Executive Summary
Financial advisors are often innately inclined to set long-term goals and stay on the course to help their clients achieve their goals, as the advisor understands the bigger picture of having a financial roadmap and its benefits. However, when long-term goals in a financial plan are too rigid, many clients may not be naturally inclined to stick with those goals or even with the financial advisor. It can be especially difficult for clients to stick to a strict ‘goals-based’ approach when their long-term goals are likely to change, or when the goals that their financial advisor conveys as important are not clearly connected to the client’s bigger ‘why’.
In our 91st episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss why setting goals overall is an important step in developing a financial plan, but how structuring those goals around a broader sense of direction can guide the financial plan toward achieving more client satisfaction over time.
As a starting point, it’s important to recognize that goals are just guesses that are highly subject to change. Often, goals set in the initial stages of developing the financial plan do not end up being the goals achieved (which is okay!). While it is a good idea to create a roadmap for clients with long-term goals, leaving only a little room for flexibility and change can make it challenging for clients to commit, especially when they are unsure about why the goals are important in the first place. In reality, life will always change and nearly all goals will have to be adjusted at some point in time. A good way for advisors to meet the clients in the middle is to set smaller, more flexible goals that identify the clients’ desired “direction” so that they can set loose, adaptable “goals” and course-correct along the way.
Ultimately, the key point is that a ‘goals-based’ approach is not a one-size-fits-all solution. Because the future is uncertain, goals need to be reevaluated, clarified, and adjusted over time. And goals that are not based on a client’s current reality can be difficult for clients to connect to. Importantly, as the advisor/client relationship matures and goals are clarified, having flexibility allows for a deeper understanding by both advisor and client of why these goals are important. Furthermore, when the intent behind achieving the goals is understood, deeper trust – and longer-lasting relationships! – between the client and the advisor are established, instilling more confidence that goals will be achieved.
Authors:
***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 Stitcher.
Show Notes
Kitces & Carl Podcast Transcript
Michael: Well, greetings, Carl.
Carl: Hello, Michael. How are you?
Michael: I’m doing well. How are you?
Carl: Things are fantastic, actually. Super good.
Michael: I’m loving the blue couch is just nicely draped behind you. So, as of when we’re recording this now, it’s little ways after the Jolt! Conference. So for those…not everybody got to see you. I guess I could say it because you said, like, you trolling me on Twitter of documenting the journey of the blue couch to the Jolt! Conference from Snappy Kraken. And then, being on the couch with other people coming up to you, sitting with you on the couch, and then taking pictures and saying, “Why isn’t Michael here at the conference?” Because I was unfortunately conflicted out with another one. And a steady stream of this for several days. So, I’m glad to see the couch made it home because for those who hadn’t looked, really, it’s worth going back to Carl’s Twitter feed to find it. There are multiple pictures of the couch making the drive across the Midwest. And some people take pictures when you move the gnome around, like, the journey of the gnome. Carl did the journey of the blue couch all the way to the conference. It was pretty amazing. So, I’m glad to see it made it back. Because we saw all the pictures going there, but there were no pictures coming home. So, it made it back safely.
Carl: Yeah, that was…it made it back. It was so fun. The drive between Salt Lake and Las Vegas is some beautiful, super varied, but beautiful landscape. So, I was like, “Why not stop and put the blue couch out in the middle of the landscape?” I did. It was pretty funny. Everywhere I stopped, I was like…I felt really strange, like putting a couch out in the middle… I tried to find a field full of cattle. That was my main goal was to find a field full of cows that I could put the blue couch in the middle and sit on it and take a picture with the cows. But I never pulled that off. So, anyway, yes, it did make it back. That was a super fun event. And it’s finally here in the office with…everything from London has finally arrived, so.
Michael: So, is this a thing now? Just if we see you out at conferences going forward, should people who are listening expect to see the blue couch with you when you are at conferences in the future? Is this a thing now? Like, an in-person thing?
Carl: I can’t talk much about it, but, at least, in the fall, the blue couch is going to be in some very, very interesting places.
Michael: Fantastic. Fantastic. So, I then I do have to check in, how’s your wife with this? Because we all know, technically it’s her couch. It’s not your couch. She’s the designer, and it’s a genuinely cool designer of the couch.
Carl: Whatever. It’s got a name. Yeah.
Michael: Yes. So, how’s she with the evolution of the blue couch?
Carl: I don’t know if we mentioned it, but when she found out it was going to Vegas to a conference with hundreds of people that were going to sit on it, she was like, “That couch is not coming back.” So, I’ve got to buy her a new couch. So it’s fine in my studio here in my office. I’ve got to buy her a new one now. So that’s we’re…
Michael: So, just the next event, the couch needs an appearance fee to cover its siblings that need to cover for it back home.
Carl: For sure. For sure. Super fun.
The Psychology Behind The Desire To Set Goals [03:31]
Michael: So, for our discussion, today, speaking of your entertaining conversations on Twitter, you had put out this comment, actually, literally earlier today, as we’re recording this, that it stirred up this interesting conversation, that you had said, and correct me if I don’t get the quote right. But some of the effect of don’t think about goals, just focus on the general direction. Capture the essence of that.
Carl: Yeah, totally. I think that’s exact…I don’t recall exactly what it said. I don’t have…but that might be word for word. Don’t…or maybe like stop thinking about goals and start thinking about general direction.
Michael: So, we’re goal-setting machines, find a planner. Goals are what we do. So, just talk about this more. Goals are what we do. So, help me reconcile, stop thinking about goals when literally the first step of the financial planning process, well, after establishing a relationship, is identify the goals.
Carl: Right. Right. Right. Yeah. Look, I think anything we can do to suggest to the mind, and to the client and their mind, that goals are guesses, anything we can do to lower that pressure around what’s your goals? Whenever you ask anybody that…now, we have all forgotten because, and I believe you even have some survey research to prove this out. But we have all forgotten that most people don’t like talking about goals. They don’t have them. And the research I believe you have is the reason we’ve forgotten it’s because we love it, right? But most people, most humans don’t, partially because two things.
Number one, and this is also research, right? Number one, they don’t know what their goals are. And number two, every time they think about goals, there’s this big problem that comes up. And the big problem is we’re mimetic machines. We don’t know what our goals are. We don’t know what to desire. Luke Burgis’ work, his new book called “Wanting,” which really piggybacks off the work of René Girard, around the mimetic desire, really lays it how clearly from the youngest age, we don’t know what we want. We look to others to see what we want, right? We look to mom. We look to dad. We look to the people around us. As we grow, we look to the tribe, and we look to the kids around us and peer pressure. And so…
Michael: That’s labeled mimetic desires. We don’t have desire; we mime the desires of others. That’s the root of it.
Carl: Exactly. And I think that’s what plays into this pressure around goals because you add Instagram to it, and suddenly you’re like, “You don’t even…” So, we all know this. When you say to a client, what are their goals? The first round of that is, you know, I need $3 million when I retire. And you ask one question, why? And they’re like, “Oh, I read that in a book.” You know what I mean? And that’s just what we do as humans. So, I think back to this particular thing is, look, goals to me are really good goal. And I realize I’ve never really had them. And it would be fun to talk about that. Because I think you feel the same way. And we could talk about the book and working with Penguin would be my favorite story when we get to it.
But a good goal to me is still important because it provides two things, a sense of direction. I’m going that way, right? There’s a stake in the ground. I’m going to head that way. But it’s just a strong opinion loosely held. I know it’s going to move. So, a sense of direction. And number two, it provides gravitational pull. So, I like that idea. I love the idea of like, “Oh, interesting things are starting to show up in my life. Because I’m looking for a red car, I’m starting to see lots of red cars.” And I love that idea. So, that’s how I think about goals.
Now, one last thing, and then I’ll be quiet for a minute, is, this form of…I think most of the work we do, and particularly this form of thinking about goals, requires you to believe two things at the same time, two competing facts at the same time. One, that goal is really important, I’m going to get there, I’m committed to it. And at the same time, I got to believe, I’m totally open to changing it. I know it’s actually not going to be the goal. And it’s just a strong opinion loosely held. And we can believe both of those things at the same time. So, that’s how I think about goals. That’s what sparked that tweet.
Michael: So, I was really struck by this, or just personally, when you had made the statement. And so, now, I was thinking of it through three lenses. One just, there’s a whole weird thing. I mean, just literally, our financial planning process, you know, the acronym is CGADPIM. The second letter is the G. The G stands for goals. The whole thing is to understand their circumstances, determine their goals. So, if you’re going to take my goals away, there’s a record scratch moment on financial playing. And I might come back to that moment.
So, the second thing that was bouncing around my head is you were…as you had put that statement out was, so you’d alluded to this earlier, but we did a study last year on advisor wellbeing. What makes us feel happy and fulfilled and have positive emotions, and not negative emotions? And there’s really interesting work and research in the psychology realm of just what wellbeing is, how you actually measure that in people. And so, when we did our wellbeing study, we literally used one of the measures to do that. It’s called the comprehensive inventory of thriving. It’s been very well academically vetted. It assesses well-being across 18 different dimensions of positive emotions and negative emotions, and our feelings of control, and autonomy, and learning, and all this different stuff.
And so, we put advisors through this as part of the questionnaire, as part of the survey that we did. And one of the striking things that we found in our results was that there were two dimensions that advisors were just…as advisors, we’re off the charts different than the average person, the average general population.
The first was we are just astronomically high on the dimension of accomplishments and pursuing goals. And we are extremely high on self-efficacy, which is essentially the personal belief that we can achieve our goals. And so, in essence, what the research would essentially say is forget all the goals-based is financial planning. Financial planners, the people who choose to do financial planning are basically…we are goal setting machines, who love setting goals and achieving them, and feel really good about achieving them, and are confident we can achieve them, which helps to make sure that we consistently achieve our goals. And, frankly, at that point, I’m like, “Well, then, maybe we really just become financial planners because we’re so obsessed with setting goals and achieving them. And it feels so good.”
We just want to help everybody else do the same thing. It’s awesome to set goals and achieve them. Let’s all do it together. With the interesting asteroids that we score off the charts on this, relative to the average person, so we are actually…we, as advisors, appear to be way more goal-oriented, just empirically. The average advisor is way more goal-oriented than the average client that we’re working with.
So, we are wired for goals, which means when you start saying things like, “Stop thinking about goals and start thinking about the general direction,” you mess with us as advisors. Now, you’re quaking a little bit of my foundation, or, at least, my foundation is the average advisor. Because the other thing that struck me when you had put this comment out, and I don’t think we’ve ever talked about this before, but I actually have this strong view. For personal goals achievement planning, I am very…I would almost go so far as to say anti-goal setting. And I’d actually written about this on the blog, 10, 12 plus years ago, back when they were really short blog posts, back in the old dark days.
Carl: What happened to those days?
Michael: I don’t know. I found more time, and it got longer. And…
Carl: You found less time. Sorry, for the long blog post. I didn’t have time for a shorter one.
Michael: That’s actually very true. That’s actually very true.
Carl: You got busier, so it got longer.
Michael: I had more time to edit them. And the whole thrust of the post was, essentially, why I don’t set goals…
Carl: Just let me interrupt you for a second.
Michael: …for myself.”
Carl: Because I remember hearing you mention this, “This is exactly where I wanted to go.” Because I remember hearing you mention it. So, tell us, what in the world is that all about? You just went through all these, we’re goal-setting machines, you love goal setting, whether you’ve shaken the foundation. And then here you drop this thing that you don’t set goals yourself. What are you talking about?
Michael: Well, so first of all, I’ve accepted that I’m sometimes different than other people. So, moment to own that. Because, yeah, I clearly don’t line up with the rest of our research on advisors. So, I’ll own that I’m a strange case. But, yeah, I don’t set goals, and I very consciously don’t set goals. And I was struck even as I went back and looked at this because I wrote it 10 plus years ago, and ironically, I find it even more true today than what I was writing and thinking about then. But here’s the essence of it. We are not very good at predicting change in our lives, right? It’s part of why setting things like retirement goals are really hard until you’re basically all right up on retirement, because it changes so much.
And so, I was writing this article back almost 10 years ago, and at the time, I was 10 years in my career. So, I was looking back on… Well, a little over 10 years ago, I’d graduated from college back in 2000, and then here I am at the end of 2010, looking back on the first 10 years of my career, and doing this like holy blank of just how far had it gone. I mean, even by then, I’d spent some time as an insurance agent, I’d lived in the independent broker-dealer world. I’d been a paraplanner. I’d been a client service manager. I’d been director of financial planning. I delivered a bajillion, hundreds, and hundreds of plans in a big growth phase for a firm. I’d already taken the leap to start the kitces.com platform. I’d had written my first book. I’d had four or five different major career, iterations progressions already that I wouldn’t have possibly dreamt of when I was graduating from college.
So like, “Yeah, here’s my goals after the first 10 years after college. I’m going to be in a fast growth firm of an opportunity to make partner. I’m gonna write a book. And I’m gonna launch my own independent business.” Said me never as a 22-year-old. Couldn’t have dreamed of where it was gonna all grow and compound because it grew quickly just like…I was in the right place at the right time for the industry. I happened to show up with a good skillset. I had some very fast compounding growth to my career early on. And had this realization. And I felt a version of this even doing planning and delivering plans to clients that, the human brain is so bad at compounding. We just don’t know how to wrap our heads around compounding.
The numbers get so big in the out years of anything that compounds. You just can’t really grasp how big numbers get. I mean, whether it’s compounding a business, compounding a career, compounding a portfolio, just compounding life. The iterative changes add up to so much when they compound, you can’t really wrap your head around it in the early stages. And what had struck me was, if I had ever set a goal at any point in the first 10 years of my career, there’s no way it would have been what happened.
I would never have set it that far out. It would’ve seemed comical at the time. And if I had tried, I know what would’ve happened. I would’ve set the goal. I would’ve gotten to the goal. I would’ve patted myself on the back, like I got my goal. And then, I would’ve taken my foot off the gas. I would’ve chilled out. I accomplished here. Once you accomplish the goal, either you got to come up with a new goal, which is hard, or you hang out with the goal that you’ve achieved. And then it never would’ve gone as far as it did.
And, again, I’d had this realization that, I guess, as I would frame it, goals are incompatible with things that compound. It’s fine for short-term. I want to lose some weight, here’s what I’m going to do. I’m going to eat healthier, and I’m going to do this exercise routine. I’m going to do this stuff. And I’ll see how I’m doing in a couple of weeks, in a couple of months. And I can measure my incremental progress. There’s a level of short-termness that I think goals can be helpful to just define really concrete, short-term action plans. But the longer the time, the less interested I find I am in trying to set any kind of goal because the goals are just not compatible with things that compound.
And finances compound, businesses compound, life compounds, and goal setting to me just doesn’t work with them except to the point that you had made, which is if you don’t have a direction, the goal helps to set the direction. And I’ve happened to be, I think, pretty good at just knowing the general direction I want to go. And I just keep marching in that direction. And we see what happens as it compounds. But I do get, if you’re not sure on the direction, the goal can help create some clarity around the direction. And that’s about it for me.
Using Goals To Find A ‘Sense Of Direction’ For The Financial Plan [18:47]
Carl: There’s so much to unpack there. And I think we should record another episode around humans live in a complex adaptive system, but we pretend we live in a simple system. So, to me, if you understand that, which I think we need to unpack at an episode by itself, if you understand that, then you’ll understand the statement that I actually believe goals…because we’re certainty, not only are we goal-seeking machines, as financial planners, as humans, we’re certainty seeking machines. And certainty’s something that we loved. It’s easy to sell ‘cause everybody wants it it’s, but the reality is it’s impossible to deliver.
And so, I think goals are the trick that ambitious humans use to deal with uncertainty, right? Because they’re a joke. It doesn’t…and you don’t…we all know this, and we keep playing the game. The reason we keep playing the game is we want to believe we’re in a simple system. If you do A, you understand the process, and you get B. That’s what we think we live in. The reality is we live in a complex system, bordering on chaos. And in a complex system, you do A… you don’t understand what happens. And in fact, even with the benefit of hindsight, you have no explanatory power. All you’re left with is myth and legend.
Michael: Well, okay, Carl. But then, I channel what piece of goal setting there is for me. And I’m like the…I mean, I guess it is what it is, if it’s reality. But the picture you’re painting sounds awful to me as a…
Carl: No, it’s…
Michael: …as someone who wants to set goals, it’s just like, yeah, don’t really bother with goals, life is chaos, and things are going to happen. I need more than that.
Carl: No. But you got to remember what we said at the beginning of the thing, it’s chaos, don’t bother setting goals, and you need to set goals. And the reason you need to set goals is it gives us a sense of direction. That would be saying to a pilot. You know, every single pilot I’ve ever flown with, I’ve asked the question… two questions. Number one, do you…? The commercial pilots. “Do you make a detailed flight plan before every flight?” And the answer is always, yes. I do remember one exception, but he wasn’t a commercial pilot, and I would never fly with him. Do you make a detailed flight plan before every flight? Yes. Question number two, “How often does the flight go according to plan?” Answer always, never.
Michael: I just got to ask, you literally pop your head in the cockpit and ask this question?
Carl: No, no, no. This is, like, when you run into a friend. Not every flight, I’m saying every pilot that I’ve ever flown with.
Michael: I thought you said every flight. I’m like, you really just do like a…
Carl: No. no.
Michael: Because I could totally see that. You just…
Carl: I could do that.
Michael: Well, that’s why you drive. That’s why you drive now.
Carl: It’s because I’ve been outlawed. I’ve been ruled and outlawed. No…
Michael: Too many cockpit visits.
Carl: They’re a bunch of pilots that live in Park City because of the Delta Hub. And I’ve had this conversation, at least, a hundred times. The point is, does that mean you shouldn’t make a flight plan because it never…? No. So, goals are joke. They never work. You don’t even set them. They’re such a joke that you don’t even set them. And you need to have goals because it gives you a sense of direction. It provides framework for humans. Humans need some certainty, especially the work we do. Hey, we’re headed this direction. Because I’m the same way, I would’ve never dared. I do set goals, but I would’ve never dared set the goals I’ve hit. It never would’ve occurred to me to write a book for Penguin. “Oh, really, you would’ve set a goal like that?” No.
Michael: Well, but that’s the…I mean, I guess that’s still the interesting piece to me. I mean, I sort of hear, I don’t set goals. Yes, set goals for general direction. Except I’ll say on my own, I don’t set goals for general direction. And then part of that is just, I’ve got a sense of direction. Just, like, for whatever reasons, I don’t know, if that’s how my…
Carl: Michael, I hold on.
Michael: …how my brain is wired.
Carl: But I don’t know that I believe you.
Michael: Okay…
Carl: Because here’s why. I’ve had conversations with you, and you’ve said…or, for instance, well, I don’t…yeah, I can think of a conversation we had recently about a direction you want to take the business. We’d like to do more courses, for example.
Michael: But I don’t know…
Carl: Now, maybe you just call that a…maybe like…
Michael: Well, but that’s a direction.
Carl: That’s an intention. We’d like to more.
Michael: Well, it’s a direction, right? I see a gap around the kinds of training that we have as advisors. No one really teaches us how to do the things. We learned the book knowledge, right? You learned about taxes in CFP class, and then you’re supposed to class your client’s tax return. And no one actually shows you how do you walk through the tax return? Which lines do you actually look at? And how do you map that back to what you learned in tax class? So, we made a course for that. And I see a lot of gaps like that. And I believe there’s a market opportunity to do that.
But I’m not sitting down saying my goal is to have a library of 50 courses, and we’re going to sell this many courses, and we’re going to have this many advisors. I just see a need for teaching advisors, and it’s not happening. So, we made a course. Then we made a second. And now, we’re working on the third. And if a lot of advisors show up, we’ll hire a lot more people. And if a few advisors show up, we’ll hire a few more people.
Carl: And some people would call that a goal. But let me just ask you real quickly…
Michael: But there’s no number.
Carl: So, literally there is no…because I know some of the people you work with coaching-wise, and most of them would suggest, “Oh, what do you mean? You don’t have some big, huge, giant revenue number goal?” You don’t have a revenue goal?
Michael: No, I mean, there’s some very light, I guess, I would call like milestone measurements over the next year or two. Just because at some point from the pure business end, we have 21 team members. I need to make sure I can support their salaries…
Carl: How would we know if this is a success?
Michael: …and their raises. And that the economics work, that if we do this many courses, I need to hire this many people. Let’s just make sure the math works. So, I mean, there’s a little bit of just short to intermediate-term business tactical measurements that just, I do have to do because I take the responsibilities of an employer very seriously about team job security. But there’s no goal of number of courses and number of people, and how far we’ll go. If a whole bunch of people do it, we’re going to do more, and we’ll do it faster.
And if some people like it, we’ll continue to do some. And we’ll go where the opportunities are. Because, I don’t know at the end of the day, if 10 years from now, we could be doing courses for 200 advisors or 50,000. I have no idea. I mean, I never would’ve thought when I started writing a blog for the couple of friends I had 10 years ago, that it would turn into hundreds of thousands of people every month coming to read it. Never would’ve dreamt it, wouldn’t have even tried.
Carl: Yeah, I know. And I…this is where we’re…
Michael: So, I’ve got the direction, there’s a gap for courses. I think we can do something there. The more that show up in compound, the more that we’ll do. I do know how to follow the business when demand comes as a business. But I don’t set a goal for this because I’m afraid any goal I would set, if I come up short, it’ll feel bad. And if it comes out better, I’m probably just going to undershoot.
Focusing On ‘Reality-Based’ Planning Versus ‘Goal-Based’ Planning [26:43]
Carl: This is fascinating to me because this is exactly…we literally had our strategy session yesterday with the team. Anyway, long story. But we only meet once every six weeks. And I’m not allowed to talk to them in between, which is just…there’s a whole story behind that. But we sat down and talked about, we don’t set goals either because it…what does that even mean? We’ve set goals before, and we blew them out of the water. We felt great. When we didn’t hit them, we felt stupid. And we were like, well, where did we even pick that goal from? It was an arbitrary number.
Michael: Well, yeah. I mean, it cuts both ways. We’ve had things we tried and didn’t work out. The cool thing about not setting goals, you feel bad when it didn’t work out. Try to think, that wasn’t so popular, let’s just move on to the next thing.
Carl: That brings us to, okay, so functionally, where do you place the focus if it’s not on goals? To me, you functionally place it on what I think of as reality-based planning, which is, let me get really clear about where I am today, let me make some guess about the direction I’d like to head, and then I’ll back up and say, what’s the next local optimum? What’s the next step?
As I take that step, new information will show up. That new information will inform where that stake is way out there in the distance, the goal. And as that new information shows up, I can fine-tune my goal. So, the goal is fine-tuned. And we talked about this in another episode, we mentioned, goal clarification over time. And following tailwind, which is what you’re saying. We try a thing, and if tailwind shows up in the form of resources, demand, energy, people, then we try it again.
Michael: So, help me translate it back now. So, I’m still thinking about this in two domains. It’s one thing in the advisor context, right? And I think to me, I hope there’s a takeaway for some around you getting a sense of just the direction that you want to compound your business, your career, your life is more important than setting the long-term goal around it because that just gives you the opportunity to compound and just go with the flow of what’s working for you.
Again, the origin of the blog was not a whole lot more than there’s really no one else out there that just blogs on financial planning. Things like there’s no financial planning blogger, dude, or dudette. So, I’m gonna be financial planning blogger dude. That was about the extent of it when the blog launched. And when people showed up, we did more because it was working. So why would you not do more of the thing that’s working? But I had a clear sense of direction, which was there’s this gap where no one’s doing this thing. I’m gonna start doing this thing and see if people like the thing. And if they like it, I’ll do more of it. But I had the sense of direction.
It just reminds me of the conversation we had on this podcast a couple of months ago around the challenge, I know a lot of us have as advisors, we’re you set the goal and you get the goal. And it’s like, well, what next? Because we’re so goal-oriented. If you’re a goal-oriented machine, you always have to have a goal. And no one sets backward goals, you have to always have to set forward goals. And so, then we get stuck on this treadmill of, well, the only direction is growth, growth, growth, because if you’re not growing, you’re dying. And if you set goals, you clearly want a growth goal, not a death goal.
So, we get stuck on this treadmill of setting ever-escalating goals, unless you create a new goal for yourself. So, I see it on the advisor end. But with limited time, I actually want to bring this back for a moment and hear your thoughts about how do you do this to the client’s end? It’s one thing for an advisor to say, like, “Look, if you decide you want to go after doctors and that’s going to be your thing. Cool.” Just go after doctors, you don’t have to set the giant goal. If we’re going to serve you 10,000 doctors doing this and that, just start showing up, being awesome for doctors and see where your business grows and compounds.
But when we get to the client end, if only…because I’m a financial advisor trying to create value, like, “Here’s my financial plan. I don’t know what’s gonna happen, what the future is. Let’s just do something and we’ll see what happens.” Doesn’t feel very planningy, I’m going to charge them a fee. So, how does this show up with the clients? I guess I should even take a step back like this whole stop thinking about goals and start thinking about general direction, was that for us as advisors, or do you envision that as a client philosophy?
Carl: All right. I literally think it’s almost…look, we’ll use different words, but it’s literally the same thing. And all I mean is look, and I’ve written about this a bunch, goals are guesses. And look, we can still…there’s some theater to the art part of our business, right? I mean, the easy example about the theater would be, I know listeners will relate to this, especially if you serve a niche, as you would say. If you serve doctors, let’s say you serve architects that own their own firm. After you’ve met with and interviewed 10 of them, you know what the 11th is going to say? You’ll know in the first 30 seconds. You can diagnose in the first three minutes of an hour-long meeting, you can diagnose a few key things. How long have they been there? How many employees? Boom, you know.
But the theater of what we do, this is just an easy example. The theater of the art of financial planning is you can’t prescribe right then because they need to feel thoroughly diagnosed. Goals are very similar. We may know that…we may in our heads even be thinking, “Oh, that’s cute, they think they know they need $2.7 million, and that they’re going to vacation here. They’re gonna do this.” And in our heads, we might be thinking, “Oh, that’s cute.” We may also be more generously. We may be thinking maybe, but we may not say that. We may say, “Oh, that sounds like a really good goal.” And we may write that down because it gives them a sense of direction.
And when we ask about goals, the best way to ask about goals is coming out of statement of purpose, out of values, right? The goals flow out of that. But if we just demonstrate to them the two things, this is really important, we’re really committed to getting there. And we know this is a journey and a process. And, in fact, it’s such a journey that not only the landscape’s going to shift, inflation’s not going to be what we thought. For example, returns gonna be a little different. Your inheritance may or may not come. Your goal may also change. And we’ve all seen this. Anybody who has a client that’s retired, anybody who has an entrepreneur client that sold a business and tried to retire, they know that those goals are going to change.
Determining Values To Clarify And Align Goals Over Time [33:52]
Michael: So, I hear you. I think the part I’m struggling with is, so what’s the general direction? I mean, I get it as a business, right? Just here’s a segment we’re served. We’re just going to show up awesome for them, serve the people we serve, get more of them and see where the business compounds, right? You can do that with a business. I feel like life shows…
Carl: Give me…
Michael: …up that way. I can do that with the portfolio. But how does that show up in financial planning? Just how does that work?
Carl: Give me some…
Michael: What’s my general direction? I’m going to get older and try to increase my wealth, and then I’ll just have choices later.
Carl: No, no, no. Let’s use somebody who’s just getting ready to retire. I’ll use a specific example that I literally just had this conversation with somebody. This happens a lot where I live. People, successful, they move here, venture capital, private equity, entrepreneur people. They have a liquidity event. They move here. And I get this phone call or email from the work I do at times where people are like, “Hey, I’d love to chat with you.” We go chat. And it’s almost always the same conversation. So, let’s just use an example. Real financial planning example.
We ask, look you… your business… Okay. So, a friend of mine, I got to change the name. A friend of mine named Steve recently sold his second venture-backed business. This is like airplane money. Steve is like, “What do I do now?” So, this is a common question. You could replace retirement. I’m about to retire, what do I do now? Well, what do we do? Well, let’s get a sense of direction. So, to Steve, I would say, “Well, geez, what have you thought of? Do you have any goals? What would you like to do?” So, we start clarifying the goal from really wide, there’s this huge range of potential options, we narrow that. “Gosh, I’ve always…you know, what I’d love to do? Maybe go back and teach at the university. I’d love to…or be maybe involved as a mentor.” “Oh, that’s interesting.” And I may…let me just go one step further. I know we’ve done a long time, but I think this is valuable.
Let’s pretend somebody says, “I have no idea.” Well, here’s some hints on, I have no idea. What have you always wanted to do? What do you see other people do and you’re like, “Oh man, I’d love to do that?” What magazines do you subscribe to? I’ve found that to be really interesting. What blogs do you read? What podcast do you… So, somebody says, “Gosh, I’ve always loved winter sports.” “Well, that, that’s interesting. Have you ever thought of…?” So we’re framing up.
So, my friend, Jason, who sold the business, says, “I’d really like to consult a bit because the problem that I solved with this business is still a massive problem.” He just sold a cybersecurity business. It’s still a massive problem. “Oh, that’s interesting.” So, he thinks he wants to consult. He doesn’t know yet. So, in my head, I’m thinking, “That’s a cute idea, maybe.” I don’t say that.
Michael: Why don’t you just go try that a little and see how it goes?
Carl: That’s exactly right. “What would it look like for you to experiment with like…” “Well, what if I called my buddy John? Because John does a little bit of…” “Oh, interesting.” See what you…? So now, we’re narrowing it. Steve goes and does a little bit of consultancy, like, “Carl, I hated it.” “Oh, what else could we try?” And you could do the same thing with retirement. You could do the same thing with somebody who hates their job. Every single person around any goal… Replace that with education funding. We think we want…we got to pay for the kids. “Oh, that’s interesting. Where did you first come up with that goal?” “Oh, my parents did it.” “Is it what you…? Is it what you, too, want?” How would that look? It’s just purely goal clarification. That gives us a sense of direction. And we’re holding loosely. It’s a strong opinion, loosely held.
Michael: Loosely held. All right. I like that. I do get that sense of direction. That sense of direction. As you start prompting that conversation, well, what would you want to do with your time? Is there anything you’ve always wanted to try? What kind of magazines you read? What blogs are you into? Just, most of us have some sense of direction thing. If only deep down, subconscious never talked about it, or acknowledged it, or framed it, or owned it, but it’s there. We have interests. This is, I think, how brains are wired. But often we don’t give ourselves permission to pursue it. So, let’s own what really is. There is a sense of direction. Let’s talk about how you might pursue that. And that begins to formulate the sense of direction.
Carl: It’s really like a more playful way. And I think it’s a more reality-based way of engaging with the word goal. So, we’re still going to use the same word. We’re still going to use the same tools, but we’re just going be a little bit more real about it.
Michael: Okay. So, I like it. So, stop thinking about goals and start thinking about general direction, or I guess how to better formulate your own general direction, or how to help a client formulate their general direction.
Carl: Yeah. Reality-based goals.
Michael: Reality-based goals. All right. Thank you, Carl.
Carl: Cheers, Michael. It was so fun.
