Latest / Root Ready / Here's a Better Answer than "It Depends"

Transcript

Here's a Better Answer than "It Depends" · Root Ready

• 0:00
  SPEAKER_01: Welcome back to another episode of the Root Ready podcast.
• 0:02
  SPEAKER_01: Today we're talking about clients when they ask a question and the answer is it depends.
• 0:08
  SPEAKER_01: How do you respond?
• 0:10
  SPEAKER_01: How do you respond directly, but also make sure that you're providing all the necessary information, knowing that a lot of times there's a lot of nuance that is required to make the right decision and to give the right feedback.
• 0:21
  SPEAKER_01: Eden, I think you are uh seeing this.
• 0:24
  SPEAKER_01: You're having my meetings with clients.
• 0:25
  SPEAKER_01: I would love to know just examples of when does like what's a common example of a client asking a question and the right answer being it depends, but wanting to make sure you're providing proper context with that.
• 0:40
  SPEAKER_00: Yeah, we've definitely been having some one-off questions as we go through fall reviews, but this certainly comes up with new clients as well.
• 0:47
  SPEAKER_00: And I feel like it's especially when we're early in the process and they're kind of eager to, you know, they have random questions that are kind of not related to what we're talking about today.
• 0:57
  SPEAKER_00: It's usually the one-off random questions where I feel like this comes up, or maybe it wasn't on the agenda.
• 1:02
  SPEAKER_00: And it's it could be something along the lines of, you know, new, newer client.
• 1:06
  SPEAKER_00: We haven't gone through the tax media or anything yet.
• 1:08
  SPEAKER_00: Okay, so I've been contributing on a pre-tax basis to my 401k.
• 1:12
  SPEAKER_00: Should I switch to Roth?
• 1:14
  SPEAKER_00: Well, it depends.
• 1:16
  SPEAKER_00: Should I, you know, accelerate paying down this HELOC that I have, or should I kind of keep keep more of the cash that I have coming in?
• 1:24
  SPEAKER_00: It depends.
• 1:25
  SPEAKER_00: There's so many questions that are, it's really those kind of one-off random questions of the, well, should I do this or that?
• 1:33
  SPEAKER_00: It depends.
• 1:34
  SPEAKER_00: And uh that that comes up a lot for sure.
• 1:37
  SPEAKER_01: Yeah.
• 1:38
  SPEAKER_01: Yeah, it depends.
• 1:39
  SPEAKER_01: The classic financial advisor answer, because there is so much that it depends on for sure.
• 1:44
  SPEAKER_01: I would love to know though, like, are there I'm sure there's so many good examples of how this was used before, though.
• 1:50
  SPEAKER_01: Are there any examples where you or Naomi or anyone that you saw like said it depends and you felt like, uh, that was that the right answer, or did we fully address the question that was asked?
• 2:05
  SPEAKER_00: The the key piece to this is if you want to be like a terrible financial advisor, you can just say it depends to your clients for pretty much any question, and then just leave it at that.
• 2:14
  SPEAKER_00: If you really want to go that route, you could use that for pretty much it's the right answer for almost any question that a client can ask us.
• 2:22
  SPEAKER_00: But what you do with it depends.
• 2:25
  SPEAKER_00: It there has to be more to it than that.
• 2:27
  SPEAKER_00: Why does it depend?
• 2:29
  SPEAKER_00: Tell me what factors in my situation make you incapable of just giving a yes or no, do this or that.
• 2:37
  SPEAKER_00: How do we add some more context that is specific to the client, given whatever question that they're asking, to show them why it depends and help them understand the pros and cons of each side.
• 2:50
  SPEAKER_00: Yeah.
• 2:51
  SPEAKER_01: Yes, I see too frequently it depends is an easy out.
• 2:59
  SPEAKER_01: Either because the advisor doesn't fully know and it's like, hey, I need to buy, I don't know the right answer, I need to buy time, I don't know, I need to go see what the financial planning software says, which maybe is an issue.
• 3:10
  SPEAKER_01: Right.
• 3:10
  SPEAKER_01: Or they want to show up how much they know.
• 3:12
  SPEAKER_01: Well, Eden, it depends.
• 3:13
  SPEAKER_01: You know, if you're in this situation, that this is the best approach because yada yada yada.
• 3:17
  SPEAKER_01: If you're in that situation, that then it depends because and it's just like that's not providing any value to the client, to the prospect, to whoever you're speaking with.
• 3:28
  SPEAKER_01: So I I I actually have some thoughts around this for sure.
• 3:34
  SPEAKER_01: But is there any like any initial thoughts you have before we go in there that you feel like is a good framework or way to think about it before we jump into how I'd think about it?
• 3:44
  SPEAKER_00: I would just say, as far as what I've observed from Naomi is that she does a really good job of tailoring her answer to the client situation and providing it within the context of their plan.
• 3:58
  SPEAKER_00: It's never just the cookie cutter.
• 4:01
  SPEAKER_00: Well, contributing on a pre-tax basis means this and contributing on a Roth means this.
• 4:06
  SPEAKER_00: Period.
• 4:07
  SPEAKER_00: It's cool.
• 4:08
  SPEAKER_00: Okay, great.
• 4:09
  SPEAKER_00: What does that mean for me?
• 4:11
  SPEAKER_00: And I'd say that she does a really good job of just making sure that whatever comes after it depends is not just your straight out of the textbook cookie cutter answer.
• 4:19
  SPEAKER_00: It's why does this depend for you, Mr.
• 4:22
  SPEAKER_00: and Mrs.
• 4:23
  SPEAKER_00: Client?
• 4:24
  SPEAKER_01: Yeah.
• 4:24
  SPEAKER_01: I yes, I think that is so of perfect.
• 4:29
  SPEAKER_01: How is this related to them?
• 4:30
  SPEAKER_01: If it's just, well, it depends.
• 4:32
  SPEAKER_01: Like I can get that from Google.
• 4:33
  SPEAKER_01: What am I getting from you that's unique and that's the tailored application of this?
• 4:38
  SPEAKER_01: I think that one thing I always like to, if I'm in another situation, like we are so in this work that it's hard for us to see it clearly.
• 4:48
  SPEAKER_01: Like there's we're just too in it.
• 4:50
  SPEAKER_01: So I've used this example before, but anytime I'm in another situation and I'm feeling confused or uneasy or like communication wasn't good, I try to use that as a learning lesson.
• 4:59
  SPEAKER_01: Like, draw something out of it, like, what was it about that situation, either really good or really bad, that made it really good or really bad?
• 5:08
  SPEAKER_01: And like, I mean, some, you know, I have two young kids right now.
• 5:10
  SPEAKER_01: And so it's like, okay, if they have to go to the pediatrician or the doctor or something, like if I take my daughter in and it's like, hey, she's got this fever, should we do this?
• 5:20
  SPEAKER_01: Or she's got I'm just whatever.
• 5:22
  SPEAKER_01: Like something's wrong.
• 5:23
  SPEAKER_01: And it's like, well, it depends.
• 5:24
  SPEAKER_01: If it's this, it's that, if it's this, it's that, it's like, I have nothing to anchor to.
• 5:30
  SPEAKER_01: And I think what I actually always try to do, if I have proper context, like I think there's I'm gonna split this into like two categories.
• 5:39
  SPEAKER_01: Do I have I won't say full context, like sufficient context, or do I have insufficient context?
• 5:47
  SPEAKER_01: Eden, if you're my client and I feel like I have sufficient context on what you're asking, you say, hey James, should we do a Roth conversion?
• 5:54
  SPEAKER_01: I'm actually usually gonna start with an answer.
• 5:59
  SPEAKER_01: And I know that's the wrong, if I just said yes and left it, that bad answer.
• 6:04
  SPEAKER_01: But if I go right to, well, it depends, it's this, it's it's like, James, come on, man.
• 6:09
  SPEAKER_01: I just like can you just give me an answer?
• 6:11
  SPEAKER_01: Like, I'm just I'm I don't want you to make me exert mental calories trying to keep up with this.
• 6:17
  SPEAKER_01: By just giving you an answer, I'm at I'm giving you like a baseline, an anchor to compare to.
• 6:23
  SPEAKER_01: And then I'm gonna do the it depends of eating.
• 6:25
  SPEAKER_01: Yeah, I think you probably should, but I want to confirm that because I also know um you do a lot of charitable giving, and I'm gonna see if a qualified charitable distribution might be more effective.
• 6:36
  SPEAKER_01: I also know you're thinking of moving to this state, and they have much lower taxes than where you currently are.
• 6:41
  SPEAKER_01: So I want to take that into account.
• 6:42
  SPEAKER_01: I also, so it's almost like a yes or a no, like an answer that is hedged with the it depends.
• 6:52
  SPEAKER_01: Like, let me give you something.
• 6:53
  SPEAKER_01: So now as I'm saying this, you have something to compare it to.
• 6:57
  SPEAKER_01: Of the doctor saying, Yeah, James, you hurt your shoulder.
• 7:01
  SPEAKER_01: I think, I think that you should probably get surgery.
• 7:04
  SPEAKER_01: But here's the other options, or here's other things we can compare it to.
• 7:09
  SPEAKER_01: And now it's not just random it depends.
• 7:11
  SPEAKER_01: I'm trying to compare, it's how does that compare to surgery?
• 7:14
  SPEAKER_01: How does this treatment plan compare to that?
• 7:16
  SPEAKER_01: And it can give a bit more it, it takes it, it takes the burden off of me to have to mentally feel like I can track or follow everything.
• 7:26
  SPEAKER_01: That's if I feel like I have sufficient information.
• 7:30
  SPEAKER_01: Not full information.
• 7:30
  SPEAKER_01: I think the full information is gathered after, but at least I've told you, Eden, yes, I think this is probably a good um good idea.
• 7:37
  SPEAKER_01: But let's run the numbers, and here's the things that's actually going to depend upon for me to say with 100% conviction that's the right thing for you.
• 7:46
  SPEAKER_01: Now, let's use an example of Eden.
• 7:49
  SPEAKER_01: I'm having the same conversation with you, but it's in our kickoff meeting.
• 7:54
  SPEAKER_01: You're saying, James, should I do a Roth conversion?
• 7:57
  SPEAKER_01: Well, in the prior example, I would have given you like a yes, no, like I would have given you a more direct answer and then hedged it with the it depends.
• 8:04
  SPEAKER_01: Now I have no idea.
• 8:07
  SPEAKER_01: But I still want to provide something that's of value to you.
• 8:09
  SPEAKER_01: So I'm not just gonna say it depends, it depends, it depends.
• 8:12
  SPEAKER_01: I'm gonna, I'm gonna tell you like, I'm gonna help you organize your thinking.
• 8:16
  SPEAKER_01: I'm gonna help you understand how to think about it.
• 8:19
  SPEAKER_01: I'm gonna say, Eden, that's like that is a really good question.
• 8:21
  SPEAKER_01: It's one of the top questions I have too, going through this process.
• 8:24
  SPEAKER_01: But let me tell you like how we're gonna think about that.
• 8:27
  SPEAKER_01: We're gonna start, you know, with kickoff and what do you want to do and all that stuff.
• 8:30
  SPEAKER_01: We're gonna start, then go through cash flow.
• 8:32
  SPEAKER_01: We're gonna talk about your investments in here.
• 8:34
  SPEAKER_01: Like, people jump right to this question, Eden, and they miss this.
• 8:37
  SPEAKER_01: Like, what if I come back to you and recommend a really aggressive portfolio versus a really conservative portfolio?
• 8:43
  SPEAKER_01: I'm just speaking hypothetically here.
• 8:45
  SPEAKER_01: Like, just bear with me for a second.
• 8:47
  SPEAKER_01: You're 62 years old, you've got 13 years until RMDs kick in.
• 8:52
  SPEAKER_01: For me to give you the right tax answer, if if we go the path of a really conservative portfolio versus very, really aggressive portfolio, that decision, that's not just an investment decision.
• 9:05
  SPEAKER_01: That has tax implications.
• 9:07
  SPEAKER_01: Your aggressive portfolio is likely to grow a whole lot more by the time you're 75 than is a conservative portfolio.
• 9:13
  SPEAKER_01: It might be double the value, which means we might double hypothetically how much we do or don't do in Roth conversions.
• 9:20
  SPEAKER_01: So if we start answering that question too early, which by the way, we see that's a major mistake people make when they do their own planning or when they're doing it with an advisor that's not looking at everything, is it seems like it's just a tax decision.
• 9:31
  SPEAKER_01: But that tax decision stacks on top of, I mean, first and foremost, what do you want to do?
• 9:35
  SPEAKER_01: How much do you want to spend?
• 9:36
  SPEAKER_01: What is life gonna look like?
• 9:38
  SPEAKER_01: Then how are we gonna set up your cash flows to make that happen between social security IRAs, Roth IRAs, brokerage accounts?
• 9:47
  SPEAKER_01: Then how aggressive or conservative or anywhere in between are we gonna be with your investments?
• 9:52
  SPEAKER_01: Like once we have all of that, I'm gonna give you a very clear, not just yes, no, but how much and how often answer?
• 10:01
  SPEAKER_01: And what you've done is you've helped to organize our thinking of, oh, it's Roth conversion, it's binary, it's yes or no, into oh, okay.
• 10:09
  SPEAKER_01: Eden doesn't know the answer yet, but she does know the path we're gonna take to get to an answer.
• 10:15
  SPEAKER_01: And that gives me the reassurance, like every meeting that we have, there's a purpose for it.
• 10:21
  SPEAKER_01: And there's a reason it's in that way.
• 10:23
  SPEAKER_01: And even though I didn't get an answer, I definitely got something of value and that I now see more clearly how all the pieces of my finances fit together.
• 10:34
  SPEAKER_01: Make sense?
• 10:35
  SPEAKER_00: Yeah, I think that's the key for sure, is just adding some value because you cannot always answer the question, and it is very different on the front end versus like much deeper into the relationship with the context for sure.
• 10:47
  SPEAKER_00: Um, so yeah, I think that makes a lot of sense.
• 10:51
  SPEAKER_01: Yeah.
• 10:51
  SPEAKER_01: Do you have you ever seen people get frustrated when the answer was it depends?
• 10:58
  SPEAKER_00: I don't know that it's like necessarily frustration, but I think it can be difficult for clients to be in the ambiguity and not get that yes or no answer.
• 11:08
  SPEAKER_00: And I see a little bit of discomfort, I think I would say is more what I see where it's like, hmm.
• 11:13
  SPEAKER_00: I kind of thought that was more of a like you were saying with like Roth Convergence, kind of thought that was more of an easy yes or no question.
• 11:20
  SPEAKER_00: And it really points to how nuanced financial planning is, how personalized financial planning is, and the importance of having a well-versed advisor who understands how different things impact your specific situation.
• 11:33
  SPEAKER_00: Yeah.
• 11:35
  SPEAKER_01: People hate ambiguity, as you just said.
• 11:38
  SPEAKER_01: I mean, why do blog posts or videos that say five reasons to do this work?
• 11:44
  SPEAKER_01: Because it makes it feel like in this chaotic world where everything seems so disorganized and who knows.
• 11:52
  SPEAKER_01: It provides order in a very disordered world.
• 11:56
  SPEAKER_01: It provides structure in a very unstructured world.
• 11:59
  SPEAKER_01: And so people are craving that.
• 12:01
  SPEAKER_01: And that that goes back to, and by the way, our job is to provide that.
• 12:05
  SPEAKER_01: And the reason I mentioned I like to give an answer first is it because that it like almost what's the right way of saying it?
• 12:16
  SPEAKER_01: Like it gives some initial structure reassurance, and then the it depends that follows gives like the deeper answer of the here's what we're actually gonna do, here's how we're actually going to apply this to you, as opposed to just it's never gonna be as simple as go pretext here, Roth there.
• 12:33
  SPEAKER_01: Do Roth conversions here, not there.
• 12:35
  SPEAKER_01: Invest aggressively here, invest conservatively.
• 12:37
  SPEAKER_01: Like there, there's of course there's it depends.
• 12:40
  SPEAKER_01: But how what if we can almost think of our job as advisors is to remove the like remove the burden, like the mental burden of having to like think through, of exert too much effort of like thinking through this.
• 12:56
  SPEAKER_01: And if our clients have to exert a ton of effort to understand us or to make sense of our recommendations, we're probably doing it wrong.
• 13:05
  SPEAKER_01: And if we go on a it depends monologue that lasts for 10 to 12 minutes, we probably feel really good about how smart we think we sound and how we know that's not like there's the whole I'm sorry.
• 13:20
  SPEAKER_01: Yes.
• 13:20
  SPEAKER_01: It's like I'm sorry, I wish I didn't ask.
• 13:22
  SPEAKER_01: Let's go ahead and wrap this meeting up.
• 13:24
  SPEAKER_01: So what can we do to make receiving the information we are delivering as easy as possible and also not overly simplify our advice to a yesno when the real answer is it depends, but trying to make sure we're being respectful of both sides of that.
• 13:47
  unknown: Yeah.
• 13:48
  SPEAKER_01: Anything else or anything stand out from meetings you've had, from things you've seen?
• 13:55
  SPEAKER_01: Anything else?
• 13:56
  SPEAKER_00: I think the response to more of the ambiguity, or we kind of could go different directions, because I think it obviously depends on the question client situation.
• 14:08
  SPEAKER_00: Sometimes in our mind, we know there's an it depends and we want to explore both options, but we know we we have a viewpoint and we're gonna make a recommendation on it.
• 14:18
  SPEAKER_00: And that that of course depends on the situation.
• 14:21
  SPEAKER_00: It depends, but it does depend on the situation, what what we're gonna do with that.
• 14:25
  SPEAKER_00: Um and for some clients, I think it kind of depends on the client type that I've seen, how much they want to actually be taking on decision burden, like you were talking about.
• 14:38
  SPEAKER_00: Some of our more DIY clients want to be more actively involved in that final decision.
• 14:44
  SPEAKER_00: And that's part of why they're asking the question, is because they want to hear our thoughts and what we would advise, but they still want to have that final say, just looking for more information and the education, but they want to really be involved in the decision making.
• 14:59
  SPEAKER_00: But we've also seen that on the flip side where the client doesn't want to think about it at all.
• 15:03
  SPEAKER_00: They ask the question because they're curious, but they're looking for us to say, here's what I would recommend and why.
• 15:09
  SPEAKER_00: And that's been different to see depending on the type of client that we're having this type of it depends conversation with.
• 15:17
  SPEAKER_00: Some want to be really active in the decision, and some are like, just tell me what you think is best and let's do that.
• 15:22
  SPEAKER_00: And I've seen that go both ways too.
• 15:24
  SPEAKER_01: Yeah.
• 15:25
  SPEAKER_01: And I I I'm really glad you brought that up.
• 15:28
  SPEAKER_01: Because again, I like I like to put myself in other situations outside the finance world and think like, how did I want to be involved in that?
• 15:36
  SPEAKER_01: Because yeah, I I can think of times like, yeah, I want someone to explain the the it depends and then have my active involvement in choosing the path that we take.
• 15:46
  SPEAKER_01: Other times I'm like, hey, I don't even want to think about this.
• 15:48
  SPEAKER_01: Can you just recommend a course of action and I'll follow your lead?
• 15:52
  SPEAKER_01: And and so I think that sometimes advisors are like, no, it's the like the client, like, yes, we need client buy, like it's the client's money, it's their decision.
• 16:00
  SPEAKER_01: But I think what you just said makes a lot of sense.
• 16:02
  SPEAKER_01: And I fully agree with which sometimes people are coming to us because they want to eliminate decision fatigue.
• 16:09
  SPEAKER_01: It's like if it's a minor thing or like not, it's okay to say, Eden, this is what I recommend.
• 16:16
  SPEAKER_01: If you'd like to explore the why behind that, like let me know, and I'm happy to do so.
• 16:19
  SPEAKER_01: But I recommend this because boom, boom, boom.
• 16:22
  SPEAKER_01: James, I'm good with that.
• 16:23
  SPEAKER_01: Awesome, let's do it.
• 16:24
  SPEAKER_01: Um, because I think there are other cases.
• 16:27
  SPEAKER_01: For example, should I retire right now?
• 16:31
  SPEAKER_01: Well, Eden, like um, yes, because I know you're stressed out and you're burnt out and you hate your job.
• 16:40
  SPEAKER_01: Um but look, like if you retire now, here's how much I would feel comfortable with you spending.
• 16:47
  SPEAKER_01: I also really know you want to take some real amazing trips with your family.
• 16:50
  SPEAKER_01: I you wouldn't be able to do that right now.
• 16:53
  SPEAKER_01: So yes, but it depends on like, do you actually want to spend a bit more?
• 16:57
  SPEAKER_01: Because if you actually want to take the trips you shared with me, it's probably gonna take at least another year or two of work to get there.
• 17:03
  SPEAKER_01: Like that's an example of I'm not gonna make that decision for you, but like that's a massive decision.
• 17:08
  SPEAKER_01: How do I get your buy-in?
• 17:09
  SPEAKER_01: So it's not just this, but help you to quantify it.
• 17:13
  SPEAKER_01: Like, I'm not just it depends on this, it depends on that.
• 17:15
  SPEAKER_01: It's here's what it comes down to.
• 17:16
  SPEAKER_01: Here's the two biggest variables.
• 17:18
  SPEAKER_01: Either would you rather retire today and be free from work and able to live comfortably, but probably not take those trips?
• 17:26
  SPEAKER_01: Or would you prefer to work another year and be able to take those trips you really want to take?
• 17:34
  SPEAKER_01: And by the way, I'm not even saying it's just those two options, but just given those two so I can understand more fully how you're thinking about this.
• 17:41
  SPEAKER_01: Which is more appealing to you?
• 17:44
  SPEAKER_01: Then it's gonna get your buying, it's gonna get your involvement, and like if nothing else, it sparks a great conversation.
• 17:49
  SPEAKER_01: But maybe there's a plan C.
• 17:51
  SPEAKER_01: Like there's always a third plan, it's never just an either or.
• 17:54
  SPEAKER_01: But that's the type of thing that I can give you an answer of like, yes, I think so because you're so stressed out, or no, I don't think so because I know how important to you these other trips are.
• 18:04
  SPEAKER_01: But it does depend.
• 18:05
  SPEAKER_01: And here's the information depends on.
• 18:08
  SPEAKER_01: Let's have a conversation through that.
• 18:12
  SPEAKER_01: Um I think we've covered all of this.
• 18:16
  SPEAKER_01: Is there anything else that you think would be just looking at our outline here that would be helpful to jump into in more detail?
• 18:26
  SPEAKER_00: I don't think so.
• 18:27
  SPEAKER_00: I think we covered all the all the key stuff here.
• 18:30
  SPEAKER_00: Just good, good best practices and things to keep in mind with the classic it depends answer.
• 18:35
  SPEAKER_01: It depends.
• 18:36
  SPEAKER_01: That's right.
• 18:37
  SPEAKER_01: All right.
• 18:37
  SPEAKER_01: Well, thank you, Eden.
• 18:38
  SPEAKER_01: Thank you, everyone, who is listening or watching.
• 18:41
  SPEAKER_01: If you haven't done so, please leave a review so more people can find the show.
• 18:44
  SPEAKER_01: If you know something you think would value from this, please share this episode with them.
• 18:49
  SPEAKER_01: That's it for today, and we'll see you all next time.