You're listening to “Financial Advisor Marketing”—the best show on the planet for financial advisors who want to get more clients, without all the stress. You're about to get the real scoop on everything from lead generation to closing the deal.
James is the founder of TheAdvisorCoach.com, where you can find an entire suite of products designed to help financial advisors grow their businesses more rapidly than ever before. Now, here is your host, James Pollard.
James: On this week's podcast episode, I want to share some findings from an article published by Russ Alan Prince back in 2019. The title of the article is Where Formal Financial Plans Fail. It's interesting, because in a survey of 138 financial advisors providing plans for a fee, only 30.4% of clients implemented 20% or more of the recommendations within six months. [00:57.7]
One more time, only 30.4% of clients implemented 20% or more of the recommendations within six months. 51.4% of clients who purchased formal financial plans implemented less than 20% within six months, so about half did a little bit, a very small amount, though, implemented just a tiny bit. Perhaps, most shocking of all, the remaining 18.2% did nothing, nothing at all.
I want you to let this sink in. People aren't being forced to hire financial advisors. It's not as if someone is holding them at gunpoint and telling them, “Hey, you must hire a financial advisor.” People actively search out financial advice, jump through several hoops to get it, including attending meetings, providing documents and answering questions, and then do nothing with it. Oh, and I want to stress again, these are people who have paid for the financial advice. They've paid for it in terms of time spent searching, commitment, energy, and, yes, they have paid money from their pocket, to get the financial advice. [02:05.0]
People who sell fitness equipment for a living know that a lot of the equipment will end up getting used for a few days or a few weeks, and then turn into a close hanger or a dust gatherer. The same thing happens when people purchase exercise equipment, as it does when people purchase financial advice. They want to exercise. They obviously do. Otherwise, they wouldn't have purchased the equipment, but then they don't. Hmm.
I would argue that the problem is even worse when people hire a financial advisor because there is more work involved. Again, people have to filter through to find the right financial advisor for them. Then they have meetings. They have to provide documents. They have to answer questions. There's a lot more work that goes into hiring a financial advisor on the client side than just going out and purchasing an elliptical or a treadmill or a bench.
In psychology, there's something called the sunk cost fallacy. It's basically where people are reluctant to abandon something because they've invested in it. For example, people don't want to leave a bad job because they've been there for so long, or they don't want to stop having a relationship with a person because they've already invested so much time and money into that relationship, even if it sucks. [03:13.5]
This effect is very strong and it tends to keep people trapped. You probably see this all the time. It’s scary when it happens. People get caught in this sunk cost trap. So, you would think that the sunk cost fallacy would actually work in favor of clients hiring financial advisors. You would think that people who have hired financial advisors would be more likely to implement the advice because they invested resources into receiving it.
I tell you this because there's something or multiple things in the financial planning process that is/are so powerful that this thing or things gets people to override the sunk cross fallacy so much that they end up doing nothing, and that, my friends, is terrifying. [03:58.7]
Why does this happen? I'd like to propose three reasons. Reason No. 1 is that there's too much information. Sometimes financial plans can become so complicated that they become overwhelming. It's intimidating when a financial planner hands over a thick 20- or 30-page document with things you should do and not do to improve your financial situation.
Let's apply this to another arena, like beauty. I want to talk about other stuff because financial advisors can't see the forest for the trees, when I talk about financial advice and financial planning, and stuff within their business, but they can easily intellectualize something from another industry. It's weird how that works, but it's one of the things that I noticed when I was doing coaching one-on-one for financial advisors, and giving other industry examples really made things click with them, so I try to keep doing it.
Imagine you go to someone who specializes in improving your looks, and this person does it all. Eyebrow skin, hair, nail teeth, everything. You go through a couple meetings with this person, and then you receive a 30-page document telling you all the things you need to do to fix yourself, quote-unquote, “fix yourself” or to make yourself more attractive. That's kind of disheartening. Isn't it? You will probably think, Gee, I didn't realize I was that ugly. [05:13.2]
Years ago, I did a section of my Inner Circle newsletter talking about what clients are really paying for when they hire a financial advisor, and one of the things I discussed was that sometimes clients are paying for reassurance. They want to know that they're doing certain things right. When you, as the professional, see all the things they can improve, it can be overwhelming. It can be discouraging.
Also, there's something called the paradox of choice, which states that an abundance of options can overwhelm us. On paper, it might seem like increasing the number of choices that you have will make it more likely for you to choose, but that's not what happens. More options is good up to a point. Once you pass that threshold, you end up not choosing anything. [06:01.3]
Imagine having a dessert bar with five different types of desserts. Now imagine a dessert bar with 500 desserts. It would be much easier for you to choose one of five instead of one of 500. This is also true within financial planning and in a financial plan. When people realize that there is so much for them to do, like estate planning, budgeting, college planning, tax planning, retirement planning, and more, they freeze and do nothing. That's Reason No. 1, people become overwhelmed. They freeze when they just see all the stuff that they have to do and they're like, Dang, I didn't realize I was that messed up in my finances.
Reason No. 2 is that motivation is fleeting. This is very similar to the exercise equipment example. People get really excited to buy that treadmill and they're like, Yeah, I'm going to walk every single day and I'm going to have a new morning routine, and then life kicks in and they go back to their old ways.
People get motivated to hire a financial planner and immerse themselves in a flurry of activity. Then a few weeks go by and, suddenly, the motivation isn't as strong anymore. After a month or two, it's non-existent. It's very similar, like I said, to fitness and it's like how gyms will be packed in the first few weeks of January and then look like ghost towns by Valentine's Day. The same thing is happening in financial planning. [07:18.8]
Think about this in your own life. Have you ever been motivated to learn a new language or perhaps to learn a musical instrument? Maybe you wanted to learn guitar, so you bought a guitar and a few training courses because you knew in your heart that this time you were serious. This was the time you were going to learn how to play Wonderwall by Oasis and get all the chicks. But then, you stopped, because motivation is fleeting. Hiring a financial planner is no different.
Gary Halbert used to tell a story about porcupines in heat that I think applies here. Did you know that female North American porcupines are only in heat for about eight to 12 hours per year? That's per year, eight to 12 hours per year. That's remarkably short. [08:06.5]
I think that period for a dog is like one and a half to two weeks, so it's significantly longer than porcupines. I don't know what in the world happened in the process here for porcupines, but it is what it is. During that period, the male and female porcupines will do whatever it takes to make sweet little baby porcupines.
People tend to go in heat when it comes to their self-improvement. Something inside of them clicks, and they realize that they need financial help. They need financial advice, and if we could predict what this thing is, we could make millions of dollars. But it's different for everyone. Maybe it's the birth of a child or the death of a parent, or getting a new job or seeing someone more successful than them. Whatever it is, something, something, something, something got your client to get off his or her butt to pay for a financial plan. The problem is that the motivation doesn't last, because motivation is an emotional state, and just like we fluctuate between happy, sad, joyful, angry, and depressed, our motivation fluctuates. [09:12.4]
Motivation operates on the erroneous assumption that a particular mental or emotional state is necessary to complete a task. Stephen King has a quote, which says, “Amateurs sit and wait for inspiration, the rest of us just get up and go to work.” I think that's true. The problem is that you can't really make someone disciplined. You can't go to a client and make that person disciplined enough to implement your recommendations. Either they have the discipline or they don't. Can you nudge them? Sure. Can you influence their behavior? Sure. But, generally speaking, motivation is what gets people started and discipline keeps people going. The undisciplined people are the ones who quit along the way. That's Reason No. 2. [09:54.0]
Hey, financial advisors. If you'd like even more help building your business, I invite you to subscribe to James' monthly paper-and-ink newsletter, “The James Pollard Inner Circle”. When you join today, you'll get more than $1,000 worth of bonuses, including exclusive interviews that aren't available anywhere else. Head on over to TheAdvisorCoach.com/coaching to learn more.
Reason No. 3 is that there are no clear next steps, and in many cases, implementation fails because clients don't know what to implement or they don't know how to implement. The clearer you can be, the better. This is closely related to the first reason, because having too much complexity and overwhelming people leads to unclear next steps, but I wanted to make this a separate reason, because even something simple can fail to get implemented if the person doesn't know where to begin it. Something does not have to be complex; even simple things can fail to get implemented.
This might seem like a silly example, but I want you to imagine someone who has never seen a car before, never seen a car, has no idea how to work a car, doesn't even know the first thing about cars, and you tell that person, “Hey, can you open the hood for me? Hey, pop the hood.” [11:10.0]
That person wouldn't know where to begin, because even though it's a simple task to me and you, there are no clear next steps for the person. The person doesn't know where to go to pop the hood. They might not even know what pop the hood means. They may not know where the hood is, like, “Where the hood, where the hood, where the hood at?” Shout out DMX.
I’ve found it to be a good practice to have clear next steps for everything in life and this is true for hiring people, helping your clients, and even setting personal goals. Instead of setting a goal like eat healthier, you can think in terms of next steps, clear next steps, such as buy chicken and broccoli to meal prep for the week. That is something you can do immediately and put yourself on the right path. “Buy chicken and broccoli” is a lot clearer than “eat healthier.” I hope that makes sense.
Perhaps you've experienced one or more of these reasons in your business. I've seen all three of them with financial advisors trying to build their businesses. It's why I created my Inner Circle newsletter, which has been built from the ground up to maximize implementation, because you could have the best information and all the motivation in the world, but it doesn't matter if you do nothing with it. [12:17.7]
Of course, I understand that I can't give you motivation and I can't make you disciplined. Just like I said, you cannot make your clients disciplined. Either they have it or they don't. You can influence their behavior, yes.
You can nudge them, sure. But you cannot make them disciplined, and short of me being able to make people disciplined with the Inner Circle newsletter, I can't make it much easier for you to get results.
I'm going to tell you how I personally solve each of these three challenges. This is probably going to sound like a sales pitch for the newsletter. I promise you, it's not. I'm sharing it because I purposefully designed it so people would implement, and since I did that, I ended up solving these three things. [12:56.3]
Let me explain. The first challenge is giving people enough information that they can do something, but not so much information that they get overwhelmed. The way I do that is by making each newsletter issue 15 to 20 pages, depending on how long it takes me to cover the material. I’ve found that this is the sweet spot between giving people or financial advisors enough information without making it cumbersome.
Most people can read each newsletter issue in 30 minutes or less, and if you can't spare 30 minutes per month, then you have bigger problems, and, sadly, you are probably the one who can benefit the most from the newsletter, but you're never going to get it because you think, Oh, I don't have the time.
What's cool is that someone might sign up for a course or something with a dozen different-- What are they called? Modules or videos, and not get through them all, because motivation is fleeting. What ends up happening is that person might watch one or two videos and then stop. It's the same thing with the fitness equipment. They buy the elliptical. They go, go, go. They're like, Yeah, I'm going to get into shape this time, and then they start putting a hat on the elliptical or they hang their sweater on the elliptical, and then they never use it again. [14:03.7]
But a monthly newsletter comes every month, so if the person sticks with it, that person will end up consuming far more information over the long term than someone who tried to take on the entire world at once. Instead of just going to the one video or two videos and then stop, the person may start off with one issue and then get to the next one, and get to the next one and get to the next one, and over the long term, it's more than 10 video courses combined.
It's like the old saying, how do you eat an elephant? One bite at a time. A monthly newsletter is a little nudge every month. It's one bite at a time. That's also how I solve for the fact that motivation is fleeting because it will continue to nudge, prod and provoke financial advisors every month, even after the initial burst of motivation has disappeared. This is a great thing because it ensures financial advisors continue to grow as business owners—and guess how financial advisors can take advantage of something like this within their business? Email marketing, social media marketing. [15:03.0]
When someone signs up for your email list, it's due to a burst of motivation. They see something that they want. They want to do business. Not necessarily do business with you, but they want to stay involved in your world. If you can keep showing up in their email inbox, you can be there even after the motivation has subsided. You can remind them what they once wanted. You can remind them that they did originally seek out financial advice, and, hopefully, you can light that fire under them.
The same thing is true with LinkedIn, with other forms of social media. When people see you in their feed, they get reminded, “Hey, I did search out financial advice a couple weeks ago, a couple months ago. Maybe I should try again.” Okay, that is how this works.
Subscribing to a monthly newsletter is something called a Ulysses pact. It's a decision you make today that influences you in the future. For example, making automatic investment contributions is a Ulysses pact. You make the decision today and it will continue to benefit you in the future. For example, another one is the automatic savings, automatic bill pay. You make the decision today and it will continue to benefit you in the future. [16:08.0]
When someone subscribes to a paper-and-ink newsletter, that newsletter is going to show up in the mail every month. It's like a reminder telling them that they can have more, do more, and be more. That one decision that they make today can impact them for years into the future with no additional involvement from them, meaning, they don't have to subscribe again. They don't have to go through the signup process. Again, once they've signed up, the newsletter will keep coming until they cancel. That is it. It is a Ulysses pact.
The way I solve for the third problem or challenge or whatever you want to call it, which is not having clear next steps, is by including clear takeaways, action items, and so called homework in every issue. I may not say, “Hey, here's your homework in every issue,” but there are takeaways. Many advisors tell me that this is their favorite part of each newsletter issue because it gives them clarity on what to do next. Plus, it ensures they do something every month to move themselves and their businesses down the right path. [17:02.8]
Also, I try to put at least three or four things in every issue that can pay for itself in perpetuity. If you can't make your $99 per month back, then something is seriously wrong. I would go to a doctor and get yourself checked out if that is the case, and I'm saying that only half-jokingly.
But these are solutions that I have found that get people to do things, that get people to implement. It might be tempting to throw everything in the kitchen sink at someone and sometimes, it sounds weird, but people want to flex authority and flex expertise by showing how much they know, but it actually backfires.
Like I said, including too much stuff at once can lead to less consumption than starting with a little nibble. Sure, I could create a 1,000-page book with marketing campaigns and ideas and instructions, but would people actually consume all 1,000 pages? Probably not. They would read a little bit and then put it on the shelf, and they would totally forget about it. So, because I care about financial advisors and I want to make sure I help them, I give them a little bit at a time. That's how they're eating the metaphorical elephant, one metaphorical bite at a time. [18:10.3]
When you give your clients one bite at a time, include clear next steps. Tell them exactly what you want them to do and let them know that you're available to help them if they have any questions. Don't make them feel stupid for asking questions, and I totally forgot to mention that, too.
One of the benefits that newsletter subscribers get is they get email access to me for questions. They get top priority in my inbox, which means they can email me and ask about something, if they don't understand a topic or if I'm unclear, which does happen. I'm not perfect. Sometimes I screw up and I fail to explain things well enough, or perhaps I assume that people know things they don't. They get to literally email me and I will help them with whatever marketing and business situation that they're in. [18:53.2]
For example, I had someone email me today talking about how he lost his motivation and didn't have much joy in his business anymore. I told him that he needed to do a brain detox and I gave him some resources to help with that. Even though it's not marketing-related, I would try my best to help. Am I going to solve all his problems overnight? Absolutely not, but I am going to be a net positive force in his life. You’d better believe that I am, for sure, going to be a net positive. I let financial advisors ask me questions. That's not really something you can get most of the time from video courses or these little training methods out there.
Back to the fitness equipment example. It's not like you're buying an elliptical and then you have a personal trainer that just pops up whenever you need that person and you say, “Hey, how do I use this elliptical again? What are the different settings on this treadmill? What is the right incline for my body type? Can I crank it all the way up to 10? Is that safe? How long can I do that? Does that impact my knees?” It would be like having someone where you can literally just ask questions and get answers.
That is how I help people implement. If they need clarification on something in order to move forward, I am there to give them that clarification, and when they get it, when it clicks for them, they're more likely to take action. [20:07.8]
Anyway, that's it for this week's episode. I hope this helped you in some way. Share the podcast if you like it. It costs you nothing to share it and it helps me out a great deal. With that said, I will catch you next week.
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