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A Guide for Navigating Client Conversations When Markets Are Crazy · Root Ready

• 0:00
  Speaker 1: Welcome back to another episode of the Root Ready podcast.
• 0:02
  Speaker 1: I'm your host, james Canola, and today we're going to talk about how do you have those conversations with clients when markets are in turmoil and there just seems to be chaos everywhere.
• 0:09
  Speaker 1: This episode comes from a listener question.
• 0:11
  Speaker 1: This is from Steven.
• 0:13
  Speaker 1: Steven says could you share your strategies for guiding clients to market volatility?
• 0:16
  Speaker 1: To be more specific, I found that clients that are within two years of retirement are significantly more worried about market volatility and it is often more of a challenge to keep them in a longer term strategic frame of mind.
• 0:27
  Speaker 1: Could you share your personal strategies for helping these clients overcome pre-retirement market anxiety, stephen?
• 0:33
  Speaker 1: So that's exactly what we're going to do today and I will say that there's a difference here between are your clients in retirement or not in retirement, as Stephen's mentioning.
• 0:40
  Speaker 1: And I'll also say there's a difference here between clients who are a little concerned and just want to check in and see what are we doing, anything that we need to make adjustments to in a client that's just full level 10 panicking.
• 0:50
  Speaker 1: So today I'm going to give the conversation more towards that client who is absolutely panicking about what's going on.
• 0:55
  Speaker 1: So understand that some of this framework may not be relevant, and customize this to the emotional levels that your client is coming to you with.
• 1:02
  Speaker 1: So there's no need to go all in on this If your client's just asking a few basic questions.
• 1:06
  Speaker 1: So be able to read the room and understand the context here.
• 1:08
  Speaker 1: But that is what we're going to be going over, and what we're going to do is I'm going to go through how I personally like to structure this conversation.
• 1:14
  Speaker 1: There's a million different ways to do this, but I found one that I find to be very effective when I do it with clients.
• 1:19
  Speaker 1: And then, number two I'll give you some tips for certain ways or certain things you can do to make these conversations more effective.
• 1:25
  Speaker 1: But right off the bat, here's what we need to realize to be effective, you are not having a performance conversation with clients.
• 1:31
  Speaker 1: You're not having a tariff conversation with clients.
• 1:34
  Speaker 1: I'm recording this episode in the midst of this tariff announcement and the market is in turmoil and things are getting crazy and who knows what's going to happen.
• 1:40
  Speaker 1: This is going to pass at some point and there will be another crazy event.
• 1:43
  Speaker 1: So replace tariff with whatever crisis happens to be happening when you are having these conversations with client.
• 1:48
  Speaker 1: Here's how you should think about this conversation before actually engaging in this framework or some of the tips that we're going to talk about.
• 1:53
  Speaker 1: You are not having a performance conversation.
• 1:57
  Speaker 1: What you're actually doing is you are actively involved in a hostage negotiation.
• 2:01
  Speaker 1: Now that seems dramatic, but here's what I mean by that.
• 2:04
  Speaker 1: Your client is probably a lovely, wonderful person, a very rational person, but when things like this happen in the market, they get taken hostage and it is your job to help alleviate that, to help guide them out of that.
• 2:16
  Speaker 1: And it's not them that's been taken hostage per se, it's their thinking.
• 2:19
  Speaker 1: Because when things like this happen in the market, when anything scary happens, it's not our prefrontal cortex, the more rational, long-term thinking part of our brain, that's taking over, it's the amygdala.
• 2:31
  Speaker 1: The amygdala is thinking in terms of fear and panic and how do I get out of this and how do I avoid this pain?
• 2:35
  Speaker 1: And that is the part of the brain that you are dealing with.
• 2:37
  Speaker 1: So that's been something that's actually been a little bit helpful for me to at least position the way I approach some of this, because this client, who I know, who's great, who's a wonderful person they have not been taken hostage, like I said, but some of their thinking has been At a physiological level.
• 2:51
  Speaker 1: Their amygdala has taken over, and that amygdala is not looking out for their long-term well-being.
• 2:55
  Speaker 1: It's trying to help them avoid pain, and they're panicking in the moment, right now.
• 2:58
  Speaker 1: So I get that analogy might seem a little bit wacky or a little bit extreme, but here's why it's effective for me, at least in the way I think about this.
• 3:05
  Speaker 1: If I'm having a conversation with a prefrontal cortex the more rational, long-term thinking part of a client's brain, what I'm doing is I'm essentially performing a hostage negotiation with a person that doesn't actually have the hostage.
• 3:17
  Speaker 1: I'm talking to the wrong person.
• 3:19
  Speaker 1: I'm talking to the wrong part of the brain.
• 3:20
  Speaker 1: Instead, I need to understand what part of the brain is driving some of this thinking from the client, and that's why I said at the beginning there's a very big difference from a client that just wants to call and check in and say what's going on.
• 3:30
  Speaker 1: Anything we need to change, okay, cool.
• 3:32
  Speaker 1: Versus the client that's absolutely panicking.
• 3:35
  Speaker 1: Make sure that you're talking to the right part of the client's brain, make sure that you understand where they're coming from, and that's going to be helpful as we go through the framework that I talk about.
• 3:42
  Speaker 1: So what do I do?
• 3:43
  Speaker 1: What do I like to do?
• 3:44
  Speaker 1: Number one I like to frame the conversation.
• 3:47
  Speaker 1: So when a client is seeing their portfolio go down and they're turning on the news and they're seeing the headlines and they're seeing all this craziness, there's not a lot of sense of order or control of their feeling.
• 3:56
  Speaker 1: So when you reach out to them or they reach out to you, whatever the case might be, if you just start talking and jump right into this and there's no real structure or no real agenda for what's going on, it's not necessarily going to ease the nerves of a client that you're talking to.
• 4:09
  Speaker 1: If, instead, you can frame the conversation, greet the client, acknowledge their fears and start to frame the conversation of here's what I would like to talk about today.
• 4:17
  Speaker 1: I'll go over an example in just one second.
• 4:19
  Speaker 1: What you're doing, even at a subconscious level, is you are telling the client, you are conveying to the client there is some control here, there's some order here, this chaos that you're feeling.
• 4:29
  Speaker 1: Let me help you put some structure around that.
• 4:31
  Speaker 1: And as we go through this conversation, we're going to come out the other side with some next steps of what we need to do.
• 4:38
  Speaker 1: So, whether they consciously realize that or subconsciously realize that there's this sense of okay, james is going to guide this conversation.
• 4:44
  Speaker 1: I can relax a little bit because it sounds like he knows where this is going to go.
• 4:47
  Speaker 1: And that's not going to solve everything, of course, but it's a good first step.
• 4:50
  Speaker 1: So frame that conversation and do it in a very measured, steady way.
• 4:54
  Speaker 1: Don't say we're going to talk about this and talk about that and jump around and jump.
• 4:58
  Speaker 1: That's just adding to the chaos, that's just adding to the panic that they're already feeling.
• 5:01
  Speaker 1: Do this in a nice measured, steady way.
• 5:03
  Speaker 1: You're conveying to them this is not going to be an aimless conversation, but you have a plan which is going to be reassuring.
• 5:09
  Speaker 1: So that's the first step is frame the conversation of what you're going to do and then, secondly, acknowledge their fears.
• 5:16
  Speaker 1: What you're doing when you're acknowledging their fears is, in a way, you're aligning your interests.
• 5:19
  Speaker 1: If they're expecting that you're just going to say, oh, this will pass, or you're going to say, you know what, you're going to be fine.
• 5:24
  Speaker 1: Or you throw a Warren Buffett quote at them or you throw a Peter Lynch quote at them, they're not going to feel like your interests are aligned.
• 5:30
  Speaker 1: They're going to feel like this is a little bit of a combative experience.
• 5:33
  Speaker 1: We're not looking at this from the same perspective.
• 5:35
  Speaker 1: You're not feeling what I'm feeling is what they is going to be.
• 5:44
  Speaker 1: You fully understand the fact that, going back to Stephen's question at the beginning, you're looking to retire and you need some of these funds, so this isn't something that you have the luxury of just waiting out.
• 5:52
  Speaker 1: Meet them where they are and acknowledge the concerns that they're going to have.
• 5:56
  Speaker 1: If you're not doing that, there's not going to be full alignment.
• 5:59
  Speaker 1: As you're going through this conversation, it might seem a little bit confrontational if they're believing, or if they're perceiving that you're coming at this from one standpoint of just fighting to keep them in this portfolio that they're terrified of, and they're coming at this from the standpoint of am I going to be okay?
• 6:11
  Speaker 1: I need this pain to stop.
• 6:13
  Speaker 1: So start by aligning their interests.
• 6:15
  Speaker 1: So I usually like to do step one and step two here at the same time.
• 6:18
  Speaker 1: Here's an example of what that might look like.
• 6:20
  Speaker 1: And again, step one is frame the conversation and step two is acknowledge their concerns, acknowledge the way that they're feeling.
• 6:25
  Speaker 1: I might say hey, sally, thank you so much for taking the time to talk.
• 6:28
  Speaker 1: So I'm making the assumption here that Sally's calling me, or I'm calling Sally because there's concerns about tariffs, just to use the current example.
• 6:35
  Speaker 1: Hey, sally, thank you for making the time to talk.
• 6:37
  Speaker 1: I know we have a plan for you, but it probably feels like that doesn't really matter much in light of what's actually going on.
• 6:41
  Speaker 1: And if I'm in your shoes, I'm feeling pretty worried.
• 6:44
  Speaker 1: I'm feeling pretty unnerved just what's going on, and not just what's going on with tariffs and the economy but how does this actually impact me and my ability to do what I want to do?
• 6:52
  Speaker 1: So what I want to do today is I want to ask you a few questions just to make sure I'm fully understanding the concerns that you have.
• 6:58
  Speaker 1: I think I probably know, but I just want to ask you a few questions to make sure I'm fully seeing it from the same way you're seeing it or the same standpoint that you're seeing it from.
• 7:04
  Speaker 1: I'd like to give you my perspective on what's going on and then, most importantly, I'd like to talk about how I see this impacting you and any changes we need to make to your plan to adjust for that.
• 7:14
  Speaker 1: Is that okay with you?
• 7:16
  Speaker 1: So this doesn't have to in script, of course, or in quote.
• 7:19
  Speaker 1: That doesn't have to be like a perfect recited script, but all you're doing is you're, at the same time, acknowledging the way you think they're feeling and you're giving them this framework of let's have this conversation, let's flow through this order of questions or things that we want to do, and it's going to provide some reassurance.
• 7:36
  Speaker 1: Number one, that you have a plan and you have structure.
• 7:38
  Speaker 1: And number two, they're going to feel aligned with you.
• 7:41
  Speaker 1: They're going to feel like they're on the same side of the table with you and not feel like this is going to be a butting of heads.
• 7:46
  Speaker 1: They want to get out of the market and you're trying to convince them not to.
• 7:49
  Speaker 1: That's not the feeling you want them going into this with.
• 7:51
  Speaker 1: Now.
• 7:51
  Speaker 1: I quickly want to add on to this, and this depends, of course, on the type of client or what the client is saying when they come to you.
• 8:00
  Speaker 1: I have had clients in get out.
• 8:02
  Speaker 1: I don't want to be part of this.
• 8:03
  Speaker 1: When that's the case, I don't call them and say, hey, sally, we're not selling out.
• 8:07
  Speaker 1: That would be disastrous to your long-term plan.
• 8:08
  Speaker 1: You know that you're going to miss the best days in the market If you get out now.
• 8:12
  Speaker 1: It's a horrible way to jump right in and approach that I like to start those conversations of saying, sally, we can absolutely do that, this is your money and at the end of the day, you can do what you want with your money.
• 8:22
  Speaker 1: What I want to make sure we're doing is I want to make sure we're having a conversation so I can fully understand the concerns you're having.
• 8:28
  Speaker 1: Again, I think I might know what they are, but let me fully understand those and not make any assumptions.
• 8:32
  Speaker 1: And then I at least want to give you some guidance of what might that best thing do.
• 8:36
  Speaker 1: But at the end of this call, you want to get out of the market, you want to sell money and we will take care of that for you.
• 8:41
  Speaker 1: So something along those lines, essentially saying again, I'm not here to fight you, I am here because I care about you.
• 8:49
  Speaker 1: I care about you as a client, I care about you as a friend, I care about you as a person.
• 8:52
  Speaker 1: I want what's best for you.
• 8:54
  Speaker 1: So if you want to get out of the market, I'm essentially removing these barriers, these mental barriers of you thinking you're going to have to fight me.
• 9:00
  Speaker 1: I'm saying we'll do that.
• 9:01
  Speaker 1: Now, there's never actually been an instance where I've talked to a client and by the end of our conversation, that's what we actually did.
• 9:06
  Speaker 1: But by starting with that, it's disarming some of this.
• 9:09
  Speaker 1: It's disarming some of the defensiveness that, if I'm in their shoes, I probably have, if I think I'm going to have to battle my advisor to do what I think is the right thing to do.
• 9:17
  Speaker 1: Now, the final thing here and this is something I constantly have to remind myself of and I don't always do a great job of it is do not speak too fast.
• 9:24
  Speaker 1: You have to be really conscious here.
• 9:27
  Speaker 1: If you jump in and say, sally, here's what we're going to do.
• 9:29
  Speaker 1: We're going to talk about tariffs, we're going to talk about impacts, your plan, we're going to talk about what you, it's just going to add to that level of stress.
• 9:35
  Speaker 1: It's going to add to that level of oh my gosh, things feel out of control.
• 9:38
  Speaker 1: Speak in a measured, steady tone.
• 9:41
  Speaker 1: Make sure that you're pausing, make sure that you're not rushing.
• 9:45
  Speaker 1: What you're doing again, even at a subconscious level, is this client, who's probably coming to you with an elevated heart rate, coming to you with a lot of stress, a lot of anxiety, a lot of panic.
• 9:53
  Speaker 1: Even the way in which you speak can help to reassure them if you're speaking in the appropriate manner.
• 10:00
  Speaker 1: So don't be afraid to pause.
• 10:02
  Speaker 1: Be very measured, be steady.
• 10:05
  Speaker 1: Doing so in and of itself is going to help to calm your client in many cases.
• 10:11
  Speaker 1: Again, I'm talking specifically for clients who are really on edge and really concerned about what's going on.
• 10:15
  Speaker 1: Now, the third thing that I'm going to do so I've framed the conversation, I've acknowledged their fears is number three I'm going to ask questions and I'm going to listen.
• 10:25
  Speaker 1: I'm not going to jump in and give my opinion on tariffs.
• 10:28
  Speaker 1: I'm not going to jump in and start giving them market data and charts and how.
• 10:32
  Speaker 1: You're going to be okay because look what we did.
• 10:34
  Speaker 1: There's a time for that and I am going to do some of those things by the end of the conversation, but it's not the appropriate time yet.
• 10:40
  Speaker 1: I have a general rule Whenever I talk to clients, whenever they're asking if they just straight up ask a question in general, the framework that I like to work through is the three question rule, and what the three question rule is is, before I give a direct answer, I like to ask three questions of them instead, and there's a couple reasons for this.
• 10:57
  Speaker 1: Number one.
• 10:58
  Speaker 1: The first reason I want to ask questions first before actually giving advice is I'm not going to make any assumptions.
• 11:03
  Speaker 1: I shouldn't be making any assumptions that I perfectly understand what their concerns are.
• 11:08
  Speaker 1: Sometimes, by asking questions, you start to uncover things.
• 11:11
  Speaker 1: I had this example with a client recently.
• 11:14
  Speaker 1: She was concerned with a tariff.
• 11:16
  Speaker 1: She did call in and I just started asking questions and I thought her concerns had everything to do with tariffs.
• 11:20
  Speaker 1: Well, after some questions, what I started to realize is some of her siblings were going through a very difficult financial situation and that was weighing on her.
• 11:27
  Speaker 1: She had just lost her father and her mother was trying to recover and figure things out financially and get things in order.
• 11:33
  Speaker 1: My client had a short-term rental, short-term Airbnb, and that was a big part of her income and the city was being very difficult and she was concerned that she was going to lose some of that income.
• 11:42
  Speaker 1: So when I actually started asking questions, my assumption was okay, it's the tariffs that you're concerned about, it's your portfolio that you're concerned about.
• 11:48
  Speaker 1: And yes, she was concerned about that, but not nearly to the extent that she was concerned about some of these other things.
• 11:53
  Speaker 1: So had I never asked questions, had I not followed that three question rule, I would have been addressing the problem that wasn't actually the real problem.
• 12:01
  Speaker 1: And so by asking questions and asking questions and asking questions not just from a check the box, ask a question standpoint, but from a sincere desire to understand where the fear is coming from and where she is coming from we were able to actually uncover the issue and put a plan in place or at least address that in terms of what could we do with what was actually bothering her.
• 12:20
  Speaker 1: The second reason that I follow this three question rule before giving advice about anything, I like to ask at least three questions Is there is a study that shows people feel more connected, they resonate more with the recommendation you give them if you've taken the time to ask them more questions on the front end.
• 12:36
  Speaker 1: Here's how that study went and, by the way, I don't know this actual study, I don't even know if it actually exists, but it's been a helpful fake study, if nothing else for me to think about this in this context.
• 12:45
  Speaker 1: But you had a group of people, I think they were looking for career advice or something like this, and there's five tables they could go to to get that advice.
• 12:52
  Speaker 1: A group of people went to table one and at table one, the people at the table asked them one question and, based upon that answer, they gave them a piece of paper that had the recommendation on it.
• 13:02
  Speaker 1: A different group of people went to table number two and at table number two, the people manning the booth or manning the table there asked two questions and, based upon the answers to those two questions, wrote a piece of paper or wrote down on a piece of paper here's my guidance and handed it back to the people.
• 13:18
  Speaker 1: Table three, four, five same thing.
• 13:19
  Speaker 1: At table three, the people at that table asked three questions.
• 13:23
  Speaker 1: The people come in there, wrote their advice about career, something or other, gave it back to the participants saying here's what we recommend you do.
• 13:32
  Speaker 1: So you had one table asking one questions, another table asking two, another table asking three, another table asking four, another table asking five.
• 13:38
  Speaker 1: At the end of that they asked the participants what advice did you feel most connected with?
• 13:42
  Speaker 1: What advice did you feel most connected with?
• 13:44
  Speaker 1: What advice did you feel like was most relevant and helpful to your situation?
• 13:47
  Speaker 1: And the results of this were the people who went to table five and got that piece of feedback they felt I forget what the percentage was, but a high degree of them said yes, this is very relevant and very applicable to me.
• 13:57
  Speaker 1: At table four, a high amount of people did, but less so than table five.
• 14:01
  Speaker 1: And that trend continued all the way down to table one, where people were only asked one question and saying how well do you feel this is tailored to your exact situation?
• 14:09
  Speaker 1: And so here's the kicker Every single thing that the people at the table wrote on those note cards and handed to the participants, it was the same exact advice.
• 14:18
  Speaker 1: All those cards had the same exact thing written on them.
• 14:21
  Speaker 1: The difference was the people that were asked more questions before they were given that note card, before they were given that advice, they felt more connected to it.
• 14:29
  Speaker 1: They felt like it was more personalized to their situation.
• 14:31
  Speaker 1: They were more likely to adopt it.
• 14:33
  Speaker 1: Again, does this study exist?
• 14:34
  Speaker 1: I've heard it a couple of times.
• 14:35
  Speaker 1: I haven't been able to find it, so who knows?
• 14:38
  Speaker 1: But at the end of the day, that's something that feels right.
• 14:41
  Speaker 1: If it's not an actual study, I think that the more people are able to respond to your questions, the more questions you're able to ask of them.
• 14:48
  Speaker 1: What you're doing is you're showing them, we're catering this advice.
• 14:52
  Speaker 1: We're customizing this advice to you.
• 14:53
  Speaker 1: Number one, like I said before, because doing so, because asking questions actually helps us to uncover the true issue.
• 15:15
  Speaker 1: But number two, if you go right into it to say I don't recommend you do anything, I think you should just stay the course, that's probably not going to be received very well to it, because you first took the time to understand where they're coming from and even if that advice is the exact same, it's going to connect with them better.
• 15:25
  Speaker 1: So ask questions and, like I said, I like that three question rule, that three question framework that I personally follow.
• 15:30
  Speaker 1: If anytime someone asks for advice, this could be should I pay off my mortgage or invest?
• 15:34
  Speaker 1: This could be what on earth is going on with the portfolio because of these tariffs?
• 15:37
  Speaker 1: Ask questions before giving advice.
• 15:40
  Speaker 1: So here's an example of what that might look like A client calls and they're panicking.
• 15:44
  Speaker 1: They say I want to get out of the market.
• 15:45
  Speaker 1: What's going on?
• 15:46
  Speaker 1: Tell me what we should be doing.
• 15:47
  Speaker 1: I might say something like I know what's going on is unnerving and none of us enjoy when these types of things happen.
• 15:52
  Speaker 1: But could you help me understand what's most concerning on your end?
• 15:55
  Speaker 1: Is it the tariffs themselves?
• 15:57
  Speaker 1: Is it the impact on the economy?
• 15:59
  Speaker 1: Is it the impact on your portfolio?
• 16:01
  Speaker 1: Is it your ability to create income?
• 16:03
  Speaker 1: Ask them questions and help them to start clarifying what exactly is it that they're feeling concerned about.
• 16:09
  Speaker 1: Now, I know sometimes you don't want to ask leading questions, you don't want to give away the answer, but if you just say, hey, what's bothering you?
• 16:14
  Speaker 1: They're going to look at you probably like a deer in the headlights.
• 16:18
  Speaker 1: What do you mean?
• 16:18
  Speaker 1: What's bothering me?
• 16:19
  Speaker 1: Do you not see what's going on in the TV?
• 16:21
  Speaker 1: Do you not see what's going on in the news the tariffs, the downturns, the markets?
• 16:24
  Speaker 1: So if you just say what's bothering you, they're going to probably think that you're totally unaware of what's going on.
• 16:29
  Speaker 1: Versus if you said, look, I can fully understand your concerns and how we might be able to address them.
• 16:40
  Speaker 1: What you're doing is you're helping them to start anchoring to something.
• 16:43
  Speaker 1: You're helping them to put words to this and by doing that, you're going to be able to deliver more effective advice as you do so.
• 16:49
  Speaker 1: Now here's the thing with the follow-up questions.
• 16:51
  Speaker 1: Don't approach this like there's a question bank and you're just going to check the box and ask these questions Truly.
• 16:56
  Speaker 1: Ask with the intent of listening.
• 16:58
  Speaker 1: Don't make any assumptions that you know exactly how your client is feeling or exactly what those concerns are stemming from.
• 17:04
  Speaker 1: So there's not a bank of follow-up questions, but keep asking, keep exploring, ask.
• 17:09
  Speaker 1: Are you concerned about this because you feel like you don't have enough time for your portfolio to recover?
• 17:13
  Speaker 1: Are you concerned about this because you think the level of dividends and interest in your portfolio will be cut based on what's going on?
• 17:19
  Speaker 1: And as you're doing this, like I said, you are helping your client to define their fear.
• 17:24
  Speaker 1: And I don't know about you, but there's many times where I have this vague, anxious feeling and as soon as I sit down and write or journal or think about what is that feeling stemming from, as soon as I actually name exactly what it is, half the battle is already over.
• 17:37
  Speaker 1: Half the battle is just.
• 17:39
  Speaker 1: We have this feeling and we can't put words to it.
• 17:41
  Speaker 1: We can't pinpoint exactly where it's stemming from.
• 17:43
  Speaker 1: But once we can, that helps us, give us a sense of control, that helps give us the sense of OK, I still don't feel great about this, but at least know where that's stemming from and we're starting to move less into our amygdala thinking, our emotional, reactionary thinking and more into our logical, prefrontal cortex based thinking, where we can start thinking clearly and what can we start to do to move forward in a more rational manner?
• 18:05
  Speaker 1: So make sure you're asking questions and also feel this out.
• 18:08
  Speaker 1: Don't ask questions forever.
• 18:10
  Speaker 1: At some point your client is going to get upset and say just give me an answer.
• 18:12
  Speaker 1: But also don't go right into the answer.
• 18:15
  Speaker 1: Make sure that you're asking enough to get the appropriate feeling of what's the emotional landscape that your client is feeling, what's the landscape of what's going on in terms of the markets, in terms of their portfolio.
• 18:25
  Speaker 1: So you have a clear picture of everything.
• 18:27
  Speaker 1: And once you feel like you have that, once you feel like it's appropriate, then you can start to respond.
• 18:32
  Speaker 1: And that's step number four.
• 18:34
  Speaker 1: Step number four and the way I approach this is to respond to their questions and give your perspective.
• 18:38
  Speaker 1: Here's what that doesn't mean you don't have to be a tariff expert.
• 18:42
  Speaker 1: I'm certainly not.
• 18:43
  Speaker 1: I definitely haven't seen any takes from financial advisors that I consider a world class takes or anything.
• 18:47
  Speaker 1: Most of us are not experts in this and never will be experts in this, whether it's tariffs, whether it's wars, whether it's the COVID pandemics and shutdowns, whether it's you fill in the blank.
• 18:57
  Speaker 1: We don't have to be experts in that.
• 19:00
  Speaker 1: We have to have a general awareness of what's going on, but what we really need to do is we need to be an expert in the client situation.
• 19:11
  Speaker 1: So I'm going to go back to Steven's question.
• 19:12
  Speaker 1: At the beginning, he mentioned his clients that are within a couple of years of retirement are a lot more concerned than clients that have a long time until their retirement.
• 19:16
  Speaker 1: I fully agree, and so this is where you can start to respond to the client.
• 19:20
  Speaker 1: So what I've done at this point is I'm framing the conversation.
• 19:22
  Speaker 1: I've acknowledged Steven's fears, I've asked questions and asked questions and asked questions, and I've actively listened to what he's been saying.
• 19:30
  Speaker 1: Here's what I'm going to say to Steven.
• 19:32
  Speaker 1: I say, steven, you know what?
• 19:33
  Speaker 1: This is very different.
• 19:34
  Speaker 1: What you're experiencing.
• 19:36
  Speaker 1: You don't have the luxury of 10 years, 20 years, 30 years, until you need this money, like you did 10, 20, 30 years ago.
• 19:42
  Speaker 1: So if you had been doing this and you're plugging money into your 401k, you would view this as a buying opportunity.
• 19:47
  Speaker 1: But what you're doing and you're right in seeing this is you don't have that type of a time horizon to fully recover this and this, stephen, is why we took the time upfront.
• 19:55
  Speaker 1: When we began our relationship, we didn't want to operate under the premise that we could perfectly predict, or predict at all, what type of downturns there were going to be.
• 20:03
  Speaker 1: We knew with certainty there would be a 20% to 30%, probably some 40% downturns, not just the next few years, but over the duration, over the course of the rest of your life.
• 20:12
  Speaker 1: And while we couldn't pinpoint exactly what was going to cause that and, of course, exactly the timing, when that was going to be, we took measures up front to engineer a portfolio for you to make sure that these types of downturns wouldn't impact what actually matters, which is your ability to maintain your standard of living, regardless of what's going on in the markets.
• 20:30
  Speaker 1: So what do we do?
• 20:32
  Speaker 1: We started by understanding what would your cash flow needs be from your portfolio those first five years of retirement?
• 20:38
  Speaker 1: So maybe you have social security coming in, maybe you have a pension, maybe you have something, but what I'm more concerned about is your portfolio.
• 20:44
  Speaker 1: What cash flow needs do we need to draw from your portfolio in those first five years in order to put you in a position where a market downturn isn't going to derail your ability to retire.
• 20:55
  Speaker 1: We ran your projections, making up a number right now, and, stephen, what we saw is you need $40,000 from your portfolio in those first five years of retirement.
• 21:03
  Speaker 1: Well, we know stocks go up over time.
• 21:05
  Speaker 1: They go up quite a bit over time actually, but they don't go up every single year and they certainly don't go up every single day, every single quarter, every single longer period of time.
• 21:14
  Speaker 1: So what we did is we took that $40,000 and we said let's make sure you have five years worth of that in your portfolio and something that's fully insulated from the effect of a downturn in the stock market.
• 21:24
  Speaker 1: So what that means is we took 40,000 times five, so $200,000.
• 21:28
  Speaker 1: And we have that in very stable, conservative investments.
• 21:31
  Speaker 1: We call that your root reserves, where, if things are going great and the market keeps climbing that's wonderful we're going to be pulling money from the stock portion of your portfolio.
• 21:44
  Speaker 1: But when things like this happen let's assume this takes one to two years, maybe even longer, maybe it's three, four, five years to fully recover what happens in that case?
• 21:49
  Speaker 1: Well, in that case we don't want to have to sell your stock investments when they're down, which is why, on the front end, we engineered a portfolio for you, not to miss the market downturns, not to be able to predict and time them, but to be insulated from them, at least with the portion of the assets that you have.
• 22:05
  Speaker 1: These are very conservative, very short term assets, very stable assets.
• 22:09
  Speaker 1: They're not going to grow a whole heck of a lot for you over time, but what they're going to do is they're going to protect you, and so, as you keep taking monthly income, we're confident in your ability to do so because we don't have to touch your stock investments.
• 22:19
  Speaker 1: In fact, we have up to five plus years until we'd have to touch those in the worst case event, in the worst case scenario.
• 22:25
  Speaker 1: So that's exactly how I would start to explain it to a client.
• 22:28
  Speaker 1: Now, obviously, I'm making the assumption that we did the right thing up front, that we did do the work, that we did do the engineering, that we did the portfolio construction on the front end to ensure that, when something happened like this, we were good to go.
• 22:43
  Speaker 1: The client was protected not protected in the sense that their portfolio wouldn't decline it absolutely would but protected in the sense that the portfolio had certain types of investments that didn't perform the same and that we would have something that was a lot more stable to use when the time came to do so.
• 22:54
  Speaker 1: Here's why the order in which you do these things matters.
• 22:57
  Speaker 1: If you start with this conversation, if I were to say right off the bat hey, steve, we've got your root reserves, you're good, we're just going to start pulling money out of that.
• 23:03
  Speaker 1: You're not in an emotional place to hear that yet.
• 23:06
  Speaker 1: That's why we need to start by framing the conversation, acknowledging fears, asking questions.
• 23:11
  Speaker 1: What you have done there is you start to calm the situation.
• 23:14
  Speaker 1: You've started to ensure that the client is feeling hurt.
• 23:17
  Speaker 1: They're feeling like you're in control of the situation.
• 23:20
  Speaker 1: Not in control of tariffs in the markets, anything like that, but in control in terms of you have a good understanding of their plan and what you need to do to address some of these issues.
• 23:29
  Speaker 1: Once that has happened, the client can then start to think in a more rational, long-term way.
• 23:35
  Speaker 1: You are drawing them back to it.
• 23:37
  Speaker 1: You're guiding them back to the so what of it all.
• 23:39
  Speaker 1: What can we do today to make sure that you're going to be okay?
• 23:43
  Speaker 1: Does that mean we're going to change where you're pulling income from?
• 23:46
  Speaker 1: We're not going to be pulling it from your equity investments.
• 23:48
  Speaker 1: We're going to be pulling it from your bond investments.
• 23:50
  Speaker 1: Does that mean we need to change the timing of when you collect social security?
• 23:53
  Speaker 1: Do you collect it earlier or later based upon some of these things?
• 23:56
  Speaker 1: Does that mean some other type of change?
• 23:58
  Speaker 1: But by the time you've gotten to this point, you have rescued the hostage.
• 24:03
  Speaker 1: Going back to my initial point, and again, just as a reminder, I'm talking about these more severe cases you go through all of this with a client that's really not all that concerned and just wants your feedback.
• 24:10
  Speaker 1: You're probably overkill at this point, but that client that is really concerned, that's telling you to sell everything or that's absolutely panicking about what's going on.
• 24:19
  Speaker 1: This is the framework that I like to follow.
• 24:20
  Speaker 1: The fifth step, if needed, this is where you could kind of reframe, redirect some of this stuff.
• 24:25
  Speaker 1: This is when I might come in with the charts, the data, the missing, the best days, all that stuff.
• 24:30
  Speaker 1: You may not need to, though A lot of times at this point.
• 24:33
  Speaker 1: The client understands, okay, james understands me, james understands where I am.
• 24:37
  Speaker 1: Most importantly, james understands and has designed a plan upfront to make sure that when things like this happen, I'm going to be okay and I can look at my portfolio and I can look at what's going on the market and somewhat separate that from my actual plan and where my income is going to come from.
• 24:52
  Speaker 1: So if you now need to go into some more of the data because the client's interested or you think it might be helpful, feel free to do that at this point, but I think what you'll find is in many cases, the client doesn't actually need that.
• 25:06
  Speaker 1: Now this episode is already a lot longer than I was thinking or planning for it to be, so I'm going to go through the next portion of this pretty quickly.
• 25:10
  Speaker 1: There is a book.
• 25:11
  Speaker 1: So going back to my whole idea or my whole concept of what you need to look at this, as in some cases, in extreme cases, is that hostage negotiation of your client's thinking has been hijacked, has been taken hostage by the amygdala portion of their brain, by that reactionary, panicky portion of their brain.
• 25:27
  Speaker 1: There's a great book called Never Split the Difference, written by a former hostage negotiator for the FBI, chris Voss.
• 25:34
  Speaker 1: Some of these things actually apply quite well when he gives tips for negotiation, for hostage negotiation.
• 25:41
  Speaker 1: Read the book, but I'm just going to briefly go over some of the things that he talks about.
• 25:44
  Speaker 1: One of the things that he talks about is the importance of tactical empathy in these hostage negotiations.
• 25:50
  Speaker 1: The way he describes tactical empathy is just demonstrating that you can see the situation from their perspective.
• 25:55
  Speaker 1: Phrases like it sounds like.
• 25:57
  Speaker 1: It seems like these things are crucial and it's going to build that trust.
• 26:00
  Speaker 1: Okay, you are trying to see things from my perspective and you're not just in your advisory ivory tower telling me things, not fully recognizing how I actually feel.
• 26:09
  Speaker 1: Mirroring is another thing that he talks about.
• 26:11
  Speaker 1: Now, this is something that I have mixed feelings about.
• 26:13
  Speaker 1: Mirroring means you're simply repeating the last few words maybe the last one to three most critical words of what you just heard your client say.
• 26:20
  Speaker 1: You can do this really wrong.
• 26:22
  Speaker 1: It's kind of like you know people say repeat someone's name.
• 26:25
  Speaker 1: This is the whole how to win friends and influence people.
• 26:30
  Speaker 1: The sweetest sound to someone is a sound of their name and if you're talking to someone, typically a salesperson, if you've ever noticed they just beat to death the use of your name.
• 26:35
  Speaker 1: It's actually really annoying.
• 26:37
  Speaker 1: Hey, james, good to meet you today.
• 26:38
  Speaker 1: James, do you mind if I take a few minutes to share with you how this might work?
• 26:41
  Speaker 1: James, do you see how this might be effective for and it's just like, stop using my name, like use it a couple of times.
• 26:45
  Speaker 1: That's fine, but at a certain point it actually becomes counterproductive.
• 26:49
  Speaker 1: It actually becomes quite annoying and that's all you can actually focus on.
• 26:52
  Speaker 1: Mirroring can be that same thing I have seen people do.
• 26:57
  Speaker 1: The last one to three words automatically is going to build trust and build rapport with clients, but there is something to it.
• 27:03
  Speaker 1: It is just subconsciously signaling to your client James is hearing what I'm saying simply by repeating back to them what you just said.
• 27:14
  Speaker 1: Labeling is another thing.
• 27:15
  Speaker 1: They talked about Actively identifying and naming the other person's emotions.
• 27:17
  Speaker 1: It seems like this.
• 27:18
  Speaker 1: Saying something like it sounds like you're quite concerned about what's going on in the market as simple as that is.
• 27:23
  Speaker 1: Yes, I am.
• 27:24
  Speaker 1: It sounds like this, it feels like this.
• 27:26
  Speaker 1: Saying things like that means that you're putting words to this feeling that the client has, which again can help to move them forward and helps to build that connection with you of your understanding how they're feeling.
• 27:37
  Speaker 1: I'm going to breeze through the rest of these.
• 27:38
  Speaker 1: Simply Google this what are Chris Voss's techniques or recommendations for hostage negotiation?
• 27:43
  Speaker 1: And yes, this seems extreme in a lot of cases.
• 27:45
  Speaker 1: But this is just in any negotiation, so this doesn't have to be high stakes, fbi hostage negotiation.
• 27:51
  Speaker 1: This could simply be talking to a client about scary markets.
• 27:53
  Speaker 1: This could simply be talking to anyone about negotiation, but he talks about the importance of getting a.
• 27:59
  Speaker 1: That's right, that's right, acknowledging it.
• 28:06
  Speaker 1: That's what you're ultimately going for.
• 28:07
  Speaker 1: He talks about the importance of giving them the opportunity to say no.
• 28:08
  Speaker 1: How many times has a salesperson specifically tried to build you up by saying get the person to say yes, get the person to say yes, get the person to say yes?
• 28:13
  Speaker 1: And what that's actually doing is it's making me feel like I'm out of control.
• 28:17
  Speaker 1: If they're just asking questions where I have to say yes, well, I don't feel like I have any control of the situation.
• 28:22
  Speaker 1: No, the word no makes me feel like I do have control of the situation.
• 28:27
  Speaker 1: So ask questions where it's perfectly acceptable for the client to say no.
• 28:30
  Speaker 1: It's going to make people feel protected and in control, and you might even ask questions to give them that sense of control.
• 28:38
  Speaker 1: Because, again, what we're doing is we're not trying to be manipulative.
• 28:39
  Speaker 1: What we're doing is trying to take the client's thinking and we're trying to wrestle it back to where they are thinking in a more logical, long-term way, so we can have that good, rational conversation about what can we actually do to protect you.
• 28:51
  Speaker 1: He talks about the importance of what's called an accusation audit.
• 28:53
  Speaker 1: So an accusation audit is positively listing out all the negative assumptions, thoughts, the feelings that the other side might have about you before they actually voice them.
• 29:01
  Speaker 1: So what might this look like in a conversation with the client about scary markets?
• 29:05
  Speaker 1: This might look like hey, stephen, I know you probably think that I'm just here to prevent you from doing anything to your portfolio.
• 29:10
  Speaker 1: I know you probably think that I'm just going to sit here and say you're going to be fine.
• 29:13
  Speaker 1: That's not the case.
• 29:14
  Speaker 1: I want to have this conversation with you.
• 29:16
  Speaker 1: I want to understand what you're actually feeling so that we can get to the point of understanding what exactly should we do to protect what you have and to make sure you're going to be okay.
• 29:24
  Speaker 1: So if you voice the concerns that they're probably feeling about you, that is going to go a long way in building trust and breaking down barriers and when I say breaking down barriers, there's barriers even if you have a good, longstanding relationship with this client, because the way they're feeling, the panic they're feeling is going to feel at opposition to what they think you're going to be telling them as your advisor.
• 29:44
  Speaker 1: So this episode is already way too long.
• 29:45
  Speaker 1: I'm going to cut off some of the final couple of things there.
• 29:47
  Speaker 1: Go Google Chris Voss's tips for hostage negotiation if you want to see the last few things we're going to talk about.
• 29:52
  Speaker 1: But I think the point is, your goal isn't to be smarter than your client.
• 29:56
  Speaker 1: Your goal isn't to know everything you need to know about tariffs.
• 29:59
  Speaker 1: Your goal isn't to talk sense and reason into people.
• 30:02
  Speaker 1: That's not what should be happening.
• 30:04
  Speaker 1: Your goal should be to go through this framework to make sure that your client can get to a place where they trust you, that they trust that you have your best interests or their best interests.
• 30:12
  Speaker 1: I should say at heart that they feel fully understood and then they're going to be in a position to say what should we actually do with our investments?
• 30:19
  Speaker 1: And that's where you can talk to them about the plan, about the data, about what you've done to protect them, but only after you've gotten to that point of building that trust and getting to the level where they're going to hear that.
• 30:29
  Speaker 1: So that's it for today's episode of Root Ready Stephen.
• 30:32
  Speaker 1: Thank you for the question.
• 30:33
  Speaker 1: For those of you who are listening and have other questions, you can submit them on the Root Ready podcast website.
• 30:38
  Speaker 1: It's rootreadypodcastcom.
• 30:49
  Speaker 1: You can see a link to that in the show notes in the description here.
• 30:54
  Speaker 1: Thanks for listening.
• 30:54
  Speaker 1: I'll see you next time.