Kitces & Carl Ep 165: Finding Repeatable Conversations To Explain Complex Concepts More Understandably To Clients

***Editor's Note: Can't get enough of Kitces & Carl? Neither can we, which is why we've released it as a podcast as well! Check it out on all the usual podcast platforms, including Apple Podcasts (iTunes), Spotify, and YouTube Music.

Show Notes:

• Your Money: Reimagining Wealth in Simple Sketches by Carl Richards
• Creating Visual Deliverables That Clearly Communicate Financial Planning Concepts
• Kitces FinTech Map on Advice Engagement Tech Solutions
• Four Reasons You Must Tell Your Data Story With Pictures, by Dan Roam
• Holistiplan
• Clearnomics
• Exhibit A
• fpPathfinder
• Income Lab
• FP Alpha

Kitces & Carl Transcript

Carl: Well, hello, Michael Kitces.

Michael: Hello, David Carl Richards III. I have such trouble. I want to make a DCF. I so want to make a DCF in cash flow. I remember because it's not discounted cash flows. So D is David Carl Richards. I don't know what else I would put in there, Franklin or something, but...

Carl: Yeah. Sorry about that. Sorry, I'll let my mom know that that's problem number 17 with my name, for sure. That it doesn't fit into this discounted cash flow.

Michael: Your DCR III is a little too close to DCF. I have to recognize that challenge.

Carl: Yeah, yeah, yeah. Well, that's interesting because I want to talk about making things simple.

Michael: Okay. Very up and proud of the fact that I need to make it simpler. That's fantastic.

Carl: So, there's this challenge. And I want to frame this up carefully here because there's a challenge in our industry. And I don't think most of our listeners this applies to. I just want to make sure we frame it so they know we're talking about something different. Sometimes complexity is used as a sign of intellectual prowess, right? We try intentionally to use it to make other people feel like they need us. That is not what I want to talk about, because I don't think it applies largely to the people who listen. That's the old sales model of, dig a pit, throw the client in it, and look down and say, "I'm the only one with a rope." It doesn't...

Michael: I do love that analogy. It's very colorful…

Carl: Yes, for sure. And I think I might have even been taught using that analogy in whatever early, early days.

Why Is Challenging To Give Financial Advice Simply? [02:05]

Carl: What I want to talk about is the challenge of making things simpler, not... And we could even talk a little bit if we want to about the fear of if we make it too simple, but I think we've covered that in other areas. I'm just talking, actually, how do we take something that is actually pretty complex? And there was a lot of nuance and edge cases and we did a bunch of calculations and we thought about things. And now, we're at this point where we have this thing, but we've got to present it to the client. We want to actually make it simple.

And I'm thinking about this because I just turned in the manuscript for my book that we got in October. And I was struck by how much time I was spending. Like, "No, get rid of that sentence. No, that word's not quite right." And then I'd get some feedback and somebody would be like... I'd have them read it, and I'd say, "What did you read?" And they would tell me and be like, "Oh, no, that wasn't even close to what I intended." And I had to go back and make it even simpler, even clear, even more direct.

And so, that's why I was super curious to ask you...because you deal with a lot of complex things in that brain of yours. And why is it so challenging for so many of us to make things simpler? Because this is one thing we hear from clients a lot. I hear from the public a lot because of the work. And one of the emails I get the most is, "Could you please, please tell them to stop using those words? Please make this simpler. I don't understand what they're saying." This is smart, successful people saying these words.

Michael: So, when I think about this, the first thought that always comes to my mind is... There's a famous saying, at least, attributed to Mark Twain, and I presume it's his, "I didn't have time to write you a short letter, so I wrote you a long one instead.” I didn't have time to write you a short letter, so I wrote you a long one instead. And I really do feel like that's a very good reflection of why it gets really hard to make a lot of this fairly complex financial planning stuff that we do simpler, assuming we're not doing the, "I'm trying to create a complexity pit so I can throw you in and then tell you that I'm the only one with the rope." I'm going to keep using that analogy because it's really, really in my head.

But if I think through just some generic version of a planning process, I'm going to gather all this data, quantitative and qualitative, the numbers, and the where you want to go, hopefully, we have a good conversation back and forth so I can really get to the root issues of what you want and what you want to achieve, then I'm going to do a bunch of analytical stuff. And I will say... I think there is a general framework that I've long maintained that one of the fundamental reasons why clients tend to come to us as financial advisors is that they are experiencing complexity in their lives. To the extent that they didn't start out with a financial advisor in like 22 years old straight out of school, they've lived not to knock folks in their 20s.

Most of us take on clients that are well into their 40s or 50s or even 60s. And when you ask, "Why would a human being who has navigated the past 10 or 20 or 30 years of their lives without a financial advisor suddenly, suddenly decide to get a financial advisor?" I find the answer almost always comes back to some version of a complexity that's been introduced into their lives. There's something that they have to navigate that's new and more complex and more difficult and less familiar than anything they've done before that they say, "I need an advisor to help me figure this out." So, maybe it's a tax-related thing because they're selling a business or exercising options. Maybe it's a windfall financially with the life change. Maybe it's a more direct life transition. It's death. It's divorce. It's retirement unto itself. I don't know how to get a paycheck and spend it. I don't know how to have a pile of cash in an investment account. And somehow my bills are supposed to get paid. It may or may not be the most objectively complex thing newer financial advisor has experienced. To me, clients show up because there is at least something in their lives that has hit a complexity point that they say, "I may have handled my financial situation up until this point, but I can't do it myself anymore. It's too complex." They don't necessarily use those exact words, but there's real complexity there.

And so, when I think about that, I'm like, look, client situations start with a level of complexity. They bring us a ball of complexity. We analyze in that complexity. Sometimes we can get to it pretty quickly if we've got knowledge and experience and capabilities and great analytical software and all that. But if someone comes to me with complexity and I said, "Okay, I've analyzed your complex situation. Here's what I see and what I recommend." If I say, "I've analyzed your complex situation, now let me translate it back to you in simpler terms and then give you what I recommend." There's just literally an extra step in there after the analyze complexity and before the provide recommendations to a client, which to me, really comes back to Mark Twain, why did I... "I didn't have time to write you a short letter, so I wrote you a long one." I don't often have time to create short, simplified, focused, meaningfully impactful financial plans for clients. So, I have to create them a longer, more complex one, and then we talk through it.

Carl: Fascinating. Yeah, that's really, really interesting. I want to just touch on a couple of things. One, I think what I was thinking about when you... I think it's actually like a bar chart of how much complexity I can handle in my life. It's not necessarily... Because it could be that not a lot got more complex in your financial situation. It just could be that there was more complexity in your life generally. And you're like, "Finally, I need to..." It's, "There's one more unit of complexity over here. I have a parent I need to take care of." Or it could be completely unrelated, "I blew my ACL. My yard is messy." It could be completely unrelated, but it's suddenly, "I need to get rid of something. There's a thing."

And then the second thing I think is really interesting is, I don't think after having... I believe I'm correct in saying...well, it's certainly at least hundreds. I was going to use the word thousands...of interactions with people, especially from the readership, I don't think what they say is, "I need an advisor." What they say is, "I've got a problem. Who knows how to answer this problem?" And then that leads them to the path. Which I think is just really important for us to keep in our heads. People don't really ask for financial plans or financial planners or financial advisors. What they ask for is a solution to their problems, which leads them to a person who... So, that's interesting.

But the complexity thing, I'm super fascinated. So, you're saying that you're going to take this big ball of complexity. I'm going to do a bunch of work on it. What I'm pointing to though is often the client is saying, "Hey, this long letter you sent me, give me the executive summary. Give me the bottom line. Give me the... I just want to know what to do next." And it's hard for us. I think you're right. It's hard because it's cognitively demanding and it takes time.

Michael: Yeah. Literally speaking, I generate my financial planning software output or analysis or whatever you do. And then I got a crack me open a Word doc. And that way...

Carl: Wait just a second, you crack you open a Word doc?

Michael: Yeah.

Carl: Okay, just checking.

Michael: I love it. Well, only because I have to close Excel, but yes. Great. Advisors... Some of the planning tools are getting a little bit more capable of this now, but we've had this literally in our data for years, almost by definition. If you created an executive summary for your financial plan, you have to make an additional document outside of the financial planning software output to look at their planning situation, synthesize it down to executive summaries, try to boil it down to a smaller number of key insights or points or comments you're going to make back. And it just literally takes time. So, what's one of the primary differences between advisors who don't spend a lot of time on financial plans, crowd-structuring the plans, and advisors who spent more, the advisors who spent more often had a more synthesized, executive summaries.

Carl: How about in the...?

Michael: Because those of us who didn't spend as much time just literally took the financial planning software output and put it in front of clients. Again, that's changing a little today because more of us will do it on a live screen interactively with the tools.

What It Means To 'Simplify' Financial Advice [12:12]

Carl: What about in the talk through, let's talk about that for a minute then. Because what the client's asking for is, "Simplify my life generically," a sort of broad theme, "Make my life simpler." We all know that real simplicity has massive value, not simplistic answers. We've talked about this before. We all know why we sometimes avoid it.

Michael: I would lightly challenge the premise though that clients come to us to make their lives simpler.

Carl: Well, that's literally what they say, "Make this... This is too complex. I need help. Make this simpler. I want things to be simpler."

Michael: I think there's a segment of clients that do. That's out there. I've certainly heard that from a segment of clients. And it probably crops up a little bit more if you work with retirees because they spend a long time...

Carl: Wait, wait, wait. Hold on.

Michael: ...making their lives complex and they want it simpler, but...

Carl: Let me go back to your... Let me just make sure I'm phrasing this right before you answer. Because your initial introduction was things get really complex in clients' lives and they need help.

Michael: So, they can't figure out the answers on their own, not necessarily because they're trying to make it simple, although that's sometimes what they're looking for. To me, sometimes it's just, I literally don't even know how to get to the answer because there's so many moving parts of things that are going on in my life that I don't know anymore. "Okay, I knew to save in my retirement account because that's effective. I don't know how to split my savings between my traditional account, my Roth account, and my individual accounts, asset locating the assets across all the different places, figure out how much to draw down from each while also optimizing the Roth conversions. Oh, and apparently, I'm supposed to do some tax loss harvesting as well. Also, I want to do a capital gains harvesting. But don't do so much gains harvesting that I bump up my Roth conversion tax rate."

You start putting all that stuff in there and someone says, "Look, I want to finish with more money to live my life. And I literally don't know how to get more money out of this ball of various accounts with different tax treatments and investments. How do I..."

Carl: So, do you think the word that I'm using about it, 'simplify' it, maybe that's the wrong word? Because it seems to me like... Let's get away from even retirement discussion. A very busy senior executive that's got a lot going on, the CEO of a publicly traded company, they want to hand you this big pile. They want you to clearly diagnose and understand what's important to them, where they want to go, what the...all those things. And then they want you to provide them with answers, right? Solutions. Is that... So, I'm calling that process sort of, "Take me out of this and get me to the solutions." I'm calling that simplifying. Is that wrong?

Michael: Well, so I guess I would contrast it slightly. Because, again, there are some clients who literally come and say, "My stuff's all over the place. My like financial household's a mess. I know I've accumulated a lot of stuff." But if the clients have, "I got seven different accounts at five different institutions. I've still got three old 401(k) plans [that] I never managed to move and consolidate. I just literally wanted to simplify my life and all these institutions. I'm getting ready to retire. I want to enjoy my life. Please help me simplify this." So, I think that version of literally, "Help me simplify," is a thing for clients. The rest where, I guess, we go in the vein, just like, "I'm the complex CEO. I want answers." I still 100% agree with you that when that client sits down and says, "I want answers. I want answers where I understand what the answer is and what you're recommending. And I don't need to read 150-page book or listen to a two-hour lecture from the blue-shirt guy presenting a plan. I need to know you've done your analysis to trust you," which is why I still think we have to do the plan, the analysis stuff. But I do think it is very true. No client literally wants a complex version of the answer. I don't think any client wants a complex version of the answer.

Carl: At least the level of complexity we like.

Michael: Correct. I think they want a simple answer with still the confidence that they can trust it that we've done the analysis and the rest. But clients want to feel like they understand what's being recommended to them. And it's really hard to say yes and act on and follow through on advice where there's a part of you that's like, "I'm not even sure what he just said." Which means, I'm also definitely not sure that he fully understood my situation because I don't even understand my situation and I don't understand what he said, so I'm not sure he understands my situation.

Carl: Nice.

Michael: He's told me to do a bunch of things. I don't even know what half of those words meant. And we start falling off that complexity cliff because the client's situation is complex. The answers have complexity associated with them because if they were simple things to answer, the client might have answered themselves. And so, I say, what do I do when a client brings me a complex thing and the answer is pretty complex, but I'm trying to present it to them more simply so they really understand it. The answer is, “Oh, crap, I got to put a couple of hours on my calendar to sit down and figure out, how am I going to repackage this piece of advice or analysis or whatever it is and try to figure out a way to show it to a client that they'll understand it?”

Carl: Yeah. So, let's... I want to get in tactically a little bit to that, what you just talked about, what would you do during the three hours? But I want to wrap this up, the early conversation, because maybe the word isn't simple. Maybe it's just... Because what you hear clients say, and this is across the spectrum, if you ask a client what it works with a real financial plan or what the value is, "I don't worry about things anymore," or, "I feel organized," or, "They've taken it off my plate," or, "I understand," or, "We have a strategy and it's being implemented." There's a sense of chaos has been turned into order. There's some sense of that.

Michael: "I know where we're going now. I know what we're doing."

Carl: Yeah, yeah. All of that.

Michael: "I know how we're getting to where I want to go."

Carl: All of that. So, that may not be like making things simple. It may be like making things understandable, making things clear.

Michael: That was literally the word I was about to use. Maybe it's a little bit more...

Carl: "I understand."

Michael: ...understandable than simpler per se. Although I think the moment you get into, how do you make it more understandable? The answer is you simplify.

Carl: Sure. Sure. Maybe it just...

Michael: You simplify what you're saying.

Carl: But maybe it clears up a mental hurdle that was in the way, which I think is really helpful for me. So, that was really valuable.

Simplifying By Crafting Financial Advice Around One Takeaway [19:02]

Carl: So, let's talk about, okay, maybe you're not doing much. Maybe you don't have time to write the executive summary because the long letter story...

Michael: Or come up with a great graphic or visual.

Carl: But the client's going to come in. What do you do? "Okay, I got these complex answers." What are some things you can do to say, "Okay, how do I do this?"

Michael: What strikes me in practice is, I just literally start thinking out loud like, "What am I going to do?" I'm looking for a visual.

Carl: Interesting.

Michael: Almost always. In practice, okay, maybe I'm going to write an executive summary or make a charter summary table. But short of that, I'm looking... “There's a particular chart from the financial planning software that I think explains this well.” Or I love Holistiplan because they've got a particular tax output that illustrates this well for the client. Or I get explainer charts from Clearnomics. There's a lot of organizations that are kind of in a visuals sort of business to help us have the charts, graphics, visuals to illustrate these things more directly. Income Lab seems to be having a lot of growth because they're coming up with some really unique ways to visualize, "Are you on for track for retirement? Are you in the proverbial guardrails?" Instead of just the good, old mountain chart of wealth that doesn't go to zero by the end of your retirement time horizon.

So, just reacting very raw and directly to what you said,how am I going to do this if I'm trying to get a client to understand it? My head goes two places. Either I'm going to try to come up with some sort of a story or analogy to try to connect it to them and make it more real for them. Or hopefully, because I don't have time to create, I'm going to try to get some kind of visual from my software, from a chart, from an article, from something that's out there because I'm trying to find a way to explain it besides just brute forcing my way through a really complex analysis.

And again, all of those, to me, start with assuming I have the time... to find the visual, find the graphic, find the chart, sign up for the vendor that's got the pretty charts or graphics, or whatever it is. We get a lot of people signing up for fpPathfinder because they just literally, like, "Can you just make the flow chart for me with my logo on it so I don't have to make this for myself?" And now, the Ritholtz guys have launched Exhibit A, which is their version of investment charts for clients when we're trying to explain what's going on in scary markets and get clients more comfortable.

So, my head goes quickly to, I'm trying to tell a story or analogy, or I'm trying to create or at least find a graphic or a visual I can use and relative to this original, "Why is simplicity seem to be so much harder for us than the complexity version?" Because these all take time.

How do you do this? You make the beautiful, simple, illustrative graphics that we all love so much that we literally buy prints of them and put them on our wall, not coincidentally, because when you see a good graphic that illustrates a point to a client, you really want to use it. I mean, how do you tackle this as someone who literally makes these graphics to simplify the points that we're all trying to say to our clients?

Carl: Yeah, no, just to emphasize visuals first, I think... I can't remember who it was, Dan Roam, I think, some of the data on how we learn. And the number was astonishing. I believe it was in the 90% of the people surveyed said they visuals enhance. It's either their primary learning style, or it's definitely an enhancement. And the reason they're perceived as such high value is only some crazy low number of us said we were comfortable communicating that way, creating them. So, it's actually that the really high visuals have really high perceived value.

But one thing I would do, here's a couple of tricks that I think are really, really valuable. One is get clear about the one thing, yourself first. So here, let me break that down. Here's a question that I use all the time that I would ask any... Okay, you're going into a meeting with a client. And in some of the consulting work we do, we ask this all the time. You're going to a meeting with a client. You're going into a presentation. You're going... So, let's just stick with meeting with a client. Big, important client's coming. You're going to have 60 minutes with them. When they leave, I want you to pretend like there's somebody in the parking lot with a clipboard. And they're going to approach your client and they're going to say, "You just spent 60 minutes with Michael. What's the one thing you remember?" And the question I'm asking you, Mrs. Financial Planner, is what do you want those clients to say? In advance, can I identify? And you can use this on any... If I'm going to go to your website and I'm going to spend 30 seconds, and then I go to get out, leave my office, and there's somebody with a clipboard. I love the clipboard metaphor. There's a person there with a clipboard.

Michael: Do they have a white lab coat as well?

Carl: Maybe. Maybe.

Michael: Because my brain is filling that ad…

Carl: That's fine.

Michael: There aren't very many people with clipboards that don't have lab coats.

Carl: Exactly. White lab coat. And they're going to just say, "You just spent 30 seconds looking at XYZ Financial Planning's website, what do you remember? But I think the one thing, and I often say you only get one. So, if you can become clear about that yourself... I have found a big part of the problem with making these things clear, more understandable, or dare I even say more elegantly simple, is we're not exactly sure what it is we're trying to communicate in advance. So, that's one question.

Strategic Practices To Give More Specific Financial Advice [25:47]

Michael: Do you know why?

Carl: Because it takes time.

Michael: Yes.

Carl: I agree. It takes time and thought.

Michael: I got to sit down and figure that out, "Carl, come on, man, you know how many meetings I got on the calendar today?"

Carl: So, if you just said what took three minutes, and maybe it's part of your on-your-staff prep document, what's the one thing, if they only remembered one thing, what's the one thing we hope? Well, then you can sort of structure some things around that. And I really actually do think you only get one. But you may be able to buy subpoint two and subpoint three. So, that is actually my favorite exercise. And then I go back in. And so, I call that the zinger. And in the work with the book, so the book's 100 essays, so I know which line is the zinger in every one of those 100 essays. I know what line is the point. In the newspaper business, you'd call this the lede, don't bury the lede. In comedy, you call it the punch line.

Michael: Good point.

Carl: So, I think you think through that. And then you can go back and say, now you have the lens through which to look at all the output you're putting in front of a client and saying, does it support that punchline or not? And if it doesn't, then you get to ask yourself a question, is it a distraction or not? Because if it's a distraction, we want to remove it. And I can give you just hundreds of examples of distractions like, "Oh, no, suddenly we're 30 minutes down a path." It actually doesn't really even matter that much.

Michael: So then, here's the question I would ask with our own limited time left. So, I guess, the simplest sounds like, how do I do this, or at least get closer to doing this well, because I don't have a big, old pile of time running around right now? I feel like we are collectively agreeing, I think, that this is sort of a version of the Mark Twain letter. Why aren't our financial plans simpler? Because I didn't have time, so I just made you a long, complex one. And I didn't find the stories and the visuals and the charts and the graphics and pre-identify the one thing so that all my points can drill into the one thing. So, what do I do as a busy financial advisor to navigate this?

Carl: You decide if it's worth it. And I think that's actually a reasonable question. I have a strong bias about that, and the people I worked with and would work with if I started a firm again, would have a strong bias towards that, and they would self-select. But that doesn't mean everybody does. So, you decide if it's worth it. And if it's worth it, it becomes a craft that you practice. And that's... I think other words for this are distillation, curation. There's real value in curating and distilling and hand-crafting, all of those words, and you just decide if that's worth it. If that's the kind of thing you think clients pay for, then practice.

And one easy way to practice would just be, just use the just use the clipboard question. And you can use it on your website. But for this purpose, let's just say, before you go into a client meeting, set aside three to five minutes with the team member and ask the clipboard question, what's the one thing I hope they remember? And just practice. And then over time, that muscle actually becomes stronger and it takes less and less time to identify that. It's just, you can become better at anything you practice. Is it worth practicing? That's the question.

Looking For Opportunities To Repeat 'Simple' Conversations [29:56]

Michael: The part that strikes me around this, because it takes time, and for most of us, the clients we work with, I don't really have time to craft the most unique zinger of a visual or new story or analogy for every client and every financial plan that I'm presenting, that my head then goes to, "So where are your repeatable conversations? Can we look for the conversations that repeat?" Because a lot of times, my new, I call it the spiel, the investment spiel you do for a new client where you explain your investment process and philosophy is a very repeatable conversation. If you've got a pretty high volume of clients, just the annual or semi-annual client review meeting where we talk about whatever is going on in the markets for the past few weeks or months becomes at least a semi-repeatable conversation. It doesn't go indefinitely, but whatever's going on the week, that's pretty much what I'm talking about 6, 8, 10, 15 times this week, depending on what my client meeting volume is. If I've got a pretty standard clientele, dare I say in a niche – 30 minutes in before I set it for the first time, that might be a record.

Carl: Yeah, about 30.

Michael: If I've got like a particular clientele that I serve, then I've often got a similar financial plan delivery meeting because I'm always doing the thing where I explain how ISOs versus RSUs work and how we sequence their unwinds because I work with equity comp people, or how I talk about sustainability of retirement income and withdrawal rates because I always work with retirees. Whatever that clientele is, there may be some, there often are some repeatable conversations we have that I always do like the spiel about how we explain what withdrawal weight and spending is sustainable, how we analyze it in the financial planning software, and therefore, we're recommending that your spending be here, plus, or minus this. Look for the repeatable conversations and see... Because if I find a repeatable conversation, one graphic, one story, one thing, literally, I get a lot more mileage out of it. At least I'm not taking the time to do it once for one client, taking the time to do it once for lots of clients.

Carl: I love that. And I think that's just, again, if you just put that lens on just a little bit, like what are the repeatable patterns I'm noticing? When this question comes up, I've noticed that this analogy really helps. Or when this question comes up, I've noticed this image really helps. You just start pattern matching a little bit, and then you build a little bit of a data set, at least in your own head. To the degree you can build it outside of your head is even better.

Michael: Or you go buy the visuals. You sell beautiful images on your website, like Clearnomics and Exhibit A do this, Planning Software does this, Income Lab's doing this for retirement, Holistiplan and FP Alpha are doing it for taxes, fpPathfinder does it for lots of flowcharts and checklists.

Carl: Sure. Find your thing.

Michael: When you figure out what the repeatable conversations are, then it gets a little bit easier to say, okay, is there some aspect of this conversation I have over and over again where it would be worth taking a bit of time, a few hours to find some graphic that would really zing this and drive the point home so that it's easier to explain it to everybody going forward.

Carl: Yeah, and then the last thing I would want to say on this is just one pointer to a way to distill and make things understandable and simple for clients is, what's top of mind for them, right? If you allow that to... If your answer to the clipboard person is, I hope they left with their number one most pressing concern answered or eased a little bit. That's a really good way to shortcut into the dialogue of, "Hey, I want to make sure they leave feeling comfortable about this thing because it's what they told me was the most important. That's why they're here today." That's another good place to start the process.

Michael: I love it. Thank you, Carl.

Carl: Yeah, it was super fun. Thanks, Michael.