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Introducing Carl Richards: Altering the Focus of Your Advice

It’s hard for clients to be content if they’re constantly working just to make the future better. So how do you help your clients make good decisions—keeping the future in mind—so they can live with greater fulfillment in the present?

On this episode of Elementality, Reese introduces his new co-host, Carl Richards. Reese and Carl look at why forecasting has flaws, and why advisors should embrace the moving parts of planning that make the job so challenging. As a planner, you’re constantly projecting, even though you know those projections won’t be accurate. That’s why your biggest challenge may be helping clients make optimal decisions throughout their lives, while ensuring they enjoy the here and now.

 

 


Podcast Transcript

[music]

Carl Richards:
To me, why financial advice, speaking broadly as an industry, and maybe even more narrowly as a profession, I think that’s why it’s endlessly fascinating, is because there’s a whole bunch of really interesting questions. And if we’re honest about it, and that’s the real challenge, is being honest about it leads us down this path of… We literally have to say “I don’t know” a lot more than we’re saying, if we accept the reality of how complex all of these decisions and how many moving parts there are. And to me, that’s fascinating, which leads me all the way back to presence. It’s hard to be… Like, all we have is now. And we know that. We don’t have tomorrow, and certainly, we don’t have yesterday. All we have is now, and it’s really hard to be here now if I’m constantly thinking about the future being better.

Jordan Haines:
Welcome to Elementality. I’m Jordan Haines, Financial Planning Specialist at Elements. Each episode, Reese Harper and Carl Richards will explore the major challenges faced by financial advisors, and the things they can do to manage the functional, emotional, and social jobs of delivering real financial advice to real clients. We hope you enjoy this episode.

Reese Harper:
Welcome to another episode of Elementality, everybody. I’m your host, Reese Harper. This is a special commemorative episode, as you all know. Periodically, I like to change my co-host when the previous co-host has moved on to bigger and better things and left me in the dust. Matt Glazer started to one-up me on the show, sound a lot smarter than me… I was starting to get a little bit offended and worried he’s gonna take my job, so we fired him. And I was like, “Alright, who can we find in the industry out there that will come and pair?” And I’ve made a list of two people that I wanted to work with. The first one I thought we had no chance of getting, and the second one said yes. And the first one is the one that’s on with me today. And I didn’t think we’d have a chance of getting him, but I’d like to welcome Carl Richards to the show. Carl, thank you for joining us. I really appreciate it.

Carl Richards:
My pleasure, Reese. Super excited about it.

Reese Harper:
Yeah. Yeah. Did you… About Matt, you know… How would you… You recently met Matt. You could tell it was time for me…

Carl Richards:
Way smarter than you.

Reese Harper:
Yeah, exactly. We needed to get him off the show.

Carl Richards:
Yeah, for sure, for sure. For sure.

[laughter]

Reese Harper:
He was starting to one-up me. I was worried at some point, so… For those of you who don’t know Carl, and have been kind of under a… I don’t know what you say, under a rock, or hiding under a… Some kind of hiding area. Carl’s kind of a big deal in the industry. Now for me personally, I can’t speak for everyone, but for me, I always thought of Carl as kind of this really down to earth, thoughtful planner that cared a lot more about people than he did about making money, which I thought was really interesting to me, because usually, a lot of people, when they produce content, they have kind of a big agenda, they’re kind of… They’re pretty promotional; you can tell they want you to buy something. And after a while, you don’t feel that authentic connection with somebody, but…

Reese Harper:
I didn’t know that Carl and I were actually in proximity of each other. I didn’t know we lived close. I think the first time I really started paying attention to where your whereabouts were in the world, you were, like, either in New Zealand or in London. And it was interesting, ’cause I dunno if it’s been a year since we met, but I realized we were like 20 minutes from each other, and I didn’t know we lived close. I just want to say thanks for all that you’ve done for the industry; really excited about kicking off some of these episodes together. I just really appreciate all the 25-plus years of hard work you’ve put in to kind of improving things in the industry, so thanks so much.

Carl Richards:
Oh, thank you. Yeah, super excited to have these conversations, and yeah, New Zealand… We’ve been back about a year and a half. So, New Zealand and London, and then we’ve been back on the Park City.

Reese Harper:
Well, let’s jump in a little bit to like how we met, what you remember from our first interactions, and what you felt like the common ground might be, ’cause it’s been a while of kinda cultivating this relationship to see if we wanted to make some content and put things together. So tell me a little bit about what you remember about the common ground, you know?

Carl Richards:
Yeah. Yeah, remind me, ’cause I’m trying to piece together the first conversation.

Reese Harper:
My gut is telling me it was at Tony Caputo’s, at a sandwich shop in Holiday for dinner?

Carl Richards:
We did that before we did…

Reese Harper:
Dinner?

Carl Richards:
A conversation around… On the podcast.

Reese Harper:
Oh no. We first did a conversation on the podcast.

Carl Richards:
Yeah, yeah, yeah, so… ‘Cause when I…

Reese Harper:
So I first… Yeah, when we first met, I had brought you on to this show like a year ago or something.

Carl Richards:
Yeah, so what I remember, though, specifically about that was after. So we recorded, and the recording was great, and that was super fun, and the conversation was interesting. But the common ground to me is I remember saying to you that the one-page plan was a compromise, because what I was really fired up about was a no-page plan, right?

Reese Harper:
[chuckle] No-page plan.

Carl Richards:
Was this idea of like, “Why are we spending so much time projecting in the future and not being present now?” Like… What… Why? Is that helping us? And I remember you saying something like, “Yeah, this idea of getting present now with current information, it helps me make decisions on what to do next; not what to do 30 years from now, but what to do next.” I remember that resonating a bunch.

Reese Harper:
Yeah. Think you’re one of the only people that I could talk to about presence and sort of being in the now. I was referencing… At the time, I think I was reading Lao Tzu or something. And some of the older kind of Eastern philosophy about just being able to be happy and kind of feeling like money can sometimes get in the way of that, you know, more than it… Does money empower presence, or does money kind of pull us away from that? You know, and… I do remember that being, you know, a big common ground. Then we went, I think… I dunno if it’s a month or two later. That’s when I remember meeting you for the first time at the sandwich shop.

Carl Richards:
Yeah.

Reese Harper:
And I just remember you having such a passion for trying to figure things out about the industry and being really curious, asking lots of questions. And I think it’s a really important trait, you know, and probably what’s been so… One of the things that’s been so successful for you is you just ask a lotta questions. And you’re really curious. You’re not super certain of… You know?

Carl Richards:
Anything. [laughter]

Reese Harper:
Yeah, and I think that’s really healthy in terms of getting to answers.

Carl Richards:
Yeah. Yeah, I have increasingly… In fact, this was a point of debate among the editorial team at the New York Times. They would… I would often write a column, and I would get this standard question back from editors that says “And so what?” And “What’s the point? What’s the lead?” All those sorts of questions, and I really… At first, I was like, “Oh yeah, I must be doing something wrong,” and then I realized like, no, I don’t know much about answers. My whole goal is to find better questions. And that became the point of a lot of the work, ’cause I’m not trying to answer questions, I’m trying to ask… I’m not trying to answer the question, I’m trying to ask really good questions, and that’s the point of… With the editorial team, I was always explaining, “Look, no, the point of the column is this question.”

Carl Richards:
And I think that to me, why financial advice, speaking broadly as an industry, and maybe even more narrowly as a profession, I think that’s why it’s endlessly fascinating, is because there’s a whole bunch of really interesting questions. And if we’re honest about it. And that’s the real challenge, is being honest about it leads us down this path of… We literally have to say “I don’t know” a lot more than we’re saying, if we accept the reality of how complex all of these decisions and how many moving parts there are. And to me, that’s fascinating, which leads me all the way back to presence. It’s hard to be… Like, all we have is now. And we know that. We don’t have tomorrow, and certainly, we don’t have yesterday. All we have is now, and it’s really hard to be here now if I’m constantly thinking about the future being better or I need to improve this. Or if I’m a planner, it’s really hard to be here now.

Carl Richards:
And so, the nature of the work we do, and then you blend in money, and that’s a whole other subject, but just the fact that I’m a planner brings us… And if that happens to be the job you do, you’re constantly projecting. That’s almost… You felt like that was your job, is to project and to see if things are gonna be okay, and to worry about something that may or may not happen 12 and a half years from now. It’s constantly. So I love the idea of saying, “Hey, look, first of all, is that serving us at all? Is it serving clients at all?” I don’t know the answer to that. I don’t even know the boundary conditions to the question, right? But second, is it serving us? And if it is serving clients, then we have to figure out how to put on a planner hat when we do our job, and then take it off when we’re living our lives. And that’s a real challenge. So I think that’s, to me, why this industry, speaking broadly, has been so fascinating.

[music]

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’s 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/demo, and we’ll show you how Elements can help future-proof your business.

Reese Harper:
So you asked this question in that segment… This little break, you know, that you were going off on, that you said, one, we don’t know… Like, these may… Planner hats may or may not serve us or the client; the client, I think, is what you said. And for me, I’m like… I’ve really struggled with that issue my whole career, ’cause I feel like the planner hat, the forecaster hat, the modeling hat. Like, that starts to spin up client emotion in a way that, for me, pulls people out of presence really fast, and it either causes them to judge their past and say “I didn’t have the right job,” or “I didn’t make enough money,” or “Oh my gosh, I was stupid, and look at me. Like, I did all these stupid things, and… ” Or they jump into the future, like, “Man, one day, I’m gonna have more money than I know what to do with,” or “One day, I might not have anything,” or One day, I’m gonna be broke.” I mean, there’s no Happy Land in the future, and there’s no Happy Land in the past, unless you’re able to just fully accept your past or fully accept whatever future is coming. That’s where you can find presence and be like, “Okay, I’m cool, my money is fine.” But does planning and putting on a planner hat really have a gain for the client, or just spin up emotion, or just grinds up emotion? I feel like it’s…

Carl Richards:
Yeah.

Reese Harper:
If it has a benefit, I feel like it’s very selective, like we have to be very selective when we go into the future too much with a client, ’cause it does… I know there are negative implications to that. That’s my view.

Carl Richards:
Yeah, it’s super interesting, and we’ll unpack this in future episodes, I’m sure, but just… That… We don’t even know if those… Well, we know for sure that those projections are wrong anyway. We know that for sure; that’s… In fact, the only thing we know about the projections are that they’re wrong. So, we’re already dealing with something that may not be reality anyway, so it’s sort of a… So, is there a benefit? I don’t know, but I do know the planning with emotions thing. I remember… Let me… I’ll just tell you a story. And I have to be careful here. I remember working at a big… I was a consultant, let’s put it that way. I was a consultant at a big firm. And that everybody would know. And I came in, they asked me to come review some process, and part of it was the financial planning process, so I sat in on the meeting.

Carl Richards:
And this was a place where the financial planning team would come from out of town, so this was… This was at least 10 years ago, maybe longer, 15 years ago. So the local, you know, advisor would call the planning team, and the planning team would come, and they would present… So the planning team was there. The clients weren’t there. I was there, and we were just sort of talking. And they said… And I’ve been through more than one of these meetings, so this is not… I know this isn’t an isolated case. They said, “Well, what response do… What… You know, which… What will this client respond best to?” And what they were talking about was, how good or how bad should I make this plan look?

Reese Harper:
[laughter] Yeah.

Carl Richards:
All you have to do is change the inflation rate by half a percent over 30 years and things look different, or the return rate, or the savings rate, or the date of death. Like we… There’s all sorts of things we can move, all sorts of levers we can move. And you know what happens to that line out 30 years, is there’s a massive difference in… So, will this client respond better if it looked really bad, so they would save more? Would this client feel better?

Reese Harper:
How do we manipulate them? [laughter]

Carl Richards:
Essentially, what emotion are we trying to generate?

Reese Harper:
Yeah, yeah.

Carl Richards:
Now I know that’s a really overt example, right? And to me, malpractice; like it’s not ethical in any way.

Reese Harper:
Well, that happens all the time, you know?

Carl Richards:
A, that overt nature happens all the time, and B, a much subtler version happens too, when we’re just thinking through the assumptions we’re making. So, I don’t know… I don’t know what… I don’t know. To me, that’s one of the great questions, is how do we help people make decisions today, with the future in mind and the appropriate focus on living today as well?

Reese Harper:
Yeah. I have an answer for that for myself, but I wanna respond to, one, to further your point just really quickly, another case of that exact scenario is when an advisor, like in… At Dentist Advisors, when I was building my firm, what I saw was they would come to me and say “Dude, I can’t make this plan work. Like, I can’t make it work. Can you show me how to make it work?” [chuckle] And what they’re really saying by that is… There’s no way to paint a rosy picture here; what did the client pay me for? This is like a decade plus ago. And that’s when I realized, “Oh my gosh, we are doing this all the wrong way,” because if we’re trying to… If any part of our brain is like, “How do I make some kind of a forecast to give someone emotional security or help ’em feel good… ”

Carl Richards:
The right emotion. Whatever the right one is.

Reese Harper:
Yeah, like, that’s not the… We’re in the wrong space, you know? So, how do we get… In my view, like, total term in Elements is kind of the way I anchor people into some kind of… A range of future state, like, “Hey man, at some point, for… Really, for work to be optional, it’s pretty simple, you know, what your worth has to be, quite a bit bigger than what you spend every year.” And when it gets close to, you know, 15, 20, 25 years out, that’s quite a bit of money, and a lot of people can retire in that range. I you have 30 or 40 years, that’s financial independence land. I don’t know where you’ll be. It doesn’t really matter. You might be at a 10 or 15 or 20; like, I don’t know. And that’s… We’re gonna try to get you as far as we can go and as comfortable as you can be, and get there loving every day that we are alive between now and then, and we’re gonna optimize every decision we can between now and then.

Reese Harper:
But I have no idea; like, I can just tell you, it’s possible to be fine with a total term score of a five, and people in other countries are doing it everyday. And… And here in America, we get a little obsessed about wealth maximization. And I know you wanna forecast, with precision, exactly how the future might look, but we just can’t… I can’t go there without, you know, creating a lot of unintended consequences for you. It doesn’t matter how much or how little we have, we’re gonna make the best. We’re gonna optimize this, but that’s… A little bit of a range in how I describe it to people, so they at least go in like, “Well, tell me something. Give me… You gotta give me something. You can’t just be like, “It doesn’t matter. There is no amount of… Money doesn’t matter.”” You can’t be that philosophical, but…

Reese Harper:
I arrived at, you know, at least using total term as a proxy for a range; I don’t think it’s the perfect way, but it allowed me to never be like… I didn’t have to tell someone what the dollar amount was. I hated saying like, “You’re gonna have 3.2 million, or… ” ‘Cause they’ll remember the numbers of like, “You told me how much I would have,” and so, I don’t know. I’m biased this way, ’cause I don’t traditionally like to use forecasting software. And people know that I’m biased ’cause I’m, you know, architecting something that’s anti-forecasting. I do think there’s a place for it, and I use it occasionally, but I hate the feeling of… That we might be spinning up emotion that just didn’t need to be there. Anyway, man, I know you might have a different point of view on this, before we wrap this… This idea about forecasting up, but…

Carl Richards:
Yeah. I’ve got a friend that’s a venture capitalist, and he told me the other day that he takes every pitch deck, and the first thing he does is he flips to the projection section and he tears it out. And I’ve got another buddy who’s running a venture-backed startup that told me his entire business model, his entire plan is “suck less tomorrow”, right? So it’s not about being precisely correct today with a set of forecasts. It’s about taking information I have today, available information, making the best decision I can tomorrow, and then tomorrow, new information will show up. And I think that is just so counter to the way we’ve thought, but we’re starting to see that show up in other areas; like, we’re starting to see complexity theories or get our hands around it. We see it even in development. There used to be this huge software development; a sort of planned roadmap that was really called waterfall development, right? You build, build, build, build, build, build, build, build until the thing was ready. And then years ago, we started seeing agile development, where we’re gonna build and iterate and build and iterate, because we don’t have all the information we need.

Reese Harper:
Yeah.

Carl Richards:
So I think we’re… We just have a little… And I’m sure we’ll unpack this more in other episodes, but we just have a little bit sort of physics envy, ’cause this is so close to… So much of what we do involves calculators and math that we think there must be…

Reese Harper:
Some kind of precision.

Carl Richards:
There must be a way to be precisely correct, but there’s none.

Reese Harper:
But as we wrap this up, I just wanted to ask you a last question that we didn’t really get to cover in this intro episode, but what made… I guess for you, what made the philosophy or the framework, if we were to just recap it, you know, of elements of this work that I was doing… You know, when we met, what… I guess what was resonant about that, the philosophy, the framework, the planning method, you know? I mean, what… How… Given… And some of it relates to what we’ve talked about today, but I’m just kinda curious what… How would you describe why it was attractive as a… As a philosophy?

Carl Richards:
Yeah. So two; there might be more than two, but two that come to mind, is one, are… And this is gonna be a little out of left-field, but our industry is devoid of design.

Reese Harper:
Okay.

Carl Richards:
And there… A visual element that made sense. To me, that… Already, I was like, “Oh, that’s really interesting, and it stands out in our industry,” like, design that actually makes sense.

Reese Harper:
Especially to a client that’s important, right?

Carl Richards:
Yeah yeah, for sure, and closely following that is this idea of like, can I just get a sense of where I am today, in a visual way that helps me understand it quickly, like “Oh, now I understand.”? That, to me, like, “Where am I today?”, ’cause if I know where I am today, then that helps me understand that… Any really good plan starts with a clear understanding; I call it my current reality.

Reese Harper:
Okay.

Carl Richards:
And so making decisions based on that. So those are the two things. And then a quick measure of, like, “How am I doing?” And there is some element… I don’t like to admit this, but there is some element of “How am I doing relative to others?”

Reese Harper:
Yeah.

Carl Richards:
And it seemed like Elements was a quick way to get my hands around that.

Reese Harper:
Especially for the planner to be able to interpret that for the client, like “Do you think I’m doing okay?” It goes back to your question, “Am I doing okay?” I still think that’s the core question. And sometimes, people have a little more confidence, I think, in you answering that question for them, if you’re able to reference data and say, “Dude, you’re doing fine,” or “This area you need to actually focus on and… ” So, it’s good insight. Appreciate you taking the time to record this inaugural episode, man, and you and I have a hundred topics to go down rabbit’s holes on, so it’ll be a lot of fun. And I appreciate you carving out the time and driving up here to the office.

Carl Richards:
Yeah. Amen, Reese, thank you.

Jordan Haines:
Next time, on Elementality.

Jake Larsen:
At a very, very high level, I think we all, whether they’re financial advisors or not, tend to overcomplicate what selling actually is. We start to think that it’s more about, you know, pure persuasion and convincing, when in reality, whatever it is that you’re selling has a value behind it. That value has to be understood and realized by the person receiving the product or the demo or whatever it is. And if you think about it on a scale from one to 10, one being “This brings me no value,” and 10 being “This is amazing, I wanna buy this right now.” What you’re really trying to do is move people as close to a 10 as you possibly can.

Abby Morton:
You can learn more about the Elements financial monitoring system at getelements.com/demo. And schedule a time to talk with one of our friendly financial planning experts. Elementality’s executive creators are Reese Harper and Carl Richards. Elementality is produced by Abby Morton and directed by Jordan Haines. Have a good one!

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