldn’t really define what that is ’cause it’s a limiting, when we say what it is, it limits what it can be. And I would just keep aspiring as a firm and as a technology provider, like I just wanna keep trying to solve more functional jobs.
Carl Richards:
Yep.
Reese Harper:
And not burden the client down with all of that visual weight, ’cause it can be very overwhelming when you give them 20 pages of spreadsheets. And so, I think it’s just give them a scorecard that says comprehensive and let’s go continue to work on the massive amount.
Carl Richards:
Yeah. And not only that says, but also allows them to feel like, oh wow, look, it’s all covered.
Reese Harper:
Everything’s here.
Carl Richards:
Feel like it’s here.
Reese Harper:
It just closes some open loops.
Carl Richards:
For sure.
Reese Harper:
And then let’s give them that peace of mind and let’s do a good job of at least covering the major subject areas that are critical to financial wellness.
Carl Richards:
For sure. Amen. Reese. Carry on.
Abby Morton:
Next time on Elementality.
Reese Harper:
There’s been times when I’ll see a client build up significant balances in 401ks or SIMPLE IRAs, whatever they are. And a lot of money in brokerage accounts, but then the cabin, the second home, the beach house, something comes up for grabs and they’ll just go wipe out a brokerage account, hundreds of thousands of dollars for a down payment or a big project or something. And then, I’m always left thinking like, I’m really glad we have that qualified, that retirement plan because this might be the single thing.
Carl Richards:
That’s left.
Reese Harper:
Yeah. It might be the thing that’s left after years of work because if that behavior continues, which you wish you could prevent sometimes, but you can’t always. This might be the thing that on top of a practice sale is the saving grace for cash flow and retirement.
Abby Morton:
To find out more about Elements, go to getelements.com/demo. Elementality’s executive producers are Reese Harper and Carl Richards. Elementality is produced by Tad Henderson and directed by Abby Morton. Have a good one.