Hannah: Well thanks for joining us today Moira.
Moira: It’s a pleasure.
Hannah: You are a clinical psychologist and the author of the book Advice That Sticks that came out earlier this year, and I am so excited to have you on. I can’t tell you how many planners I talk to where there’s just so much frustration about their clients who don’t implement eh great advice they give them. But from your perspective, what really prompted you to write this book?
Moira: I too have been concerned about the fact that so many people are struggling to implement good financial advice, and the fact that it doesn’t get acted on compromises everybody. It compromises individuals in our society, it compromises their families, it has huge implications for public policy when you’ve got this huge cohort of people who are facing impoverished retirements, and all of the kind of healthcare decisions that that involves.
Moira: Then there are the concerns about what that does to people who are trying to help them. And how can we just get better at helping them out so we as the advisors are more satisfied with our work at the end of the day and that clients and the broader society are better served by the work that we do.
Hannah: I don’t know quite how to frame this question the right way, because it’s not about pointing fingers as who’s the problem. From your perspective, where are the fundamental issues with advice that doesn’t get implemented?
Moira: I think it doesn’t lie at any one person or system’s feet. I think it’s a multi-factorial problem, Hannah. There are certainly there is much about North American culture that flies in the face of sound financial advice. We are bombarded 24 hours a day with all kinds of ideas on how to part with our money. And a message that if we don’t own this or if we don’t do this that we are somehow less desirable as people or less successful. So there’s societal contributions to financial problems. And there are some predictable and preventable errors that advisors themselves make, or anybody within financial services professions, I’m using advisors very broadly there to include accountants and bankers and credit counselors as well as investment advisors. There are just some mistakes that we see crop up at the level of the advisor time and again.
Moira: There are some things that reside really within the individual client, their own history with money, their own level of financial literacy. There are some parts of the advice itself that contributes to its likelihood of flying or not flying. Some advice is simply harder to take than others, and we actually know a great deal about what makes some advice harder than others. Yeah, those are the big five factors that contribute. The domain of finances itself, what characteristics of the specific advice that’s being given, what the clients do, what the advisor and the advisory team do, and then what are some of the broader societal contributors including what are the inherent defaults in systems that either promote or help to thwart financially desirable behaviors in the long term.
Hannah: When you first started talking, oh it’s a really interesting point. I hear a lot of conversations about how we can differentiate ourselves from other financial planners, but really what we’re doing is we’re competing against all the different places that our clients are being asked to spend their time and their money. And that’s a really kind of sobering idea.
Moira: Well it’s one of the things that makes financial advice hard to take in terms of the advice characteristics itself. You’re asking people to forego immediate pleasure for the sake of a future self that may be literally decades down the road. You’re asking them to forego something certain, like that thing that they could purchase today or that experience that they could have today for something that’s pretty ill-defined or pretty vaguely thought of, again, farther down the road. There’s a lot about good financial advice that’s a lot like good lifestyle advice, which is that it all sounds very easy, we all know that carrots are better for us than cheeses, but why do we not then do those things? Because it’s not just a matter of head knowledge it turns out, it’s a matter of yearning and it’s a matter of pleasure, and it’s a matter of competing demands on our time and our energy.
Hannah: Is that a problem that financial planners can help with? Or do clients kind of have to have that internally figured out before they walk into our office?
Moira: I think advisor teams can do a lot to help with that. We know that there are lots of things that will help people gain access to their best self. We know lots of hacks that get around the willpower problem. When you think about what banks do, for example, Hannah, why is there such a success in terms of people paying their mortgages every month? Why does that work? Why do the vast majority of people make their mortgage payments?
Hannah: You’d lose your house, yeah.
Moira: In part because they don’t have to do anything once they sign the initial paperwork. The banks make darn good sure that the mortgage payments come out automatically without a client having to think about that decision, remember that decision, remember to act upon the knowledge that the mortgage payment is due. The defaults are just set up. Once you sign hat initial paperwork, the good behavior follows without you ever really having to think about it again. And similarly, financial advisors are trying to figure out ways to help clients make one decision initially that renders all a host of subsequent decisions unnecessary.
Moira: If you sign the paperwork to contribute to your pension, your 401k or in Canada your RSP, then once you’ve signed that, the default is that the payments will get made. And in order to undo that, people have to go through a series of steps that are quite manageable, but nevertheless they require action to undo that step. The fact is that most people, we’re just far too lazy to uncheck a box, so the default reigns supreme. And the best willpower hacks are those things, those steps that allow people to use their willpower to make the right decision initially, and then just to have habit and defaults carry on from there. We know similar things exist with respect to savings and earnings. The more we can do to make these things automatic, the better.
Hannah: It’s funny, when you gave the mortgage example, my immediate thought was tying into retirement or you’re gonna be the bag lady under the overpass.
Moira: Yeah, it turns out fear is a really short-term motivator and it’s insufficient most of the time to really result in lasting behavior change. Think about somebody who’s had a mild heart attack and has been told that she needs to lose weight and stop smoking. She may be very virtuous and motivated because she’s just had a life threatening event occur, but that fear, we habituate to emotion. Fear is one that we tend to habituate to quite rapidly in fact. So over time, people pick up the cigarettes again, and we need to get better systems in place to help them persist on these hard behavior changes.
Moira: When you think about go back to the mortgage example, Hannah, people could be highly highly motivated to keep their house, of course they would be, and highly scared to lose it. But that emotion is not nearly as strong a driver of behavior as is a simple default action that’s been set up. Because you can be really motivated to do something, but then forget to do it. Pure old normal human forgetting or overwhelm contributes a lot to advice not getting followed. Paperwork that gravitates to the bottom of the pile or just gets forgotten about. It’s not that people made an active decision to not follow advice, it’s that it wasn’t top of mind anymore and it just kind of fell off the radar.
Hannah: The term decision fatigue came up when you were talking about we want to help clients make one decision that makes future decisions for them as well. Do you see a decision fatigue? Is that kind of what you’re talking about?
Moira: Sure, that’s one of the things that we try and avoid. And part of what financial advisors can learn to do better is to give advice, to understand that often clients are coming to you because of decision fatigue or because they’re trying to avoid it. They don’t know which of these 76 mutual funds is better than the other, and they don’t want to pour through the prospective for each one. They want you to do it, and that’s a great thing that they can trust that you would help them identify what’s best for them.
Moira: When you think about differentiating yourself or promoting yourself as an advisor, certainly one of the things that you can promise is that you hope to simplify decision making, and that’s a great thing.
Hannah: And it’s so interesting that that is the value proposition for clients. You don’t have to prove your value through making things complicated. You actually prove your value by making it simple.
Hannah: You’ve talked about motivators to get people to change their behavior and having some of these lifestyle things. What are the other main motivator that help clients actually create change in their lives?
Moira: It’s really hard. The first thing I want to say about that Hannah is that it’s so hard to motivate clients from without. And often we can get temporary agreement or acquiescence in an office, especially if we’ve kind of got the gift of the gap or we’re skilled persuaders. You can get to a temporary yes set in clients that is the result of them believing your conviction, your earnestness about why this is a good course of action. But especially if what they need to do is something that actually requires some lifestyle change, you need to get them to tap into their own motivation. What is their intrinsic motivation for doing this. And not only their motivation, but you need to figure out whether they truly believe that they have what it takes to fancy term for that is self-efficacy.
Moira: Do they believe that if they do this thing you’re recommending, that it will result in the desired outcome? And do they believe they can do it? If not, why not? And again, that’s part of what a great advisor does is help assess readiness to implement advice. Are you in agreement on this proposed course of action? Do you think you could do it? Can you already foresee obstacles to your success? Would you like to address those obstacles now? What would increase the likelihood of your being able to follow through on this, and can we help harness those sources of support now before you leave the office today? These are things that skilled advisors know how to do.
Hannah: You had made a comment at the beginning about how you had really an individual and their history of money. Can you talk more about that? What does that mean in terms of the client sitting across from you? What do we need to understand about that to be great advisors or planners?
Moira: My biggest piece of advice to advisors, if I can only give one or two, probably one of the biggest ones would be to hush more, to just stop talking and start listening, and to learn the questions that draw clients out of themselves, that make it easy to talk about money. Or if not easy, then at least creates a degree of safety and trust and understanding, and even excitement in your office about what is possible for them.
Moira: Sometimes clients come to us with painful money legacies. They may have made mistakes in the past that they feel quite embarrassed about. They may have a sense that they’re not where they should be compared to their expectations of where they would be or ought to be at this point in life, or compared to where they see their friends at this point in their life.
Moira: Conversely, they may feel that they have been blessed with or cursed with a level of richness that is totally undeserved and unmerited, and they don’t know what to do with it. They may feel quite conflicted about it. I’ve just highlighted a couple of the things that can make advising both challenging and wonderful because of the complexity of peoples relationships with money.
Moira: We can’t just assume that everybody comes in believing that money is great and that more money is greater and that the ultimate alpha out of their work with you is that they’ll get better returns. That’s kind of what a lot of financial advisors believe, but it isn’t actually what a lot of clients believe, and it isn’t their primary focus in coming to you.
Hannah: Often you have two people coming into your office too, so I would imagine that each one has their own stories as well.
Moira: Mm-hmm (affirmative), and of course one of the really challenging things is to figure out how can you be the advisor to a couple who believe different things or want different things with their money. How do you work to get them growing in the same direction or creating enough space so that both parties can get what they need and want out of their engagement with you.
Hannah: You had talked about questions that help draw this type of conversation with clients out. What are some examples of those questions?
Moira: In terms of their relationship with money?
Hannah: Yeah, the information we need as advisors to really help guide them well on the complexity of their story of money.
Moira: One of the first things I ask is, “Have you ever worked with an advisor before?” Or “Have you ever talked to anybody about money before?” What went well in that relationship and what didn’t go well? Many of your listeners will have the experience of inheriting clients from another advisor if they’re coming into an existing advisory firm. Others may be out there recruiting clients cold, trying to scare up clients that don’t have an existing advisor. And the other thing we know however is about 70% to 80% of an advisor’s new clients actually come because of a major life transition. Things like marriage, a divorce, an inheritance, a child on the way. And those major life transitions are events that actually change people’s sense of identity. These are not little things. This is not just like moving from one car to a different car, this is really the dividing line between, “I used to be this, but now I’m this.” I used to have parents, but now they’ve died and I’ve inherited this money, and I’m without my parents. That’s a big shift in identity.
Moira: When clients come to new advisors, it’s often during these times of turmoil in a client’s life. And the more that an advisor can find out about what’s bringing you here now and what’s happening in their life that led them to contact you, and what it is it that they’re hoping to get from their involvement with you? What would be the absolute best thing that could happen as a result of their meeting with you today?
Hannah: I know there’s a lot of people listening to this right now who are hearing everything that you’re saying and just being like, “Okay, this is great, but how do we fit this in our hour-long meeting?” Is there a process about this, is this something that can actually be applied for the average planner out there who maybe doesn’t have the counseling background?
Moira: Right. What I’m trying to do is to make sure planners don’t believe they have to be counselors. I think that’s quite a dangerous boundary violation. But what I can say is especially in the first couple of meetings, Hannah, the big mistake that advisors make is they talk too much. They talk way too much. They feel pressure to get through all of the stuff that’s in the know your client protocols or that kind of thing, and as a result they actually slow down the process of connecting and may actually blow the client relationship.
Moira: The first thing is they just need to ask some of those really important open-ended questions earlier, and they need to learn how to hush and listen to the answers without interruption. They need to learn how to set an agenda every single meeting, now just in the first one and not to assume that they know what needs to be discussed in the yearly meeting, but to say, “As we meet today I’d really like to know what would make this time together the best use of your time and energy and money?” To just clarify that every time. There are a few things that need to happen every session, and one final one that I would say is if you’re gonna send anybody away to do anything, you really need to make sure that you have established their readiness to do it, that they understand it, that they agree it’s the top priority for them, that they believe they can do it, and that you are prepared to support them through its implementation.
Hannah: That’s such an interesting concept of this readiness. How do you know when a client is just giving you lip service that they’re ready versus them actually being ready?
Moira: Let’s take something like a client is over-spending. That’s one of the things that I think drives most advisors most crazy. And something has come up where you’ve got them to agree that they’re going to stop over-spending. It might be that broad. You ask them, “If you were to reign in your spending in this area, what would be the advantage to that? How would that benefit you?” And if they are giving you lackluster lukewarm answers, “Well I know it’s really important that I do this so I’ll do it,” you can assume that there will be lackluster follow-up. What you want to do is really help people get to their own why. And if they are not digging deep on this, you can say, “I’m sensing that you have some ambivalence about this,” or “It sounds like maybe you believe intellectually this might be a good thing to do, but you’re not quite committed to it. Do I have that right?” And to be able to just work with peoples ambivalence and not strong arm them into agreeing with you during the meeting, because you know they’re just gonna fall off on the implementation once they leave.
Hannah: If somebody is ambivalent or they’re not gonna make a commitment that’s gonna last on that, and I hear you say you kind of push it a little bit of gently calling it out. Not what do you do, but is that all can you do? Is there just times when you just need to wait and just know that maybe in six months they’ll be ready?
Moira: Absolutely, absolutely. You can ask, “Is there something that you do feel ready to act on today? Where is it that I’m off the mark? Where is it that you are ready to take some action?” Let’s say that people do not feel that they can save any more than they are currently saving. We can often get them to pre-commit, they want to pre-commit to give a percentage of their future earnings. They can’t do it right now, but they know that they’re getting a bonus six months down the road or that they are expecting a raise three months down the road, and they will very willingly pre-commit a proportion of that future earnings in the office with you now. You can get the paperwork signed for that, and people feel really good about that. Then you just need to make sure that you’ve got policies in place to help follow-through with that, that you remind yourself, that your team is reminded to follow up with people when that thing is gonna happen or when that inheritance is going to come through, that sort of thing.
Moira: Even if the conditions are not right for them to do what you feel is the most important thing right now, they may know that there are other things that they’re absolutely ready to do. And advice that gets acted on or behavior change that is minor but successful is better than a proposed major change that never gets off the ground.
Hannah: I have some clients who they compact their spending, their plan works. And if they don’t, it doesn’t work. I guess we’re giving them the hard facts of that information, but is there any way to …
Moira: Is that a math issue? Is it that they don’t get the math, or is that a self-control issue? Or is that a overwhelm issue and a not having systems in place to do this thing? Again, often getting people to pre-commit to savings so that the first 5% of their paycheck just gets out of their bank account before they see it, that is the most successful strategy, bar none. But there are lots of other strategies that can be employed in working with … We can take overspending as an example Hannah, or we can take something like excessive supplementation of adult children’s lifestyles is another example. Those are probably the top two challenges that advisors come to me with.
Moira: If we go to the overspending thing, we know that can we get people to agree to put their credit cards away? Because discretionary spending goes down by about 30% if you put credit cards away. That’s a very simple little behavior change that is way more effective because in fact of its precision than, “You need to cut down on your spending.” All we need to do is get people to put away their credit cards and use cash and great things start to happen.
Hannah: What are some of the other predictable mistakes that advisors make that you’ve seen when working with advisors?
Moira: In addition to talking too much, they talk too fancy. They kind of forget what it was like to not know everything that they have come to know through the course of their training. The number of new terms that you learn in the course of your training as a financial advisor is in the thousands. And when that specialized really technical vocabulary slips unbidden into meetings with clients, you can really quickly overwhelm their capacity to understand to follow you. But it’s very rare that a client will say, “Hey hold on, I didn’t understand a word you said there,” or “I didn’t understand that term.” They will just let the conversation keep going, hoping that it’ll become clear to them. But often it doesn’t. When clients leave meetings feeling like they didn’t get what you said, they feel stupid. And that’s not something they want to replicate, so often they’ll just vote with their feet by not coming back to an advisor who does that to them repeatedly.
Moira: Again, it’s really critical during the first few meetings that you spend time figuring out what is this client’s level of financial sophistication, and understand that even highly intelligent and well-educated people may not be able to follow what you say if you just give it to them rapid fire in a meeting without giving them supporting materials, and especially if you don’t get them to say in their own words what it was that you’re advising them to do and why. That’s something that I do at the end of every client meeting. “Can you tell me in your own words what we agreed would be the next step and why we thought that would be the case?” Because if they can’t go home and explain to their family why they’re doing what they’re doing, chances are they really didn’t understand. Or even if they understand in the moment, as I said, they may well forget it.
Moira: If you view yourself as a real partner in that adherence process, in that process of delivering timely advice in a skilled manner, if you see yourself as a partner in follow through, then you’ll make sure that you give them whatever they need for that long-term retention so that they can get home and remember what they agreed to do and why.
Hannah: Does that come across as condescending to a client asking them to repeat what we agreed to in this meeting? Or is that appreciated by clients? How do you balance that?
Moira: Do you know the work of Carl Richards, the guy who does the little drawings in the New York Times, behavior gap guy?
Hannah: Yeah, yeah.
Moira: I’ve heard him say several times that he’ll submit a drawing to I think it’s the New York Times that they initially show up in, and he’ll think, “Oh goodness, I’m gonna get fired this time. This is such a stupid drawing, of course everybody knows this already. I’m gonna be found out for the fraud that I am.” And then as soon as this little drawing is published, people write back in and say, “That is the best thing you have ever done.” Time and again, we’re coming to understand that people love the experience of being able to understand complex materials. And the better you can get at both explaining it and ensuring comprehension, the more valued you will be as an advisor. Giving people a 100 page financial plan is actually not a gift. Giving them a one page financial plan is a tremendous gift. And that’s what increasingly we’re trying to get advisors to be able to do.
Hannah: Advisors really do give clients a one page financial plan?
Moira: You know what the compliance and the regulations around this stuff … of course you’re gonna give them the 100-page plan, because your neck would be on the line if you didn’t. But what the clients will hold onto is what you drew during the meeting. That thing that you scrawled on. Or that one page summary that you’ve typed up and prepared ahead of time that includes simple beautiful graphics if that’s appropriate, and that uses their words. My cottage dream, my early exit from hell plan, whatever words they use in their meetings with you, that’s what you put on their plan. And they talk about how much they appreciate that.
Moira: And it doesn’t mean this isn’t a tremendously sophisticated or even complicated plan. The genius that you have is being able to take these complicated and technically brilliant plans to deal with their particular estate complication or their tax issues, and really put it in terms that they can easily communicate to their partners or easily review when they get home and say, “You know what? I really like this part, but I didn’t like that part.” Again, enhancing the partnership aspect of this alliance you have with them.
Hannah: One of the other pieces of your book is you talk about there’s parts of advice that are just harder to follow than other pieces of advice. Can you talk more about that? What are the harder pieces of advice to follow?
Moira: Harder pieces of advice are certainly those that require complex lifestyle changes. Things that make them visibly different from other people. Things that are multi-step, and things that they have to implement completely on their own with no supervision or support in following through. Those are the things that are most likely to get abandoned by the roadside unless you figure out how to change that.
Hannah: Can you give me an example of what you mean by that?
Moira: Let’s take that overspending problem for example. You know how earlier we were talking about the little tweaks that people can be turned onto? That’s an example of taking a huge complex lifestyle change and just revealing it kind of one step at a time. I call it the dance of the seven veils where you’re just revealing a little bit and once you get people, “Yeah I can do that,” you create momentum. You say, “Let me know when you signed off on one click ordering, and I’ll give you the next secret to the universe.” You follow up in two days and say, “Are you ready for the next secret of the universe? Did you do this step?” And they’ll say, “Yes, what’s next?” And so it’s almost a gamification, it is really a gamification of the stuff that they want to do, and it was just nothing but pain before has now been turned into something that’s really quite easily done because you’ve broken down this huge task into something that only takes a couple of minutes a day, if anything, if that.
Moira: Not everything can be done that way, right? The overspending can be done that way, but let’s say the advice involves having a conversation that they’ve been avoiding for years with a business partner or with the children about what the estate plan is, and they’ve been avoiding having these conversations because it’s going to cause conflict. That’s another example of advice that’s going to be very hard to implement, because avoidance is such a brilliant strategy. It works immediately. It just reduces all that pain. So how are you gonna overcome that particular adherence barrier? What are the strategies for getting people to do emotionally difficult things? Sometimes that can be in the office with you, you actually role play some of those difficult conversations. Maybe you help supply them with the words that they’re lacking. Maybe you offer to bring in those adult children and help co-create the estate plan. Maybe it’s that you refer them to a really fine estate lawyer, or perhaps you offer to refer them to a therapist who can help develop skills both at managing the anxiety and at improving communication. But these are ways in which a really valuable piece of advice, “Go have this conversation,” doesn’t just become a useless piece of advice because they can’t possibly implement it.
Moira: By virtue of what you do in the office with them and your referral network, you help make this valuable piece of advice something that actually gets acted on. And that works to not only the client’s benefit, but of course to yours as the advisor. When clients don’t follow advice, when they don’t keep their commitments to whoever they’ve made them to, they feel embarrassed. And they kind of avoid, they put off future meetings, “Yeah I thought we were gonna meet today, but I wasn’t able to do what I said I would do.” And if you’re not careful, you can completely lose touch with them, all because they didn’t implement, they didn’t make good on their commitment to you and they feel bad about that. So the more you can offer to help be there, not necessarily during the conversation, but that you can help anticipate where the barriers are and then build the latter to get past that barrier, the more valuable you’ll be to them.
Hannah: We’ve talked a little bit before about financial planners aren’t counselors, that’s not what we’re supposed to be. A question that struck me is how do you know if you’re in over your head for some of these conversations? Because these are some heavy conversations to have with clients.
Moira: It’s important that you develop a really good gut check. If you’re uncomfortable with the level of emotion involved, you can just name it, Hannah. There’s nothing wrong with saying, “Wow, this is really a difficult thing to contemplate, isn’t it? I am uncomfortable even as I imagine you trying to do this, so I want to make sure that you don’t go home to do something that you’re not ready to do. What do you think would be useful to you in doing this?” By checking in with your own gut and recognizing that you’re sensing a non-readiness or you are worried, you can just bring that into the room, your own gut sense, your own intuition that perhaps this is something that needs somebody other than you or that perhaps this needs a little more thinking before you send them home to implement on it.
Moira: I always say that one of the most valuable things that any one of us has in our practices is our contact list. That group of colleagues in aligned professions that we know to be ethical and competent, that we know we would feel that we were putting our clients in good hands by referring them to these allied professionals. Making those referrals and offering even to facilitate a meeting with them is great. Giving people two or three names and making sure that you follow up on it, because even the best … No one is a great fit for everybody, so you may refer one of your clients to somebody only to find out that that didn’t go well. And you want to have access to that information, so you really want to make sure that you follow up, and if that didn’t work that you are able to refer to somebody else.
Moira: I know in some firms you have to be really careful about making those referrals, so I’ll just acknowledge that that’s not even a possibility for some of your listeners. In some, they actually have some of these allied professionals in-house. You may be, for example, an investment advisor, but there’s somebody else on the team who’s an estate planning expert, and you can just kind of hand the client off at timely junctures to do some of this additional work.
Hannah: For a lot of the planners who are listening to this, they may not be the lead advisor in these relationships, but they’re seeing a lot of the problems that you’re talking about and they want to help the clients, even though they may not be the one speaking up in the meetings. What would be your advice to them?
Moira: I think the new advisors who are sitting in on meetings, just by virtue of being a new set of eyes and ears, they can often ask curious questions that the lead advisor may not even have thought of. The new advisor can become experts at follow-through. They can provide more of a listening ear when they do that follow-through, they can provide yet another opportunity for people to let them know what they’re concerned about and what’s working and what’s not working. I love the fact that we’re having senior advisors work with people from an entirely different generation, and that we may be bringing in the best situations we’re increasing the diversity of a firm by bringing in more women, by bringing in people of different ethnic backgrounds, and that allows not just a transition of the firm, but a transition of clients from one generation of the client’s family to another, knowing that they’re gonna be in good hands because these people are on board.
Moira: These are all things that I think the new advisor can bring to a situation that’s just such a great value add.
Hannah: Was there anything else as we wrap up?
Moira: I don’t think so. In my book at the end of each chapter, I list a number of questions that are quite simple, but quite powerful as examples of how it is that you can become more of an adherence partner with clients, as ways of making sure that really great advice doesn’t go wasted. I would just drop peoples’ attention to the summary at the end of each of the chapters that provide some great questions that you can ask to further enhance your relationships.