Master Communicator

Master Communicatorblog

Carl Richards shares his 20 years of experience trying to help advisers communicate more effectively with their clients.

Dec 21, 2016, 3:09 PM EST

How long can you go without bringing your values into a client conversation?

By Carl Richards

As real financial advisers, we're paid for our advice, right? That's why clients come to us and ask for help. They want to know what we think — with one exception.Clients don't want us substituting our values for theirs. A classic example that came up a lot with my clients involved paying for college. Imagine a client tells you, "I worked my way through college. My kids can, too." You know this client has plenty of money, and you think, "Hey, quit being so stingy and help your kids." That may be true, but it's also none of your business. I understand why it's so tempting to "share" our values with clients. After all, maybe they just haven't thought about our perspective. Maybe they'd do something different if they understood ALL their options.Look, as reasonable as it sounds, our job isn't to be judge and jury of clients' values and goals. Our job is to help them make decisions that align with those values so clients can reach... Read full post

Dec 6, 2016, 5:36 PM EST

Clients must understand time frames when developing financial goals

By Carl Richards

How investors think about time plays a big role in the framework we develop for our clients. To better understand an individual's time frame, it's critical we ask really great questions so we can craft a financial plan and process that reflects the client's goals and needs. I know it's tempting to try to shortcut the system and make assumptions about “risk level,” but real financial advisers recognize this step can be the difference between building a long-term relationship or creating a short-term disaster.(More: Master Communicator: How financial advisers should discuss their pay with clients)One of the best comparisons I've found is to think about it like designing a house. Imagine you go to an architect, outline everything you want and hand over a bunch of money. You expect a house plan that matches your vision. But when you go back to look at the architect's plan, it looks nothing like what you said you wanted. I doubt ... Read full post

Nov 22, 2016, 5:19 PM EST

How financial advisers should discuss their pay with clients

By Carl Richards

I consider you a member of the Secret Society of Real Financial Advisers. As a member, I assume you realize that your clients expect transparency when it comes to how you're paid. Based on that assumption, I think you need to be prepared to answer two questions:1. How do clients pay for the services you provide? (e.g., flat fee, percentage of AUM, etc.)2. How are you compensated for the advice you provide?(More: How to prevent clients from reacting to what everyone else is doing)I know these questions sound similar, but there's an important distinction. The first question deals specifically with how a client pays you for your advice. The second question deals with all of your potential sources of compensation that may include more than client fees.Now, I know many of you only receive compensation from clients. That's the simplest answer, but it's not the only one. You may very well receive additional compensation from third parties.... Read full post

Nov 4, 2016, 5:51 PM EST

What financial advisers can do when clients make mountains out of molehills

By Carl Richards

More than once, you've probably picked up the phone or had a meeting with clients who told you they had a really big "problem." I put problem in quotes because it becomes clear pretty fast that the so-called problem isn't really a problem. Turns out humans are great at projecting way into the future about something that may or may not happen. Now, things that haven't happened yet aren't the problem. It's the thinking around those future things.Imagine a client comes to you and says, "My return just isn't high enough. I need to earn more."(More: How to prevent clients from reacting to what everyone else is doing)You've built a well-designed portfolio that's returning in line with your client's goals. To earn more will mean taking on additional risk. So you did a little deeper. You say, "It would help to know what's changed. Based on your goals, the returns are right where they need to be. What's happened?"After hemming and hawing a bit, ... Read full post

Oct 26, 2016, 2:46 PM EST

How to prevent clients from reacting to what everyone else is doing

By Carl Richards

As adults, we're pretty good at spotting peer pressure among kids. But I think we're a little blind to the peer pressure we experience as adults. We even call it a different name. We're just doing "research." We're not doing something just because everyone else is doing it. After all, we're grown-ups. We know our own minds. That all sounds good, but the reality for you, me and anyone else who qualifies as human looks a little different. Even with the best intentions, we can get caught up in what we see and hear around us and react to those external forces. In your role of real financial adviser, you have the opportunity to serve as a buffer for your clients when it comes to peer pressure and investing.(More: How advisers can explain the big difference between trading and investing)So what should we do when clients want to make big changes and it's clear the reasons have nothing to do with their values or goals? Start by listening with... Read full post

Oct 7, 2016, 10:58 AM EST

How advisers can explain the big difference between trading and investing

By Carl Richards

When we turn on the TV, we're expecting to be entertained on some level. It doesn't matter if it's HBO or CNBC. Now, we may not think about it that way, but producers focused on attracting eyeballs do. Over the years, I've been fascinated to see the entertainment complex that's built up around finance.What's really clear is that it isn't meant for investors, but for traders, people who believe speed is paramount. But I suspect your clients don't always realize that. So when they hear the "breaking news" or read the headline that pops up in their inbox, it can feel tempting to react, to do something.(More: How advisers can effectively talk about risk with clients)But as a real financial adviser you understand there's a big difference between trading and investing:One is about value; one is about price.One is about the long term; one is about the short term.So when the phone rings, you need to be prepared for that conversation. How do... Read full post

Sep 28, 2016, 3:42 PM EST

How advisers can explain investing done right

By Carl Richards

Investing done right doesn't match up very well with what people see and hear in the news. When it sounds like the pundits are talking IN ALL CAPITAL LETTERS, investing seems so exciting. Who wouldn't want to own a hundred shares in a company that's on the verge of being the next big thing? Of course, you should toss aside your carefully constructed plan for the excitement of being in on something amazing.As a real financial adviser, I'm betting you've had this conversation once or twice with a client or two. And in our role, we have the tough task of explaining that investing done right is, well, boring. So how do we get clients excited about being bored?(More: The value of real financial advice)One of my favorite examples involves the process of planting a tree. Imagine we plant the seed and every day we dig it up. The tree will never take root and remain small and boring. It's only after one year, five years, a decade, two decades,... Read full post

Sep 9, 2016, 4:35 PM EST

How advisers can effectively talk about risk with clients

By Carl Richards

Risk remains one of the most challenging topics for real financial advisers. Because when we say "risk," our definition rarely matches what our clients think. But it's so important that we learn to talk about risk effectively.We have a lot of work to do on this issue, but today, I want to focus on one narrow point. Let's assume that you've met with a client and, after listening closely and asking a lot of questions, you have a diagnosis in mind, and you're prepared to prescribe a specific solution around the investment strategy. I know there's more nuance to this discussion, but to keep things simple, as part of your prescription, you'll propose a split between equities and fixed income. Now, when clients hear you want them to invest in equities, some will say, "Wait, I want to take as little risk as possible or, even better, no risk." At this point, it's helpful to take a step back.If you feel like being direct, you can say, "Tell me... Read full post

Aug 29, 2016, 4:42 PM EST

The value of real financial advice

By Carl Richards

Five years ago, I was taking care of clients and writing the Sketch Guy column at the New York Times. My family and I were settling into our new home in Park City, Utah. Things were good. Then, I got what you might call an "interesting proposition." Looking back, I see that crossing paths with the folks at The BAM Alliance marked a point where good things turned into great things. Today, as I head down a new path (New Zealand!), I consider myself very lucky to have met many incredible men and women during my time at BAM. I wouldn't have met these individuals or had these amazing experiences if BAM hadn't come knocking on my door.Perhaps most important of all, I confirmed that the Secret Society of Real Financial Advisers exists. I'm excited to continue sharing what I've learned from them to help other advisers. From Michael Evans at The Cogent Advisor to Alex Madlener at Open Circle Wealth and Matt Hall at Hill Investment, I've seen... Read full post

Aug 17, 2016, 6:06 PM EST

Give yourself permission to see financial advice as creative

By Carl Richards

Imagine for a minute that your website has a tab labeled "work" or "portfolio." What would you find under that tab?For most of the real financial advisers I know, they'd find their clients. They'd see thousands of images capturing all the great things that have happened in the lives of those clients. These results are a work of art, but I've met very few advisers who would call themselves artists, and that's a shame. Why? Because that's who we are: We're artists whose finished work doesn't end up on a canvas but plays out in the real lives of our clients.I've thought about this concept a lot, and when Monica, an adviser in Hawaii, sent me an email about her experience as an artist, I knew I wanted to share it with this group. You see, a lot of the work we do doesn't involve things we associate with being creative. Numbers, spreadsheets and calculators don't hang on the walls of most museums.For Monica, though, she discovered something ... Read full post

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