Full Transcript

Speakers: Micah Shilanski and Matthew Jarvis

Announcer: 00:01 Welcome to the Perfect RIA Podcast, the only show dedicated to build a highly effective financial planning practice that delivers both an amazing client experience and an amazing lifestyle for you and your family.

What you will hear today is not theory, but rather real-world, tested-in-the-trenches systems that your hosts, Micah Shilanski and Matthew Jarvis, have developed in their own respective practices which have been recognized as some of the best in our industry.

Before we get started, a quick reminder from our attorneys. This podcast is intended only for a professional audience, and should not be considered as tax, legal, financial, investing, or even cooking advice. Past performance is no guarantee of future results. You alone are responsible for you.

Now, lean forward and let Micah and Matthew show you how to build the perfect RIA.

Micah Shilanski: 01:14 Welcome, everyone, to another podcast with the Perfect RIA. I’m your host, Micah Shilanski, and with us, of course, is the legendary Matthew Jarvis. Matthew, how you doing, sir?

Matthew Jarvis: 01:25 I’m doing good, buddy. How about yourself?

Micah Shilanski: 01:28 I got no complaints.

We’re off and started in a new year. Matthew and I were talking, and we really wanted to focus on something I think is really important this time, which is dealing with clients in difficult times. How do you communicate with your clients, especially when you have all the stock market volatility that we’re seeing now?

Know this is nothing that we haven’t seen before, but now that it comes up and its front-line notice with all the issues, how do you communicate with clients when you get those panic calls, those panic emails? Where do you hold your line as to say you’re doing your job as a planner? Do you keep the client when they want to do something completely different? How do you communicate at mass versus individually? What’s that message, what’s that plan you need to have to really be a great advisor for your clients?

We thought we’d jump in and talk about a little bit of that. Matthew, did I miss anything on that one?

Matthew Jarvis: 02:20 No, I think you hit it, Micah, and I have to admit, I’m glad that we’re doing this as a podcast episode, both, obviously, for our listeners, but also for myself. You and I both went through the financial crisis, as did a lot of people listening to this call. Although maybe not as many as I think. That’s a full 10 years, now.

But when I reflect back on bear markets that I’ve survived in my career, I think, “The last couple of months? Yawn.” That’s sort of a walk in the park. But, for our clients, that’s not always the case. For advisors who have not gone through a big bear market, a big recession, this is kind of new ground for them. I think it’s good that we talk about how to be proactive and also how to deal reactively as needed when clients walk to the edge and say, “I’m ready to jump.”

Micah Shilanski: 03:02 Let’s start off with that one. Jarvis, I’m just going to throw you in the spotlight, here, sir. Let’s say you get a call, and a client calls up and says, “Jarvis, I looked at my portfolio, and I’m down 15%.” Of course, they’re not saying year to date, they’re just saying from the highs. That’s the only way that clients see their accounts, and that’s all right. “I’m down 15%. The market’s going crazy. Political comment here. I just want out.” What are you going to say to the client?

Matthew Jarvis: 03:28 Micah, the first thing that I do, whether it’s about the market or anything else, is really trying to acknowledge the client’s concern. Me dismissing it or me leaving them with the impression that I’m not understanding their concerns or hearing them is going to cause a problem right away. Right away, I’d acknowledge, “Boy, yeah, it is. I don’t like it when the markets go down, either. Yeah, you’re right, they are down 15% from their all-time high. That’s never fun to see. Can you tell me a little bit more about your concern?” Then they’ll go on.

Micah, I know you’re really good at this as well. What’s the question behind the question, or the issue behind the issue? Sometimes they’ll just say to me, “Matthew, actually, really, I just wanted to vent. I wanted to make sure you were aware of it.” “Great. I am. Thank you so much.” Sometimes they’ll say, “Matthew, I’m worried that I’m not going to get my next retirement income paycheck,” or, “I’m not going to be able to afford my vacation.” I try to get to the issue that’s behind that.

Then, once I have that, then we step back a little bit. We say, “All right, we’re down 15% from the high, but where are we in the last two years?” “The last five years?” “Since we’ve been working together?” “How much ground have we really given back?” Trying to provide a little bit of perspective, there.

Those would really be my first two lines of reasoning, if you will.

Micah Shilanski: 04:37 I like it. If I could summarize that, or start unpacking it, really what you’re doing in that conversation is you’re framing that conversation, right?

Matthew Jarvis: 04:44 Yes.

Micah Shilanski: 04:46 You have no idea what information the client has received on their own. They’re being inundated with different information. We can’t change that. Your job is really now to frame that information as it is most appropriate to their individual plan, not the overall craziness of everything that’s going on. How does it affect them as a person?

Matthew Jarvis: 05:07 That’s correct. I like what you said, Micah, about, “I can’t control what information they’re taking in.” They’re being bombarded with information. Every time they turn on the news, everywhere they go, they’re bombarded by the headlines. Maybe they’re panicking on a piece of total misinformation. Maybe they heard somewhere that Social Security’s going to stop sending out checks because the government’s shut down. Maybe they heard something that’s just totally untrue, or maybe they heard something that might be true, and I need to provide some perspective to that. Either way, I need to get more information about their thinking before I launch into some kind of tirade on whatever I’m going to think is important.

Micah Shilanski: 05:41 Yeah. I would say the number one is, “Don’t jump to conclusions.”

Matthew Jarvis: 05:44 Yes.

Micah Shilanski: 05:44 When you get a client call, you get an email, you get whatever, a message from your staff that says, “A client’s concerned about the markets,” you’re thinking, “All right, they’re concerned about this.” We’re already framing it in our mind what the client is concerned about, and we can jump into that sometimes when that’s not what they’re concerned about at all.

One of the things that we talk with our clients about a lot is, “It’s not about your account balance, it’s about your retirement income.” Because you don’t take an account balance out to go buy a house or to go out to dinner, or anything else. You take out retirement income to do these things. I think, Jarvis, you’re the same fan of this as well, we have a cash bucket. I think you … What do you call yours? Your war bucket?

Matthew Jarvis: 06:25 Our war chest. Yep, our war chest.

Micah Shilanski: 06:27 War chest. We have that cash bucket in place, or Jarvis has that war chest in place. Really, it’s, with the client, is, number one, understanding what that concern is with them and then, at least for me, is bringing them back down to what that plan is and making sure your client knows you have a plan. Also making sure your client knows what that plan is. Can they articulate it back to you in their own words?

This is huge, whenever you’re delivering anything with a client, that we try to do. I need to be better at it, personally, in making sure that I get clients to do this. But, after we go through something, especially if it’s complex, I want them to tell me what we just went through to make sure we’re on the same page. To make sure, in their words, everything makes sense.

Matthew Jarvis: 07:11 Yeah, I think that’s a good point. I’m glad that you highlighted the cash bucket or the war chest, because it’s a good go-to. To your litmus test, Micah, I like to make sure that the clients are, in fact, expressing that back to me. They’ll say, “Matthew, how many years of income do we have in our war chest? How big is our war chest?” That tells me, “All right, they’re understanding this message. They’re understanding that we have a buffer in place.” Sometimes I just need to remind them of that plan. “Remember we talked about this war chest? We said we had a five-year buffer in place?” “Oh, yeah, Matthew, I remember that.”

Whatever the current issue is … Right now, as we’re recording this podcast, maybe they’re worried about the government shutdown. I’ll say, “How long do you think the government can stay shut down?” “I don’t know, Matthew, maybe a few more weeks.” “All right. We have a five-year war chest, and maybe it stays shut down. Let’s say it stays shut down for another six months. Who knows? That still gives us four and a half years to ride this puppy out.”

Again, it’s trying to put it in terminology they can understand.

Micah Shilanski: 08:03 That’s the key right there. I just want to hit on that one real fast. You didn’t say they have a quarter million dollars in a war chest. You didn’t say they have $100,000 in savings, or they have $150,000, or $1 million in their portfolio, or $10 million. Matthew didn’t say anything of that. What did he say? He said they have five years of money in a war chest.

This is the important communication, because clients, even really smart clients, because money is emotional, sometimes they don’t make that clear transition. At least, that’s my experience, so Matthew, let me know if you disagree. They don’t make that clear transition to say, “I got $200,000 in the bank. That means I’m good for five years.” No, we got to break it down to them and say, “Look. You’re good for the next five years, because this is how your portfolio’s set up. Yep, that account that went down, that’s ten-year money. We don’t need to worry about that. That’s for the long term. It’s okay it goes down 15%, because, look, you got all this other money that’s going to help you along the way if things really do turn into another 2008.”

Matthew Jarvis: 08:58 I totally agree, Micah. You got to use words and terminology that they understand. Things like percentages, they don’t understand that. Words like “inflation” … Again, this is not to be demeaning to clients, but, Micah, you and I and our fellow advisors, numbers are in our blood. We think in numbers. Everything’s numbers. For everyone else, even if they’re an engineer, even if they’re a doctor, if they’re a rocket scientist, it’s their money. It’s emotion, as you said, Micah. We’ve got to really connect with that and make sure that we’re not flying over the top of their head, because it doesn’t help.

Micah Shilanski: 09:27 Absolutely. Let’s make a little transition here, Jarvis.

Matthew Jarvis: 09:27 Yeah.

Micah Shilanski: 09:30 Let’s make a transition from individual communication. I was being reactive. What are you going to do, proactive? That’s where we want to be, right? Yeah, something’s going to come up that we have to respond to, but in an ideal world, we’re going to be in front of these things. We’re going to be communicating proactively with our clients.

Or if you want, I’ll go first, because you went first last time. I don’t care. But, how do we communicate with our clients that tells them what the plan is, and what we’re doing?

Matthew Jarvis: 09:56 Yeah, Micah, why don’t you go ahead and take a stab at that from two angles? What you’re doing proactively when the markets are in turmoil, then maybe what you just do all the time, whether the market is up or down.

Micah Shilanski: 10:07 Sure. One of the things … Let’s start with the turmoil thing.

The test that we use when we get a certain amount of clients, when we get about seven or ten clients that reach out to us that are concerned about the market, this tells us to send something out to all of our clients. That’s the number that we use, because, in the past, that’s been fairly consistent. We don’t want to be, “The market dropped 500 points. Quick, send out a newsletter. It’s okay. Don’t sell everything.” Right? Because now we’re training our clients to be reactive to the stock market, and we don’t want to do that.

But, at the same time, if our clients start having concerns, we need to be able to address those concerns appropriately. Once we get about seven or ten clients that contact us, we’re going to put together a little message that is sent out to them. Whether that’s a little video that we send out with the advisor sitting down, just having a little chat … Not talking about the markets but talking about the long term. We go through the concept of the war chest again, the [inaudible 00:11:07]. We call it “buckets of money”. We go through the “buckets of money” concepts with them, and just talk about that, again, putting things in perspective.

Then, of course, if clients have a concern, because this is a mass email that we’re going to send out, to contact us. But being out there … One of the things that we constantly say to our clients is, “Look, the reason you came to us to help build a plan. We have a plan that incorporates things like this that are going to happen now. Guess what? They’re going to happen again, whether it’s in a year, five years, ten years, who knows when. These same things are going to happen, and your plan is built with this in mind.”

By communicating that at a mass scale, we get a lot of just positive feedbacks back. Says, “Yep, I knew that you guys had everything under control,” or, “Yep, this is what you guys have said before, but I really appreciate the reassurance that’s there.” Because sometimes, again, money is emotional. Clients will be a little bit more concerned.

Jarvis, how does that compare to what you guys do?

Matthew Jarvis: 12:02 I really like what you said about having a trigger of seven to ten clients ask about a theme, then probably everybody’s thinking about that. I like that.

Similar to you, I try to strike that delicate balance of being proactive and reactive. I don’t want to create Pavlov’s dog where every time the market goes down, clients expect emails from me. Typically, even … Unless the markets are in incredible turmoil, we typically don’t break our normal rotation of sending newsletters … We have two newsletters that go out quarterly. One’s at the beginning of the quarter with billing information, and then one’s middle of the quarter. Typically, I try not to break that cycle unless there’s something really crazy.

In those newsletters, we’re talking about long term what the markets are doing. We’re reminding them about the war chest. We’re reminding them about the income guard rails that we use. We use guidance dynamic distribution rules. We remind them how that works. But it’s just being proactive all the time. Talking about, good times or bad times, we’re prepared for the bad markets, Micah, just like you said. We plan for the worst and hope for the best.

Micah Shilanski: 13:04 Yeah. When we’re doing our review meetings with clients, one of the things I express in dollars, not in percentages, is, especially because we’ve had a raging bull market for the last decade, is to really so bad and to say, “When the next bear market comes, this is what’s going to happen.” We, again, in our meetings, it’s one of the things that I just want to drill in. “This is our cash reserve. This is our bucket strategy.” I show them their long-term bucket, and say, “Look, if we have a market correction,” and I generally just take 20%, “that means you’re going to lose X amount of dollars.” I show them, right there.

Of course, they understand this this is just an example, but I like to show them the dollar amount that their portfolio will go down if the market corrects, and then how we have cash reserves, how we have fixed income that should help us weather those storms. So, this isn’t a shock factor for them. They don’t, all of a sudden, their portfolio goes down $250,000, because the market corrected, they’re freaking out. Say, “No, that’s … We actually used a $300,000 example. You’re fine,” because we’re going to see those types of fluctuations.

We have found that, especially in a bull market, really important to do, so people don’t just memorialize that the market always goes up in value. Then when it has a hiccup, they start freaking out.

Matthew Jarvis: 14:31 Yep. I totally agree. In fact, I’m almost like a broken record on that. We’re looking at those, and similar to what you do, Micah, I have a pie chart printed of their accounts. I circle the bonds and the cash, and I said, “This is our war chest. Right now, it’s five years’ worth.” I circle the equities. “Here’s where our growth comes from long term, but remember, every four, five, seven years, this part’s going to go down by 20%. By the way, it’s not exactly 20%, and they’re not going to ring a bell at the bottom. It’s going to feel like the end of the world. Remember 2008?” “Yeah, I remember 2008.” “It’s going to feel like that again. We’re going to rely on that war chest, and we’re going to push through to the end of it.”

You’ve got to be training clients all the time. You can’t train them too much, I think, in that regard.

Micah Shilanski: 15:14 I fully agree. Let’s keep in mind that this is not a negative comment to your clients.

Matthew Jarvis: 15:14 No.

Micah Shilanski: 15:20 Because we, as advisors, need continual training.

Matthew Jarvis: 15:24 Yes, we do.

Micah Shilanski: 15:24 We, as professionals, need continuing education. We need to rejuvenate ourselves. We need to get re-indoctrinated in some of these things so we can be better advisors. That’s the same for our clients. You got to be in front of them with this information of how you have a plan, and how that plan is for them.

I tell my clients, “I don’t care what the S&P 500 does. You’re not retiring based on the S&P 500. Here’s your retirement plan.”

Matthew Jarvis: 15:49 Micah, another technique I use real often that just came to mind … When a client calls in and they’re concerned about whatever’s making headlines right now, I’ll say, “Mr. or Mrs. Client, could you give me an example of one of the companies that we own in your portfolio,” which is basically every company, because we index, “that you really respect?” They’ll say whoever they say. I’m from Seattle, so people say, “Boeing.”

I say, “Great. I know you don’t know any of the board of directors at Boeing personally, but when the board meets next month, do you think that they’re going to shut down production of the 37 line because of X, Y, Z?” They laugh. They say, “Of course not, Matthew. Of course, they’re not going to shut down that line.” “Okay, do you think the topic would at least come up?” “Yeah, it probably would.” Interest rates, whatever it is, that may be an issue for them to discuss. Tariffs, whatever it is. “Great. But do you think that Boeing is going to just shut down because of this?” “No, Matthew, of course they’re not.” “Great. Neither are we.” Neither is almost every other company we own, right?

Micah Shilanski: 15:49 Right.

Matthew Jarvis: 16:41 They are full of smart people. They’re going to find a way past whatever the apocalypse of today is. It’s, again, trying to take it out of the headlines and into real life.

Micah Shilanski: 16:51 Yeah. I think that is a really great example. Take it out of the headlines, put it to real life, put it to them.

What are some action items that our listeners need to be thinking about? What can they now take this information and go and do in order to better help their practice and better help their clients?

Matthew Jarvis: 17:09 Yeah, boy, this could really be a long list. Probably the first one I would give is that you need to have a regular communication schedule with your clients, regardless of where the markets are at. You need to know … In my office, we actually have this on a wall calendar, a big laminated calendar on the wall. We mark our communication schedule. When we’re going to send emails, when we’re going to send printed newsletters. I still like to send printed newsletters. When we’re going to do client education events. So that we’re on a regular schedule, so that we can stay proactive with clients regardless of the markets.

Because, Micah, as you pointed out, they’re constantly being bombarded. I want to make sure that I have a steady drip in there as well.

Micah Shilanski: 17:47 I like that. I would add inside of there … I agree. We do our newsletters. We do it electronically. A lot of our newsletters are more family focused. We get much higher reads when we talk about that. We have a side column that talks about something on the financial planning perspective, but a lot of family updates is, quite frankly, what we send out to our clients. It goes really well. But, constantly getting them communication.

I would add to that in, when you’re meeting with them, or in your communication, how are you articulating what your plan is and making sure the clients know that? There’s a great survey that came out, and I can’t put my fingers on it, but pretty much, it came out and said about 70% of advisors say they articulate to their clients that they have a financial plan, and about 30% of clients say their advisors tell them they have a financial plan.

Regardless of what you’re saying, it’s what is the client hearing? You got to make sure your clients know this. That’s what I’m going to say is on your list. Make sure your clients can know, and they can articulate back what their plan is.

Matthew Jarvis: 18:49 Yeah. Maybe we’re going to keep diving deep into this one, but in that communication, be it in a newsletter or an email or in the office, please never, ever use canned economic commentary, or really economic commentary of any kind.

Micah Shilanski: 19:02 [crosstalk 00:19:02]

Matthew Jarvis: 19:01 Right? Don’t give your hypothesis or someone else’s breakdown on the federal reserve interest rate movement. That’s just noise. It’s just garbage. It doesn’t help a client at all. Anytime I say economic commentary, or any time I’m providing economic insight to clients, it’s always very big picture. I mean very big picture, like the last 30 years, the last 50 years. Maybe we’re looking at the rate that computers have increased over the last 50 years. Anything that provide really long-term perspective, never any commentary about interest rates or the next three months, or six months, or even the next couple of years. It’s got to be very high level, and it’s got to be very, very, very easy to understand.

Micah Shilanski: 19:39 I think a lot of that reason behind that, so, Jarvis, correct me if I’m wrong, but if you stay at the high level, you’re forcing your clients to think long term.

Matthew Jarvis: 19:48 Yes.

Micah Shilanski: 19:48 If you dive into the next three months’ prediction, you’re forcing your clients to be short-term investors. That’s a hugely different mentality, right there. What is the language you’re saying to them? Jarvis, what you’re telling your clients is, “You got to think long term,” subtly. Right? You’re not just saying it to them, you’re giving them long-term examples which put them in the frame of mind of always thinking long term.

Matthew Jarvis: 20:09 Yeah, and actually, if I can confess, obviously, Micah, just like everything I do in my practice is for my clients, right? But I got to confess, a lot of it’s to make my job easier, too, because I want to be a really good advisor.

I don’t like being wrong about things. If I’m giving any type of short-term market prognostication, there’s a really good chance I’m going to be wrong about that. Now, maybe some of you listening have a perfect track record on this stuff. I don’t. I never want to speculate on when anything is going to change. When the market’s going to go up or down, or what the federal reserve is going to do, or what inflation will be. I don’t speculate on any of that, because I don’t want to be wrong, ever. I am still wrong sometimes, but I know that if I go long term, I’m going to be right.

If I say, “Listen, the government shutdown will work its way out.” All right, I’m going to be right on that one. If I say, “It’s going to end by next Tuesday,” I’m probably going to be wrong on that one.

Micah Shilanski: 20:56 Yeah. I really like that.

The other thing that I would say, Jarvis, is when you’re articulating … I think we’ve talked about this before, but I guess I’m just going to bring it up. I think it’s so important. When you’re articulating things to your clients, put it in dollars and cents and not percentages. I don’t want, “We have 3% and 15% fixed income, and the balance in equities and international percents,” blah, blah, blah. No, it’s how much dollars do you have where, and why is that important? I think that is just so empowering to clients, because it really helps them understand their money versus percentages.

Matthew Jarvis: 21:33 Yeah. I often say that, in a client’s mind, percentage equals marshmallow. Which is kind of silly, but just keep in mind, every time you say X%, the client is hearing marshmallow. It’s such a foreign concept to them, thinking in percentages.

Micah Shilanski: 21:49 If you want a quick example of that-

Matthew Jarvis: 21:51 Yeah, please.

Micah Shilanski: 21:52 Take estate planning. If you’re doing estate planning with a client, and they’re going to give 25% to each kid, or 25% to a grandkid, break it down from percentages and tell them dollar-wise what that means, and look at the reaction of their face. They’re going to probably be shocked at what 25% actually is, or 30% actually is. Again, smart clients, they know a lot. This is just not their vernacular. It’s not the language that they speak most of the time. We can’t take that for granted.

Matthew Jarvis: 22:19 Yeah. We really can’t.

Another action item, and we’ve been talking about addressing clients, but I want to step back on this action item and, really, to address your team and yourself. When a client calls in, who answers the phone? Micah, I know it’s not you. Your team answers the phone, and if they say … If they call my office and [Colleen 00:22:39] answers, “Colleen, I’m so glad I got you. I’m really concerned about the markets. They’ve gone way down. I’m really worried.” If Colleen says, “Yeah, boy, me too,” now we have a big problem. If the client says, “What’s Matthew saying about it?” And she says, “Geez, I don’t know, he’s probably pretty worried right now,” that’s a big problem.

I always make sure, with my team, when I have my weekly team meetings when the market is in turmoil, I say, “Listen, does anybody have concerns about the markets or about what they heard on the news?” I want to get that out ahead of time, and not because I want Colleen, my office manager, giving economic commentary. Absolutely not. I want her to answer the phone with authentic confidence in our plan. I want her to be able to say, “Yeah, boy, the markets have been kind of crazy, but it’s so great that Matthew’s got a good plan in place for you.” I want her to be able to say that with sincerity and in all truth.

Micah, how about your team? You’ve got a really skilled team. Do you just let them fend for themselves, and toss them a copy of the Wall Street Journal and see if they get caught up?

Micah Shilanski: 23:39 No, we’re paperless. I tell them to go to MSNBC.com to get their market updates. I like Cramer.

Matthew Jarvis: 23:45 I’ve been to your office. The CNN screen is going the whole time with the volume on.

Micah Shilanski: 23:49 With the volume on. That’s right. That’s what I’m watching during the meetings, yeah. Of course, no.

No, it’s the same thing. One of the things that we … We can’t force our team to do this, but we highly encourage, and pretty much all of them do, is saying, “Look, if you’re working here and you really believe in our financial planning, then you need to go through your own financial plan with us.” We do a financial plan for all of our team members. When it comes to the investment section, guess what? We’re investing in the same things we recommend for our clients. We’re putting our money where our mouth is. This is your next action item. Are you doing the same thing for yourself that you are recommending to clients? Not just lip service. Are you actually doing the same things?

It is such a different conversation when you have a client that says, “Oh, my gosh, Micah, the XYZ market’s down.” I could say, “Yes. My money is invested the exact same way yours is.” Now, I might have different allocations. I might take a little bit more risk, but, “Yeah, I’m in the same funds that you’re in. I’m in the same stocks that you’re in, and I know what that’s like.” When the client knows that, and when your team is on that same page, they know what your client’s going through, they can talk, you can communicate with them, reassure them what’s happening.

It’s their money, too. It’s not someone else’s issue, it really becomes … They really understand why the client is calling, but they have that reassurance from you consistently that everything is going to be okay, because your team believes in that planning process. If they don’t believe in the planning process, why are they working for you?

Matthew Jarvis: 25:21 Yeah. I completely agree. We could really do a whole episode, and we have done episodes on integrity. But, yeah, following your own financial advice is really critical, just from a moral standpoint. But, the amount of confidence it instills in a client is incredible, just like you said, Micah. “Our money’s invested right alongside yours. We’re following that same advice. We have the same war chest,” the whole thing. You got to be there.

Because when a client’s calling you and they’re concerned about the markets, really, what they just want is a hand to hold. This is, again, no disrespect to clients. They want to know that everything’s going to be okay. Any assurances you can give them, the more you can give them, the better off you’re going to be.

Micah Shilanski: 25:58 Where do you hold that line? You get the client that calls in, and … Now, I haven’t had this with this market correction, it’s been years. But I’m trying to think what I would do if someone called in and said, “I can’t take it anymore. Sell everything.” What would you do?

Now, let’s not say that there is an emotional issue, like the death of a spouse, because now that’s a whole different category that we’re having to deal with when you get those emotional phone calls. But someone’s concerned about the market, and they want to do something 100% against your advice. Now you really got to sit down, and I think you have to do two things.

One is saying, “All right, as an advisor, how can you help coach them off the ledge?” Can you really find out what their main concern is? How do you articulate that back to them? How do you get them on the same page? But, let’s say you’ve done all those things and you can’t get them on the same page, and they’re going to do something that’s detrimental to their financial plan. Jarvis, what do you do?

Matthew Jarvis: 26:56 I’ve got to start, Micah, by really highlighting what you said about coaching, and really taking extreme ownership. If a client calls in and they’re going to go dramatically different than my advice, the first thing I want to do is step back and take ownership, and say, “All right. Where did I go wrong coaching this client that they want to do this?”

Just as an aside, for me it’s non-negotiable. If you want to torpedo the financial plan that you built, setting aside, like you said, Micah, life-changing events, or changing of goals or priorities, if you want to torpedo it … I just can’t be any part of that.

An example that comes to mind from several years ago, I had a client, he was convinced that all of his money should be moved into oil and gas investments. I said, “We don’t do that. We don’t take concentrated positions,” especially not in commodities. We just don’t take concentrated positions at all. He says, “Matthew, if you don’t do this, I’m going to leave.” I said, “Please, by all means, leave.” The way I position it … I don’t want it to ever sound spiteful of vengeful.

Micah Shilanski: 27:52 Or arrogant.

Matthew Jarvis: 27:53 Or arrogant, or not too arrogant, at least, for me.

I would just say, “Mrs. Client, you pay me a lot of money in fees, and I deliver massive value to you for those fees, but if you’re not going to follow my advice, then you shouldn’t be paying me money. I just don’t feel right about that.” I try to take ownership of that. I say, “I wouldn’t feel right for you to pay me money and not follow my advice, so I’m going to go ahead and resign from your accounts. We custody at Fidelity. You can call them directly, you can move your money somewhere else. But I can’t assist you anymore on this. As a gesture of good faith, I’m refunding last quarter’s fees just so you know that there’s no hard feelings.”

Micah Shilanski: 28:28 No, I think that’s the line you have to tow. It’s not a threat. This is a conviction. This is completely different.

Matthew Jarvis: 28:33 It’s not a punishment.

Micah Shilanski: 28:35 Right. It’s the aspect that says you are so committed to what you’re doing as correct, you are not going to do something wrong. Just like you wouldn’t recommend something wrong to a client, why would you let a client do something 100% wrong that’s going in the wrong way? Because, at the end of the day, let’s just play this scenario out. Let’s say, Jarvis, that they did this oil and gas … They went and bought those concentrated positions with you against your advice. Then oil goes from 90 to 40 bucks a barrel, and they’ve lost half their money. Who’s responsible? Who’s the client going to blame?

Matthew Jarvis: 29:10 Yeah. Or even if it goes from 90 to 200, now we’ve set this precedence that we can time the market. What about my other clients, and others saying, “I heard that you invested [Dave’s 00:29:20] money like this,” and now [Sally 00:29:22] wants to know to invest her … It’s a slippery slope for me. I don’t allow any slippery slopes in my practice, because I don’t want to fight that battle. I just want to make that decision once. “We don’t do concentrated positions.” End of story, non-negotiable. I never have to have that discussion again.

Micah Shilanski: 29:36 On our onboarding process, we talk about when we fire clients. We have that conversation with every client from the get-go of what our relationship’s going to look like, and how we’re going to end this potential relationship if this doesn’t go. I make it very clear to them on that onboarding process.

It says, “Look, if it becomes clear that your retirement is more important to me than it is to you, then all we’re doing is wasting my time and your money. We’re going to respectfully bow out of this relationship. We’re going to do it as easy for you as possible. We’re not going to make it punitive or painful, but this is our job to look at, to make sure we’re adding this value. If you start doing things that are contrary to our advice or undoing our financial plan, we’re out, and this is why. This is how important it is to us.”

Matthew Jarvis: 30:27 Yeah. It really is.

Another action item would be, this is simple but it’s important, reminding clients that your door is open. I always, after every meeting, after every phone call and every newsletter, I always say, “You know what? We always love to hear from you. If you ever have questions or concerns, even if they don’t seem related to your portfolio, anything that could even remotely have to do with money or retirement, or just your life in general, please never hesitate to call or email. We always love to hear from you.”

Then when they do call or email, we always say, “Yeah, boy, thank you so much for calling. We always love to hear from you. We always love to get your emails,” whatever it is. I don’t want them to be embarrassed. Remember, money is emotional, Micah, as you said. I don’t want them to be embarrassed, and be really stewing over the markets, and when they finally build up the courage to call me, it’s because they want to panic.

Micah Shilanski: 31:13 If a client was, maybe we’re transitioning this a little bit, too, but if a client was super panicked … I’ll go first on this one.

Matthew Jarvis: 31:20 Yeah, please.

Micah Shilanski: 31:20 If a client was super panicked or a got an email, or something like that, on a Friday night that came in, and I see it in my … Because I have someone else that checks my email for me. If they contact me and say, “Hey, Micah, [Sue’s 00:31:32] really concerned,” I’m going to give her a call on Saturday, because I want Sue to know how important this relationship is to me, and I don’t really care that it’s a weekend.

Now, am I going to schedule weekend appointments? No. Am I going to make this a habit? No. But if a client has this heightened concern, and I don’t care what the concern is, if they have a concern, now it’s a concern for me. Now my team is going to be proactive in reaching out to them. You want to talk about changing a concern with a client, whether it’s they got an IRS letter on Friday afternoon … IRS letters only come on Friday afternoon, in my opinion, because our office is closed Friday afternoon.

Matthew Jarvis: 32:06 Or just before a holiday, yeah.

Micah Shilanski: 32:08 Yeah, exactly. Just before a holiday, or a 1099 that they forgot about. Whatever those things are, that’s when they always come. You being proactive in that communication and, just, Jarvis, picking up what you’re saying, letting them know it’s okay to communicate with you and how important it is, eases so much of their concerns because they know you’re there for them.

Matthew Jarvis: 32:30 That’s right.

Quick example of that, I got a call over a weekend from a client. It’s a couple years ago. I can’t remember how the voicemail got to me, my team must’ve forwarded it to me or something, but … This client called on a Saturday and was very panicked and was insistent that $50,000 had been stolen from his Fidelity account. Maybe he had emailed, or … Anyway, Colleen reaches out to me on a Saturday, says, “Matthew, you really need to call this client. They think that $50,000 has been stolen from their account.”

I log in really quickly. I pull my laptop, which I would never do on weekend, but this is obviously a panicked call. I look it up, and I call him. What had happened is they had a position that had been recharacterized. There was a change of ticker symbol. Fidelity had shown a $50,000 withdrawal of that money coming out of the one ticker symbol into a new one. It was a repurchase or something funny. But all the client saw was $50,000 withdrawal. They didn’t see the next line of the $50,000 going back into the next position.

They were getting ready to call the FBI because they had thought for sure that money had been stolen from their account. I don’t know why they thought the FBI, but … Had I ignored that urgent call that was just like, “Matthew, call me right away,” on Monday I probably would’ve had the FBI at my office. No theft had occurred, but I still would have had a big problem.

The client, by the way, forever had gratitude towards me for just giving him a call back. Because, in their mind, money had been stolen from their account, even though it was just a misunderstanding.

Micah Shilanski: 33:56 Yeah. At no point did they think it was you, right?

Matthew Jarvis: 33:56 No.

Micah Shilanski: 33:58 But they were freaking out because they got a statement, because custodians can’t put a statement together clients understand, right?

Matthew Jarvis: 34:03 No, yeah. Talk about Greek.

Micah Shilanski: 34:06 I think that’s a lot of action items. I know we could go more, but I’m thinking that’d be good, because I actually want you guys to implement some of the things that we’ve talked about. We’ve given over several things to pick up and to start doing to be proactive with your practice, to really, of course, focus on clients.

Jarvis, anything else you want to add?

Matthew Jarvis: 34:23 Boy, I guess I would just reemphasize, have a consistent timing of communication to clients. Just consistently stay in front of them in a way that is beneficial to them.

Actually, I would leave you with one last thing. I have a client, he’s a retired engineer. He managed engineers. He had this mantra of, “Do it in crayon.” He was in a very high-tech field. Anytime somebody brought a presentation to him … They would have this slide deck. He would say, “Just draw it out on a piece of paper for me.” “I can’t. I have this slide deck.” “Then I don’t want to hear it. If you can’t draw it out on a piece of paper, then don’t waste my time.”

The same goes for us with clients. We feel like we have to bombard them and impress them with our massive amount of knowledge, but really, you should be able to explain any financial concept, especially market turmoil, on a piece of paper. That’s Micah’s bucket strategy. He can do that on a piece of paper. It’s my war chest. It’s got to be in crayon.

Micah Shilanski: 35:19 The simpler the better, so the client can embrace it. I love it.

As always, Matthew, this has been a pleasure. If you’ve made it this far in the podcast, hope you like us. Make sure you’re rating us five stars or no stars, that’s what we like. Jump onto our website, ThePerfectRIA.com. If you have questions, anything, topics you want us to cover, jump on there. Anything’s fair game. We’re getting some good feedback from people. We’d love to get more for what topics we’re going to cover in the future.

Matthew Jarvis: 35:51 Micah, thank you. I appreciate the insights. Thanks for keeping me on my toes, as well, both in bad markets and in good markets. It’s always a lot of fun.

Micah Shilanski: 35:58 Always a lot of fun. Until next time, happy planning.

Matthew Jarvis: 36:00 Take care, guys.

Announcer: 36:05 You have been listening to the Perfect RIA Podcast. For more information on how you can build a highly effective financial planning practice, please visit ThePerfectRIA.com.