Over the years, I’ve been afforded the luxury of sitting in on hundreds of meetings between advisors and their clients.

Young families. Highly-compensated executives. Small business owners. Pre-Retirees and Retirees. 

I’ve seen hugs, tears, laughs, and breakdowns. I’ve felt the tension, relief, confusion, anxiety, greed, and joy.

I didn’t know it at the time, but one meeting in 2017 planted the seeds of Wired Planning and The Human Side of Money podcast, as it illuminated the forces at play shaping the value and future of advice. I want to tell the story of what transpired that day in hopes that it will do the same for you.

 For confidentiality purposes, we’ll refer to the advisor as Matt and the clients as Ted and Julie.

Ted and Julie are the prototypical mass-affluent retirees. Ted was 72 and happily retired. Julie was 71 and still working. They had saved approximately $600,000 in their retirement accounts, both were drawing social security, and they spent less than they made.

Julie had expressed to Ted that she wanted to spend the balance of her life spending more time doing the things she loved with the people she loved most. They scheduled this meeting with Matt to talk through how to replace Julie’s income so she could finally retire.

Without diving into specific details, the message generated by the financial planning calculation and displayed on the screen in the conference room was virtually ideal:

With the recommended portfolio of investments (50/50 in stocks and bonds) and pulling from their portfolio to replace Julie’s income over their planned life expectancy, Ted and Julie would be able to do that successfully 92% of the time. Or, for those of you who are familiar, only a mere 8% probability of making an adjustment at some point. (We’ll have plenty more content on this framing in the future.)

Everything was right on script. The numbers lined up and the plan made sense. It was precisely what they woke up that morning hoping to hear. It was the type of meeting we’ve all experienced before where everything came together in a way that was tailor-made for success.

Only, there was one problem. I glanced over at Ted expecting to see a mix of joy and relief. Instead, his face was a clear display of disappointment. When Matt addressed his silence, Ted explained, “Since we’re using our savings as income, I can’t stomach the thought of losing money in the market and want to keep it in cash where it’s safe.”

So, Matt proceeded to do the next logical thing many of us would do if put in a similar scenario. He illustrated on the screen how staying in cash would impact their odds of success: 

From a 92% probability of success all the way down to 74%.

The message on the screen was clear. Ted and Julie’s financial futures and livelihood hinged on the decision between two options:

  1. Invest in a balanced portfolio of stocks and bonds that offers a great chance at accomplishing their goals without running out of money.

  1. Invest in all cash and drastically reduce the likelihood of accomplishing their goals while increasing their chances of running out of money.

Surely, showing someone in cold, hard numbers the negative ramifications of their decision would serve as the ideal recipe to change their mind?

Ted chose #2. Emotion trumped logic. Numbers were no match for fear.

As Daniel Crosby, Chief Behavioral Officer at Brinker Capital eloquently states in his book The Behavioral Investor,

“Trying to fight emotion with logic is like bringing a knife to a gun fight.”

Morgan Housel, author of The Psychology of Money, reminds us this way:

Investing is not the study of finance. It’s the study of how people behave with money.”

Watching Ted and Julie walk out of the office that day knowing they had opted for a route that jeopardized their financial future despite all of the evidence pointing them the other direction is forever wedged into my memory. 

Inevitably, it opened up my eyes to the fact that this gap between knowing and doing existed in thousands of client meetings across the country every single day.

Of course, the risk-averse client like Ted is only one of countless examples. It includes clients who hoard their money despite the fact they can never spend it all. It includes the couple who repeatedly fails to reign in their spending. It includes the clients who you’ve told six times over the last year to start stashing money away in their retirement accounts, but they still haven’t followed through. And on and on.

What a riveting, yet convicting, concept: There are likely millions of people across the country who know exactly what to do in order to set themselves and their families up for financial success, accomplish their goals, and garner more peace of mind around their finances. But they can’t pull the trigger.

Witnessing that meeting and the abrupt realization that it was happening every single day across the country taught me two important lessons:

  • The value and future of our profession lies not in providing information and advice but in guiding clients through the process, unearthing their values and emotions around money, and getting them to change their behavior for the better.

  • The ability to guide clients through the process, unearth values and emotions, and change behavior requires a skill set most financial advisors have never developed or sharpened. At the same time, the training, information and resources on how to develop this skill set is sparse. It’s a void that desperately needs to be filled.

The value and future of our profession is evolving, and the advisor who is more comfortable discussing investments than emotions will soon be extinct.

In order to fully comprehend the reality and implications of these lessons on our profession, it’s helpful to take a step back and look at them individually through examples outside of money.

The Insufficiency of Information

The reality that the value and future of our profession is moving away from information and advice while blending the human side of money is rooted in this belief:

 Information on it’s own is insufficient to change behavior.

In order to fully accept this idea that information alone is insufficient, let’s zoom out and look at a situation where we’ve stacked the deck in favor of information. A situation where your behavior could literally mean the difference between life and death.

Every year, approximately 600,000 people in the United States have heart disease so severe that it requires bypass surgery, a traumatic and expensive procedure that unclogs arteries to improve blood flow to the most vital organ in your body, the heart.

But, what most people don’t know is that bypass surgeries act as a band-aid and not a cure. They temporarily unclog the arteries and relieve chest pain, but rarely do they prevent heart attacks or prolong lives. In fact, it’s common for the artery to clog up again within a matter of years.

Unless you change your lifestyle.

The top four causes of heart disease are all correctable, behavioral problems: unhealthy diet, lack of exercise, smoking, and being overweight. Doctors explain to the patients that the only way to avoid the return of the pain and eventual need for another surgery is a change in lifestyle. Eat healthier, workout more, don’t smoke and lose weight.

Yet, despite having a prescription to avoid pain, avoid surgery, and prolong life, the research shows that within two years of surgery, 90% of patients fail to alter their lifestyle.

Information alone fails even when it’s the difference between life and death!

Derek Sivers, serial entrepreneur and founder of CD baby, has a quote that perfectly describes this gap between knowing and doing:

“If all we needed was information, we’d be billionaires with six packs.”

It’s not an information problem. It’s an execution problem.

We’ve all heard the alarming numbers on the failure rate of entrepreneurs, skyrocketing obesity rates, and depressing divorce rates. Yet, despite the fact that we have more information at our fingertips today than ever before on running a successful business, getting in peak shape, and living in marital bliss, those numbers never budge.

Knowing and doing are miles apart. Education and information alone have never built a business, shed an ounce, or saved a marriage. If they could, we’d all be billionaires with six packs in fulfilling marriages.

Now, back to Matt’s conversation with Ted and Julie, we shouldn’t be surprised that despite having all of the information they needed to make the best decision that they couldn’t do it. 

If information alone fails when it’s a matter of life and death, or when your marriage is on the rocks or the future of your business is on the line, we shouldn’t expect it to be any different when it comes to money!

As this meeting demonstrated, the perfect plan is rendered useless in the absence of execution.

Here is the undeniable implication for the value and future of financial advice:

It’s not about simply picking investments and providing a financial plan (Information). It’s the ability to guide clients through the process, unearth their emotions and values around money, and change their behavior for the better (Execution).

It sits at the intersection of technical expertise and the human side of money.

By blending these two together, the benefits are immense, not only, for your clients, but also, for your business and your happiness.

  1. Your clients are happier and have more peace of mind because they get better outcomes
  2. You’ve insulated your value from any technological disruption
  3. The growth of your practice will explode as you retain more assets, boost your referral flow, differentiate yourself from 99% of the competition and routinely turn prospects into lifelong clients

This is where the second lesson merges with the first.

While the benefits of mastering the human side of money to blend with technical expertise are immense, more immense is the gap between the skill set possessed and the skill set required to reap the benefits.

We have a dilemma on our hands. A skill set dilemma.

The Skill Set Dilemma

In order to fully grasp this skill set dilemma, we first have to take a humble look at ourselves and recognize our deficiencies in this area. The best way to do that is to look at a couple domains where careers and livelihoods hinge on the ability to build trust, explore emotions, and change behavior.

Let’s consider hostage negotiators and therapists.

In his book, The Catalyst: How to Change Anyone’s Mind, Jonah Berger describes how good hostage negotiators recognize that simply telling someone what to do while providing facts never works. They take a different path:

"They start by listening and building trust. They encourage the suspect to talk through their fears and motivations about who's waiting for them back home. Because the hostage negotiator's aim is to ease the pressure, rather than banging down the door. Gradually lowering the suspect's fear, uncertainty and hostility, until they look at their situation and realize that the best option is the one that seemed unthinkable at the start: coming out with their hands up. Good hostage negotiators don't push harder. Instead, they identify what's preventing change from happening and remove that barrier. Allowing change to happen with less energy, not more."

No hostage negotiator would ever consider approaching the suspect with the cold hard facts: “Hey sir. 90% of people end up surrendering in the end, so why don’t you go ahead and come on out?”

Facts and stats don’t drive behavior in the midst of emotion, which is why they take an approach of listening, asking questions, building trust, and alleviating uncertainty on the path to behavior change.

Obviously, there’s a distinct difference between negotiating with terrorists and talking with people about their financial futures. So, let’s look at a career that more closely parallels our own: Therapists.

Think about the fundamental job of a therapist at its core. You’re sitting in a room with a stranger dealing with an issue or crisis that has evolved to the point that they can’t manage it on their own anymore. The effects are beginning to impact their life, their happiness, and their relationships. 

Your job is to create a space for a stranger to completely open up to you about something that they have often never told anyone close to them (maybe a select few at most).

Most people can’t even do that with their close friends and a bottle of wine (or two!).

And, if that wasn’t enough, your job has only begun. Now you have to absorb the emotions and information pouring out of this stranger, while staying calm and guiding them through the process of changing for the better.

A therapist’s career is reliant upon their abilities to get a stranger to trust them, open up to them, decide they want to change their lives, and ultimately, get them to undergo the immense task of actually changing.

We clearly don’t talk with terrorists or help people with their marriages, addictions, or mental health. But, we do deal with emotional human beings on the emotionally-charged topic of money. 

And like hostage negotiators and therapists, we often need to get emotional human beings to choose the best option by building trust, talking through fears and motivations, and alleviating uncertainty.

It’s a skill set rooted in listening, asking questions and empathizing. 

Listening fosters understanding. Questions are the fuel of persuasion. Empathy builds trust. And behavior change is a natural byproduct of each. 

Richard Thaler, best known for winning a Nobel Prize for his contributions to behavioral economics, summarizes it perfectly when describing financial advisors:

You can’t do your job well unless you understand what your clients think. Recognizing your clients, goals, needs and fears is at least just as important as crunching numbers.”

Let’s bring this back to the meeting with Ted and Julie. 

When Ted’s emotions overtook logic and he balked at the portfolio, Matt’s first reaction was to bring more facts and information onto the screen. (Similar to the hostage negotiator telling the terrorist that people end up surrendering 90% of the time.)

But, what if Matt had taken the time to listen, ask questions, explore, and empathize with Ted around why he was so afraid of the market.

He could have uncovered that Ted’s real fear is rooted in the fact that the last time he invested in the market, he lost so much money that he had to derail his retirement plans. 

He could have uncovered that Ted’s real fear is having to sit down at the kitchen table with Julie and break the news that she has to go back to work.

He could have uncovered that when Ted envisioned losing money, he envisioned the elimination of family vacations with his grandkids.

Does uncovering these things assure Ted’s compliance with the plan? No, there is no magic bullet.

But identifying the root of the problem undeniably transports you closer to conquering it. And doing so requires a skill set and tactics that very few advisors have acquired, developed, or honed.

Nor have they been provided with the top-notch, high-quality training and resources to do so.

Crossroads of Value

Once Ted and Julie left the office, Matt and I sat in his conference room for another hour replaying the events from the meeting and dissecting every word and visual.

He lounged back in his chair, looked at me with a mix of disappointment and determination, and asked, “What could I have done differently?”

He assembled a detailed financial plan and constructed the optimal portfolio, but Ted’s inability to follow through on the advice made it as effective as a blank page. Information is useless in the absence of execution.

No plan, portfolio, number or chart displayed on the screen offered what Matt needed to change Ted’s behavior. 

As the conversation continued, Matt expressed a realization that I had heard from several other advisors in my career. He said, “You know, Brendan, sometimes I think I’d be better off with a psychology background than a finance background.”

Like most throughout their careers, Matt accumulated a wealth of technical knowledge and information. But all of those tests, textbooks, and designations proved no match for the invisible enemy of emotion steering Ted’s behavior. 

Matt didn’t need more information. He needed to know exactly what to do that would get through to Ted, and ultimately, change his behavior.

  • What kinds of questions should he be asking to uncover Ted’s actual fear?
  • What are some tactics/strategies to nudge him in the right direction?
  • What are some ideas to help risk-averse clients get out of their own way?
  • Is there a more effective way to communicate and deliver the information for someone like Ted?

The list goes on and on.

Unfortunately for Matt and the vast majority of us delivering financial advice, the skill set required wasn’t in any textbooks, trainings or conferences Matt had absorbed over the years.

He realized that our profession is facing a crossroads. The value and future of our profession is moving in a direction that most advisors and advisory business are simply unprepared to go. 

Wired Planning and The Human Side of Money podcast were born to meet you and Matt at this crossroads.

If you’re a financial advisor or planner who wants to pair your technical expertise with the skill set to guide clients through the process and change their behavior, but you’re frustrated with the lack of high-quality training, then this site and podcast exist for you.

Unlike most of the training that delivers a pile of information and definitions under the label “Behavioral Finance”, we will equip you with practical tips and strategies to enhance client outcomes and forever change the trajectory of your advisory business.