Planning requires a significant focus on money and clients expect you to demonstrate your financial expertise. But people are much more than what they earn and what assets they are accumulating. They are also looking for financial purpose and peace-of-mind and want permission to not feel guilty about trying to maximize the most out of every dollar. That means their well-being is a critical variable that you need to consider. And while you are not a well-being planner, that is what clients often end up valuing most about your guidance.
On this Elementality, Reese and Carl talk about why clients also look for advice about issues that financial calculations can’t solve—and how advisors need to be focused on both building wealth and personal well-being.
Podcast Transcript
Carl Richards:
This reason that we focus on well-being along with wealth is a financial return or beating a benchmark or having a certain… Those are not financial goals, they’re arbitrary ideas that for some reason… And I think you’re right, we do have a problem in the industry because we’ve been trained and the public’s been trained that our job is focused on wealth without asking the question of why. And I think that’s why this is so important to me.
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.
Abby Morton:
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 the 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.
Reese Harper:
Hello everybody, Reese Harper here, your trusted co-host, Carl Richards, making just this a lot more fun today. I usually sit here and talk to myself, and this has been a blast.
Carl Richards:
I’m glad I could help.
Reese Harper:
We are really excited to continue with our Elements The Way series. Today, we’re gonna be covering one of my favorite topics, and I think Carl is perfect to answer this. One of the maxims that we kind of live by here is we want to maximize well-being, not just maximize wealth, we want well-being to be the focal point of a client advisor relationship. And I think that historically, the industry has kind of by default, assumed that our job is to maximize the wealth of every person we talk to as fast as possible with as much confidence as possible, and I think that’s caused some unintended consequences, and I’m just curious why do you think this principle has been so important to us at Elements in the foundation of building our products?
Carl Richards:
Yeah, look, maybe I can tell you a story.
Reese Harper:
I love stories.
Carl Richards:
I went on…
Reese Harper:
You’ve never shied away from them.
Carl Richards:
I went on a… My daughter, who was 23 at the time, asked me if I’d spend spring break with her. And I think everybody should know the answer to that, how you answer that question. If your 23-year-old daughter says, will you spend spring break? You say yes. So we went surfing and we went to Baja and we sat. We were in remote Baja, Northern Baja, we drove, sitting by a fire for three days with my daughter and I saw almost no one else, nobody else in the water, nobody on land. It was amazing. Most amazing experience with one of my kids I’ve had in a long time. When I came back, and I was telling a friend about this who… He’s not airplane rich, but has tons of money, and he was like, “Man, I just think that you’re wasting a lot of time, you could be focused on building inter-generational wealth,” and I was like, “Do you… ” It was the first time in a lot of time when I actually wanted to punch somebody in the nose. Like, “What do you mean intergenerational wealth? You mean the conversations I had around the fire with my daughter and that’s… ” So I…
Reese Harper:
To you, that’s intergenerational wealth more than… As much as anything.
Carl Richards:
My point is we get focused on the wrong thing. When we start focusing on investment return or some number on a chart or wealth, we lose track of the question of why. Like, what are you talking about inter-generational wealth? I should have not gone on the trip with my daughter to have more money in the bank? That just doesn’t make sense to me at all, and I think that really points to this reason that we focus on well-being along with wealth is a financial return or beating a benchmark or having a certain… Those are not financial goals, they’re arbitrary ideas that for some reason… And I think you’re right, we do have a problem in the industry because we’ve been trained and the public’s been trained that our job is focused on wealth without asking the question of why. And I think that’s why this is so important to me.
Reese Harper:
Yeah, and I think it’s complicated because the industry really originated at the high end of the market where the only thing that we did was sit on people’s liquidity and manage it. I think it’s shifting now partially because liquidity isn’t the only way people can pay for advice now, they can pay through a subscription, they can pay through different ways that we don’t have to use AUM as sort of a starting point for when we begin. But to add maybe another color to your story, something that’s sadly, a really, to me, a very disconnected comment, I’m sure this person’s a great human that made the comment, but that’s the Mitt Romney $10,000 bet at a political kind of debate where it’s just like, “Seriously, you just said that?” You’re so disconnected from the rest of the population. There are millions of people that their most valuable thing they’ve ever done was sitting on that beach with their daughter during spring break.
Carl Richards:
Well, it might be one of yours. In fact… Yeah.
Reese Harper:
might be your top three.
Carl Richards:
For sure.
Reese Harper:
Who knows? I don’t wanna say it wasn’t. But those experiences, the wellness, the well-being of someone’s life, it’s a combination of what they love to do, what they’re good at, what the world needs from them at the time, this concept you guys have heard me talk about of the Ikigai of finding your purpose. Previous videos, in this series, we talked about values and purpose alignment, if you haven’t listened to those, go back, and for sure, listen to the way this series we’re doing from the beginning, and pick up on some of these ethos that we care so much about. I really believe that the customer, the client, these people, these humans we want to help, what they really want the most is to feel whole, at rest, peaceful, enjoying their lives, and they want permission granted that it’s okay not to feel guilty about the wealth that they don’t have yet.
Carl Richards:
Or even not to feel guilty about not maximizing every dollar.
Reese Harper:
Or not focusing on that today. It’s okay to say “No, for my own well-being right now, I just want to remodel my kitchen,” or, “I need to build up a savings of my first hundred thousand,” or “Before I sell my business, what’s actually more important to me is making the business run better ’cause I really enjoy this business. I don’t want to sell it, I enjoy what I’m doing and liquidity doesn’t matter as much to me. I’m just really happy in my job.” There’s so many ways to find well-being if you really understand someone’s values and purpose, we need to re-orient our value proposition as the seeker of well-being, not the seeker of wealth, exclusively. And I use the words and ’cause I do think it’s not well-being without wealth.
Carl Richards:
Yeah. I love Vicki Robin’s book, Your Money or Your Life, for what it gets to, but I’ve never liked the title because I’ve never felt like it needs to be your money or. I think it’s your money and your life. Well being and wealth the idea, but the big question is it ends up being like, but why? If you’re totally focused on wealth, that leaves out the entire… So many of the best things in our lives don’t make sense in a calculator. The idea of starting a little foundation, the idea of holding on to a business, I’ve been to mortgage pay-off parties, I’ve never been to an efficient markets party, portfolio party. I’ve seen people sort of bon…
Reese Harper:
I’m gonna start one now.
Carl Richards:
Yeah, people always say, I’ve seen people to have bonfires around like, “Hey, we paid off the mortgage.” Well, and we all know that if you would have invested that money, whatever. You know what I mean?
Reese Harper:
There’s a dimension… So I think pursuing also… So that’s the one side of this is well-being is the missing… It’s the missing variable. It really is the missing variable. We’re emphasizing… Like, the frame as a financial advisor, as I sit down, I identify the areas to maximize wealth, and I don’t even use values and purpose as a filter, I just start maximizing wealth. I recommend the right 401K mixture, I recommend an asset allocation that’s now changed, I recommend refinancing a mortgage to either a longer or shorter payoff period, I jump quickly to what’s the fastest way to maximize wealth. We need to change that, we need to start thinking about well-being and it’s okay to grow wealth.
Carl Richards:
Sure.
Reese Harper:
Like, growing liquidity and moving in a positive direction, actually compounding your wealth every year, looking at your net worth change, understanding that your financial strength is actually improving through these objective metrics instead of a score card. Those give people confidence and they’re important, and without them, you are just as lost when you’re just living in the well-being land with no data, with just conversation. I’ve had clients they’re so… They’re beautiful humans. I worked with dentists and still work with dentists at Dentist advisors, it’s my RA. And there are clients with significant amounts of wealth that despite lots of information and proving and showing them their score card and walking them through their numbers, their financial IQ is still so basic, sort of like entry level financial IQ. They’re very wealthy people, but very low financial IQ. And they’re still struggling to feel okay, because they’re not quite as confident yet on their own.
Reese Harper:
They need me to tell them, like I am the translator of you’re okay. Which is a good step. It’s good thing financial advisors and are gonna have jobs to offer that confidence, but I’ve seen clients from that stage, it takes several years, but they can with understanding their scorecard and learning their numbers and sort of proving that they’re okay to some degree in their present form, then they start to really be able to rest and relax. So what I’m highlighting here is, it’s both, and it requires both sides to this, an understanding of the wealth and an understanding of the well-being. You always wanna start with well-being, but it’s not enough just to say to someone, they’re okay, they do need some clarity and some confidence, but that’s not where we fall short usually. I feel like we fall short on the well-being side more than we do on the…
Carl Richards:
Sure.
Reese Harper:
The wealth side. But I’m not saying one is more important than the other. Well-being is more important than the wealth, but…
Carl Richards:
What’s the point?
Reese Harper:
Intergenerational wealth is like… That’s just a thing. It’s not like a goal. It’s just a thing and it’s a thing that some people really value, and that’s okay if that’s a deep value, but we shouldn’t impose that value exclusively as the sign of true sophistication or true wisdom or really, great goals or… I just don’t know what causes someone to place that filter of judgment on another and say, “You should have been focused on this… For you, you should have been for intergenerational wealth, but not on the time.” But that’s the problem, that problem of judgment sort of comparison more is better. The person that’s wealthier is then smarter, the person that’s wealthier has just made better decisions, those are not… That’s not always… That’s rarely the case. It’s rarely the case.
Carl Richards:
I think what we’ve done here, I don’t wanna take much longer on this, but what we’ve done here is I think we’re relatively competitive beings and comparative, from the very time we’re born, we’re comparing and looking, this whole problem, mimetic desire Rene Girard’s work. We don’t know what we really want. We learn what we want by looking at other people. And when you’ve tried to find a proxy, I think what we’re really after is happiness, there’s no measure, there’s no measure of unit, a unit of measurement for happiness. So we’ve proxied in money and then we’ve… Unfortunately, we haven’t even proxied money, we proxied in consumption or spending of money, ’cause this the only thing we see, and that’s where we get so confused about this, where it ends up being like this focus on, “Well, I must be happier if I can spend more money,” because that’s what everybody seems to think, and Instagram’s only made it harder.
Carl Richards:
So I think this idea of saying, Look, well-being is part of your job. And then the other trick here is understanding, nobody comes in, you’re not a well-being a manager, you’re not a well-being planner, nobody comes in for well-being help. That’s what’s so interesting to me about a lot of the way that we’ve talked about, is that they’re righteous tricks. It’s not something somebody comes in asking for, but later they’ll point to it and say, “That was the most valuable thing you ever did for me.”
Reese Harper:
Yeah. Well, just to wrap up on this, I think this is a topic that… For me, I think every person needs to find that balance for themselves between well-being and an amount and quantity and financial wealth that they feel proud of, that they feel happy with, they feel content with, there’s not an amount that’s too much. It’s not like an event. This is a process. I’m not really big on terminal life planning, I’m not really big on destination-oriented planning, simulations that quantify the exact amount someone will need in order to maintain their current lifestyle. I just think all of those are approximations of what they really want, which is something deeper than this quantity of money. And if we miss what’s deeper, we really didn’t give them the biggest gift we could have given them, which is, just this beautiful kind of peaceful life that they wanted, and it’s a combination of both wealth and well-being, but we over-emphasize the wealth I think.
Carl Richards:
Yeah. Amen Reese.
Reese Harper:
Carry on.
[music]
Abby Morton:
Next time on Elementality.
Reese Harper:
Really, the first thing that people feel when design is done poorly, is they feel dumb, they don’t think it as bad.
Carl Richards:
Dumb or anxious.
Reese Harper:
Dumb or anxious. In some cases, they feel like it’s their problem, they’re just the… And this is the classic problem we have in finance, is, “Well, it’s too fancy for me, I guess I won’t be… I guess I don’t really get it. I’m gonna pretend like I get it.”
Carl Richards:
Yeah, I don’t understand.
Reese Harper:
“I don’t understand it. I can’t get involved. Good thing I hired Reese, he can figure it all out.”
Carl Richards:
“I’m not a math person.”
Reese Harper:
So they disengage. And what happens when they disengage? My cost goes up. I now have a more expensive firm to run.
Carl Richards:
They don’t have a chance to make the impact.
Reese Harper:
I have more staff that I have to hire to be able to follow up and collect information. I can’t have the impact, I can’t get the advice adherence.
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.