One of our core tenets and values at The Perfect RIA is reality, not theory. Matthew and Micah discuss how we get from a theoretical environment to a real environment – especially when it comes to meetings with clients where we aim to deliver massive value. This episode is full of visuals on the whiteboard so be sure to check out the video version of the podcast so you can get a better understanding of the concepts.
You will hear about the importance of the words you use in meetings as well as what you should be doing to avoid miscommunication with clients. Matthew and Micah also share tips on how to set expectations in ways that are clear and making way for success. They share detailed examples and insight into how to smooth out discussions and give clients confidence in their retirement.
Professional activity performed in a state of distraction-free concentration that pushes your cognitive capabilities to their limit. These efforts create new value, improve your skill, and are hard to replicate. – Cal Newport Setting up a Surge schedule for your office is the most powerful step you can take to increase your effectiveness while being 100% intentional in Delivering Massive ValueTM.
Good advisors manage their clients’ wealth. Great advisors manage their expectations along the way.
From monthly distributions to Monte Carlo analyses and everything in between, there’s so much information a financial advisor could cloud their clients’ minds with—but don’t your clients pay you to make their lives easier? In this article, you’ll learn how to become a more empathetic financial advisor, forge deeper connections with your clients, and make each client feel secure in their journey ahead.
Before you pull out the one-sheets or print a stack of reports for that next meeting, put yourself in your client’s shoes. Many financial advisors with knowledge, insight, and passion for helping their clients achieve their dreams believe the best way to serve them is to explain everything they know that supports their financial management decisions. But is that what your clients really want from you?
There’s a time and a place for detailed tables and multipage reports. But when a client or prospect comes in for a meeting with a financial advisor, all of their concerns can be distilled into just two questions: “Can I retire?” and “Do I trust this person to guide me into retirement?”
By focusing on both questions, you can transform your prospect and client meetings into welcoming educational experiences and empower every person you meet with to become an eager participant in managing the wealth they’ve worked so hard to build. Here’s how.
You and your team may be handling all the big-picture stuff, but to your clients, it’s all about the details. Don’t lose sight of the issues you might consider small; to your client, they could be more important than you realize.
Here’s one example: Matthew Jarvis and Micah Shilanski, hosts of The Perfect RIA podcast, always schedule their clients’ distributions between the 5th and the 25th of each month. Why? As Matthew explains, “I want to make sure, especially at year end, that if a distribution gets tripped up because the day falls on a weekend or a holiday, it doesn’t trip over into the next month or year.”
To prevent this potential complication, ask your clients which day of the month between the 5th and the 25th works best for them for the distribution. Then, ask if you should move that date back a couple of days so your clients can avoid holiday or weekend delays and know they’ll always have their money when they need it.
These might seem like a tiny thing to you. But for a client about to embark on a serious life change, your attention to these “little” details makes all the difference.
When an advisor isn’t careful about introducing new concepts, they can inadvertently raise more questions than answers. If prospects leave your office more confused than they were when they came in, try losing the industry jargon and connecting with them as people.
“It is the highest level of skills of a financial advisor to be able to communicate complex topics in layman’s terms,” Matthew agrees. “I don’t want to go to the client and say, ‘Who would you like to serve as attorney-in-fact and contingent or alternate attorney-in-fact?’ They’re going to say, ‘I already have an attorney. Why do I need an attorney?’”
Instead, consider how different a conversation you might have if you begin like this:
“If you’re not able to make decisions for yourself—let’s say, heaven forbid, you got sick or you were in a car accident, or you got dementia and you can’t make decisions for yourself—who do you want to make decisions for you?”
This is a situation the client can understand, and this thoughtful framing helps the client get their bearings and leads the conversation in a productive direction. When you take the time to explain how each decision affects your client using the language they understand best, they’ll instinctively know they’re in good hands.
Your clients may not understand Morningstar ratings or asset location optimization, but they remember the recent downturns in the market, and they can absolutely understand why they might need five years of cash in reserves in case the markets tumble the day they retire. That’s why top advisors, Micah included, continue to reinforce these key concepts throughout their entire relationships with their clients.
And helping clients understand the important concepts that drive your approach to financial management does more than just keep them informed about your plans for their wealth. It’s also an important step in the vetting process that helps you determine whether a client is the right fit for you.
Micah agrees. “If they don’t believe in the concept we’re talking about—if we don’t have a 30,000-foot-view agreement on this—then there’s no point in talking about dollar amounts. If a client doesn’t want to have five years of protected income, they are not an ideal client for me.”
That’s why it’s so important that your client understands the concepts you rely on. Helping clients visualize the information they need to understand the best strategy for their money enables them to become active team players as you guide them through retirement and into the future.
Avoid any terminology that you wouldn’t hear a client using in everyday language. - Matthew Jarvis Share on X
I never ask clients for bank statements but I do ask how much gets deposited into your accounts each month after they take out all that other stuff. – Matthew Jarvis Share on X
If we don’t have a 30,000-foot view agreement on this, then there’s no point talking about dollar amounts. The first thing we need to have is a concept. – Micah Shilanski Share on X
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Micah Shilanski: Welcome back. Super excited to be here today with another amazing episode of The Perfect RIA podcast, and of course, with my host, the legendary Matthew Jarvis. Jarvis, how are you doing, bud?
Matthew Jarvis: Micah, good to be here. We’re actually in Alaska together right now, so if you’re listening to this in your car, when you get to the office, go to our YouTube page and you can watch the video, which is going to be critical because we’re actually illustrating on the whiteboard behind us, or if you’re driving, you’re going to have to visualize, eyes open, visualize what we’re doing here today.
Micah Shilanski: Yeah. I love how your eyes were closed when you said that. It’s outstanding. Now, this is throwing my mojo off a little bit, being in person. Right?
Matthew Jarvis: Yes.
Micah Shilanski: I’m used to standing up behind my desk and moving around and talking to you, so I’m going to bounce back and forth, but I think this is going to be great. So, one of the things that we were all about, our core tenets, our value inside of the perfect RIA is reality, not theory. So, I don’t want lab coat information. I don’t want theoretical information. Now, don’t get me wrong. I like to pontificate from time to time. I like to have a beer, smoke a cigar, talk about some other stuff that goes on there. So, I’m all about that in its proper place, but one of the things about being intentional, which is another one of our core values, is being intentional is knowing where that time and place is from a theoretical environment to a reality environment. Here’s a quick example. If we have a mastermind or smoking a cigar, we’re out on the deck, we’re doing this stuff and we want to pontificate, I am all about it. I support that.
Matthew Jarvis: Sure. Of course.
Micah Shilanski: Let’s push our minds.
Matthew Jarvis: Yeah.
Micah Shilanski: When I jump into a conference room with a client, I am not pontificating. I’m not talking theory. I have taken my lab coat off. I have put on my practitioner hat, my financial advisor hat, my client-facing hat of how do I deliver massive value to those clients, and Jarvis, as you know, it’s not just about what I know. It’s about how I can communicate that.
Matthew Jarvis: 100%, and a real struggle we have as advisors is… Let’s use retirement income as a very specific example.
Micah Shilanski: Of course.
Matthew Jarvis: Whether they’re retired or they’re planning for retirement, there are the white papers and the research, which is really critical to know what are sustainable distribution rates, what are probabilities of success, what are the variation of returns, but those words will never go into a client meeting. If you walk into a client meeting and say, “Your probability of success is X,” you might as well have said that marshmallows are ridden on by unicorns on Tuesdays in Leprechaun Land, and this is not to be degrading to clients and prospects. It’s to say that these people are not experts. They come to you for your expertise, not to have you recite back to them what MoneyGuidePro printed out on page 47.
Micah Shilanski: Let’s just push back on this, right?
Matthew Jarvis: Yes.
Micah Shilanski: Because we would do the exact same thing… If we were meeting with an attorney with a client there, or an accountant with a client there, and the attorney starts going off on legalese, and they get all their legalese out, I’m going to hit the pause button and I’m going to say, “Hey, Mr. or Mrs. Attorney, thanks for that information, for the legalese. My understanding in my layman terms, so please forgive me, is this,” and I’m then going to explain it to the client. Then I’ll look at the attorney, “Is that about right?” Now, why am I doing that? Because the attorney’s incompetent, my client’s incompetent? No. They’re speaking a different language.
Matthew Jarvis: Yeah.
Micah Shilanski: Right?
Matthew Jarvis: Mm-hmm.
Micah Shilanski: I mean, it’s just not the same, and we can fall in that same trap.
Matthew Jarvis: Yeah. It is the highest level of skills of a financial advisor to be able to communicate complex topics in, we’ll call, layman’s terms. Let’s use your estate planning example. I don’t want to go to the client and say, “Who would you like to serve as attorney-in-fact and contingent or alternate attorney-in-fact?” They’re going to say, “I already have an attorney. Why do I need an attorney?” Instead, what are we going to say, Micah? I’m going to say, “Hey, if you’re not able to make decisions for yourself, let’s say, heaven forbid, you got sick or you were in a car accident or, heaven forbid, you got dementia-”
Micah Shilanski: We’re in Alaska. The example is you get hit by a moose on the way home. Right?
Matthew Jarvis: Yes.
Micah Shilanski: That’s our example.
Matthew Jarvis: But you’re still alive, and you can’t make decisions for yourself. Who do you want to make those decisions for you? Now the client and prospect can say, “Oh, wait. I get that scenario. I want Betty,” or, “I don’t want Betty,” whatever that is, but if I throw in some term they don’t understand, attorney-in-fact, alternate attorney-in-fact, they’re going to get lost by saying, “I don’t know what’s going on here, and I’m not sure how to respond,” almost a fight or flight.
Micah Shilanski: Yeah, amen. The worst thing that can happen in my opinion, please correct me if I’m wrong, but is the client thinks they know what you said, but it’s the totally wrong definition of terms. Right?
Matthew Jarvis: Mm-hmm.
Micah Shilanski: So, now they think they know what an attorney-in-fact is, and now they’re making a decision, but they have no idea what the real implications of that is, and it’s one of the first things we do in estate planning. I know you do the same thing. We start with definition of terms. Now, we don’t go through the legalese side of it. That’s inside of there, but I make sure if a client says, “Well, you know what? I want X to be my trustee,” perfect. Let’s talk about the role of a trustee. I want to define what those terms are right away.
Matthew Jarvis: Yeah, yeah. I guess the rule, Micah, and push back on this, would be really avoid any terminology that you wouldn’t hear a client using everyday language. So, if this isn’t a term that you would use talking to your friend, say, “Oh, jeez. If I died, who’s going to take of my kids?” Okay, that’s a phrase they’re going to use. They’re not going to say, “Who’s going to be appointed as guardian for my minor children?” Those aren’t phrases. So, Micah, let’s pivot this from estate planning to retirement planning, which is kind of the impetus of this podcast today.
Micah Shilanski: All right. So, we’re going to get a little edgy on this, but you know what? That’s the content that we like. So, leave us five stars before we get too edgy for you. Okay. So, one of the things I came across recently was an article, and this is the aspect where we get from our theoretical and we miss reality in there. So, it started off with some theoretical information about saying, “Okay, this is how we backdate stuff and Monte Carlo and [inaudible 00:05:42].” Okay. Those are different religious camps, in my opinion [crosstalk 00:05:44]-
Matthew Jarvis: Sure, sure.
Micah Shilanski: … how you’re going to do it, but those are fine discussions. Then this article dove down into talking about a script that they would give to the client, and then all of a sudden we’re reading this script and like, “This is crap. It just really isn’t…” One thing that stuck out for me as I was reading it is it said, “Hey, Mr. and Mrs. Client, if in the short term you can get a 27% rate of return, this is how much it will increase your income.” I said, “Holy crap. Did you just tell a client in the short term they’re going to get a 27% rate of return?” Because that’s what the client heard. Now, we had many issues with this statement right here.
Matthew Jarvis: Yes.
Micah Shilanski: One, what’s short term? That’s tomorrow, right?
Matthew Jarvis: Yes, and no client can tell you what 27% of a number is. I know that you as our listeners, Micah, you and I can do this. We can, “Hey, 27% of a million dollars, great, $270,000,” no problem, but they can’t do that. They don’t think that way. So, I’m not going to… The article is great. It’s written by an advisor we respect, so the technical analysis is accurate, and they were looking at the gap in the guardrails, but I would never say 27%. I would say, “Hey, if over enough time your portfolio grew by $200,000, then we could look at turning up your income,” because no one talks in everyday conversations about percentages. They talk in dollars.
Micah Shilanski: But I’m going to just stop you right there.
Matthew Jarvis: Please.
Micah Shilanski: I want to pull out this nugget-
Matthew Jarvis: Yes, yes.
Micah Shilanski: … that’s right there, because what you just said was that if over time your portfolio grew by $200,000, then we could look at this. We didn’t say short term. Now, you might say this is a minute detail. It is not, or I’m totally wrong, and you’re welcome to push back-
Matthew Jarvis: I’m with you.
Micah Shilanski: … is we have to define timelines, and setting expectations with clients. I’m going to get a task done and get your money sent out. Okay, perfect. This has to go to my operations team, and it’s going to take a couple days. I’m going to send it out. Well, I just got off the phone with a client. I said I was going to send the money out. They’re expecting the money this afternoon in their bank account.
Matthew Jarvis: Yes. Yeah, if not sooner.
Micah Shilanski: If not sooner. Why isn’t it there now? Micah said he was going to do it. I completely failed to set expectations on how long versus, “Great. You need money in your account? How about Wednesday of next week? That’s the 17th. Is it going to be okay if the money shows up in your account by then?” “Micah, I really need it this Friday.” “Great. Wonderful you let me know. We’re going to make sure that happens.” I’m setting expectations.
Matthew Jarvis: By the way, Micah, something you didn’t mention, just for the sake of time, is you’re watching the client’s body language in the discussion. So, if Micah says, “Hey, it’s going to be next Wednesday,” and the brows tighten a little bit, there’s a little bit of concern, that’s where I can remind them, “You know what? This doesn’t work like a bank account. You may recall how much interest your bank account earns. It’s a round number. It’s zero,” and we laugh. Maybe it’s 0.00. “This account, because we want it to grow, takes a little bit longer to get money out of, three to five to seven days unless you give us a heads-up,” and we’re going to go down that discussion. This is that small thing that separates the academics from the advisors that are delivering massive value. They know, wait a second, the expectations didn’t align with reality. I need to do adjustments here.
Micah Shilanski: So, we can apply those things right there that we know, setting expectations in a client meeting on something small like a distribution.
Matthew Jarvis: Yeah.
Micah Shilanski: We have to set the correct expectations on something larger like lifetime retirement income and what that’s going to work and how that income’s going to be there.
Matthew Jarvis: Yeah, and to go back to this 27% upside number or short term… Excuse me. Go back to this idea of in a short term. I would always say to the clients, “Perhaps, let’s imagine a scenario where there’s several years of really good growth, several years of really good growth, not 27%, not short term.” I want to always set that expectation so that I’m on the winning side. I’m also going to tell them, “Mr. and Mrs. Client, Murphy’s law of retirement is the day you retire, the markets go down, and probably by a lot, and I hate to be the one to tell you, and I’ve got a big smile, that’s probably what’s going to happen.
Matthew Jarvis: Great news. We’re prepared for that.” Here’s what I win for this. If that does in fact happen, and again, Murphy’s law is that it will, they say, “Matthew, you know what? Just like you told us, the market went down when we retired. I don’t know how you knew this. I’m so glad that we have our war chest in place.” Perfect. So, I’ve managed these expectations versus, Micah, to your point, hey, if the market goes up 27% in the short term, I’ve shot myself in the foot.
Micah Shilanski: Yeah. I haven’t done the math on this, but if you’re into a 60/40 portfolio, and not saying that’s what should, when you get a 27% in the short term [crosstalk 00:09:42] short term as two years.
Matthew Jarvis: Yeah, or medium term or-
Micah Shilanski: Yeah.
Matthew Jarvis: Yeah.
Micah Shilanski: Yeah. So, there’s some big expectations that we’re setting with clients.
Matthew Jarvis: Well, if you bought March of 2020, the bottom of the COVID panic, you probably-
Micah Shilanski: Fair enough. Fair. So, apparently, it is possible. All right.
Matthew Jarvis: It’s possible.
Micah Shilanski: All right, but setting those expectations is really, really important. So, a couple of big things here, and then let’s jump on the whiteboard.
Matthew Jarvis: Yeah.
Micah Shilanski: An example is we always have to be looking at this from a clear communication in the client’s language about how they spend money. Do they speak in annual terms? Do they speak in monthly terms? They never speak in gross. We always speak in net to the client. “This is the money that will be deposited in your bank account.” If I’m getting a client who’s getting ready to retire and they’re used to getting a paycheck every two weeks, I’m not going to talk about the $117,000 a year in retirement that they have.
Matthew Jarvis: No.
Micah Shilanski: That doesn’t make any sense. I’m going to talk about the $6,000 a month they had deposited in their retirement account every month.
Matthew Jarvis: But we could do a whole episode just on that. So, I know that there’s advisors that say, “Bring me in your bank statements.” I’ve never asked clients for their bank statements. Instead, I say, “How much money gets deposited in your bank account each month or twice a month,” after they take out all that stuff, and I’m using my fingers. After they take out all that stuff, the 401(k), the taxes, “What is the actual amount that goes into your bank account each month?” and then they’ll tell me, “Let’s see. It’s $4,720 twice a month.” “Cool. All right. Well, we want to make sure that in retirement you have about the same amount of income even though, great news, you’re not working.” So, again, I’m using all the same terminology that they use in their everyday life.
Micah Shilanski: Absolutely, and then we’ll make that distinction in there that says, “Great. You’re used to getting paid every two weeks in retirement. Most of your retirement checks,” because again, we deal with federal employees, “is going to come on a monthly basis. Your Social Security’s going to come monthly. Great news. With your IRA account, if you still want to get paid every two weeks, we can set that distribution to make sure that happens. I want to make sure this is the most convenience for you. What would you like, either monthly distributions like most retirees have, or would you like to keep doing it every two week?” I’m going to give them an option.
Matthew Jarvis: Yep, and that’s where we’re delivering massive value. You might think, “Well, that’s not massive value, one payment versus two payments,” but for that client it is. You’re now the first advisor who understands their needs, who asked what’s important to them. They don’t care about the 93% probability of success because it means nothing to them, and, hint, it means actually nothing to anybody. It’s not even a real thing. It’s just a lens for doing forward projections.
Micah Shilanski: Yeah, and it’s just so much of a tangent. Right?
Matthew Jarvis: Yeah.
Micah Shilanski: We haven’t even jumped into this other stuff, but sometimes clients will be like, “Well, why shouldn’t I take out a lump sum of money and just manage that out of my account?” I say, “You know, Mrs. and Mrs. Client, you’ve done a great job for the last 34 years. You’ve aspired over a million dollars in a nest egg. I’d hate to stop doing what works. This is working on a great basis. You’re getting paid every two weeks. Your pension and Social Security should come in on the 1st of the month based on this. How about we send your retirement check on the 15th? How does that work for your bank account?” Then the wife or whoever runs the checkbook will tell me, “Well, really, all of our bills come at this time. Can we get the money here?” Perfect.
Matthew Jarvis: Yeah.
Micah Shilanski: Right?
Matthew Jarvis: Yeah.
Micah Shilanski: That’s what I’m going for, is when do they want the money. Now they’ve got an extra 50 grand in the bank account for a zero number. Right?
Matthew Jarvis: Mm-hmm.
Micah Shilanski: But I want to make sure they have the income when they want it in their terms to make sure they feel comfortable with this retirement transition.
Matthew Jarvis: Here’s a quick Matt and Micah tip, and Micah, I want to get to the whiteboard here.
Micah Shilanski: Yeah, yeah, yeah.
Matthew Jarvis: Matt and Micah tip, we always do our distributions between the 5th and the 25th of each month. Why? Well, because of holidays and weekends. I want to make sure especially at year end that a distribution, if we’re planning for R&Ds or anything else, doesn’t get tripped up because the day falls on a weekend, on a holiday, and then it trips over into the next month or year. So, I always ask clients, “Which day of the month between the 5th and the 25th works best for you for the distribution?” “Oh, I would love it on the 17th.” “Perfect. We’re going to set it on the 17th. Just remember that when, not if, when the 17th falls on a weekend or a holiday, that might get bumped forward or backwards a couple of days. Is that enough flexibility for you, or should we move back a couple days to the 15th so that we know that you’ll always have it by the 17th?” These seem like little things. They make all the difference.
Micah Shilanski: It seems so trivial, right?
Matthew Jarvis: Yes.
Micah Shilanski: But really, what this means to the clients then is that you care about their stress and [crosstalk 00:13:24]. Money’s emotional.
Matthew Jarvis: Incredible.
Micah Shilanski: [crosstalk 00:13:27] clients. It’s so emotional, and we want to make sure, especially if they’ve had abundance to successfully move into retirement, we want to make sure they have that confidence going forward.
Matthew Jarvis: Perfect. By the way, we’re going to talk about this in great detail as it relates to prospecting later this week on our Power Session on Wednesday, May 18th, where we’re going to go through how successful advisors double their prospect process by avoiding the five mistakes. But Micah, let’s take the theory of retirement distributions, translate it. When a client comes in, let’s say they have a million dollars because let’s do easy math, and they say, “Micah, how much can I take from my nest egg each month?” How do you answer that question?
Micah Shilanski: Perfect. Let’s do it.
Matthew Jarvis: So, for those of you listening, check out the video online.
Speaker 3: Hey, TPR Nation. It’s no secret that Matthew Jarvis and Micah Shilanski have some of the industry’s top registered investment advisory firm practices, and each year they have a waiting list of prospects waiting to come in and meet with them, and the reason? They deliver massive value at each and every meeting, including their prospect meeting. Want to know how the boys do it? Then make sure that you’ve signed up to join us at our next Power Session where we’ll unpack the five mistakes that most financial advisors make in prospect appointments, and guess what? I bet you’re guilty of at least one. Go online today to theperfectria.com and make sure that you’re signed up for this Power Session and every one thereafter.
Micah Shilanski: All right. So, let’s jump into this, this retirement income. Now, I’m going to do this in two ways with a client. I’m going to talk about the prospect way. Then I’m going to draw it out. Then we can give examples, especially even if our Backstage Pass and Invictus members can jump online and can see our one-page status report or buckets report that we give out, the guardrails report on your end that we do to clients.
Matthew Jarvis: Yes.
Micah Shilanski: Let’s walk through it from the prospect aspect.
Matthew Jarvis: Then real quick, Micah, when you’re meeting with a prospect in person, are you standing up and drawing it on a whiteboard like we’re doing right now, or are you doing it on a piece of paper in front of them on the table?
Micah Shilanski: I’m doing it on a piece of paper in front of them, upside-down. So, the piece of paper is… Now, the upside-down thing, this is not a must. If you need to face it to you to draw it and make it and then do it with them, that’s totally fine. I love drawing this and not having it pre-done because it allows me to walk the client step-by-step.
Matthew Jarvis: Yes.
Micah Shilanski: If a client’s not used to this buckets concept and I give them this one-pager, even ours, which I think is relatively simple, I don’t exactly know where their eyes are looking. They’re jumping ahead. They’re not following along. When I draw it, their eyes are glued to where that pen is and what’s moving on, and I can explain it step-by-step, and it just makes such a great foundation. We do this for taxes, right?
Matthew Jarvis: Mm-hmm.
Micah Shilanski: The buckets is such an amazing thing for taxes to show right where the four different quadrants of the income tax is, and how do we reduce your taxes over time? We do that. We do this. We do estate planning, how money transfers. So, we love these illustrations that we draw with clients.
Matthew Jarvis: Micah, I’m jonesing right here because the other thing, or one of the many things it does, drawing it out, is it makes it 100% personalized, and I think about if I go to the doctor with an ache or pain or something, as I leave they hand me a five-page printout about that thing, and it always goes in the garbage because, what did they do? They pushed a button on their computer. It spit out the generic Wikipedia page off of WebMD or whatever, and they give it to me. But if the doctor says, “Jarvis, let’s sit down for a second. The reason that your knee hurts is because you’re not doing this certain exercise, and if you did this exercise, and let me practice it with you, your knee will stop hurting.” Cool. That’s 100 times more valuable to me than, “Here’s a printout on knee pain.” So, don’t think that this drawing thing is because Micah loves to draw and he’s secretly a child inside. He is, but that’s not the reason.
Micah Shilanski: That’s a different issue, but yeah.
Matthew Jarvis: Yes. This is critical, so every step matters. Thank you.
Micah Shilanski: I love it. Okay. The other thing that you’re going to see that… Now, I’m going to do this at a faster pace because I’m assuming you guys get how the math works, so I’m going to go through this a little bit quicker for time.
Matthew Jarvis: Please.
Micah Shilanski: It would definitely be slower, and I’m definitely looking and reading body language to make sure I have agreeance on those spouses as we’re going through this. The other thing is that when, not if, because I’m writing upside-down, I do a number backwards or I spell something wrong, I’ll make a quick little joke. “Sorry, I didn’t go to art school. I went to school for math, so my math is pretty good. Art I’m still working on,” and the clients will laugh. Right?
Matthew Jarvis: Yes, of course they do.
Micah Shilanski: That’s why I draw stick figures. So, there’s simple little things that are there. Okay.
Matthew Jarvis: Quick note, Micah, as you’re drawing this. Listeners, if you’re not a buckets user, which I’m not myself, if you’re not a buckets user, listen and say, “How am I going to apply whatever Micah’s talking about to guardrails, to,” whatever thing you’re using, “How can I apply this?” So, don’t let yourself get pigeonholed in your mind about this is only for buckets. It’s for all communication. Micah, please.
Micah Shilanski: I love it.
Matthew Jarvis: Let’s see it.
Micah Shilanski: All right. I feel like I’m being graded all of a sudden. All right. So, Mr. and Mrs. Prospect, you guys have done a phenomenal job saving money for retirement. Now, first thing is let’s just take all of the money that you guys have saved for retirement, and just for simplicity, we’re going to put it in this one big bucket. Let’s not worry about taxes. Let’s not worry about Roth accounts or anything else like this. Just for simplicity, let’s say all of that money was together, and let’s say all of that money was that million dollars or so that you have saved for retirement, which by the way, congratulations on saving a million dollars for retirement. This is going to go amazing. Now, what I want to talk about is, how does this generate a retirement income that you’re never going to outlive? How do you make sure you can do the things you always want to do in retirement? So, previously, we’ve already talked about their pensions.
Matthew Jarvis: Yes.
Micah Shilanski: We’ve already talked about their Social Security. So, we’ve already laid the groundwork for these things. Now we’re going to be talking about their investment income. So, Mr. and Mrs. Client, one of the things that we want to do in retirement, I make two… I can’t really make promises about investments, but I make two kind of promises about investments. Number one, the day you put money in the stock market, tomorrow it will crash. So, we know that’s going to happen.
Matthew Jarvis: Yes.
Micah Shilanski: Guess what the second one is. The day you retire, it’ll be like 2008 and the market’s going to crash, and they joke and says, “All right.” So, we know those things are going to happen at some point in retirement, so how do we plan for those? Five years is really, really important. We always want to be looking out over the next five years.
Matthew Jarvis: Yep.
Micah Shilanski: This is why we talk about cashflow so much in our meetings, because in the back of my mind I’m saying, “Great. What money are we going to need in the next five years? Any money you need to spend in the next five years does not belong in the stock market. Now, Mr. and Mrs. Client, why do we say that? Because 2008, ’09, ’10, ’11, ’12, when the market fell, it took about five years to get back to even.” You financial advisors are saying, “Micah, it wasn’t exactly five years.” You’re missing the point. The concept is what I’m going for here. It took five years to get back to even. So, Mr. and Mrs. Client, have you had retired in that point in time, you’re pulling out 4,000, 5,000, 6,000, whatever it is a month in income, and every month that market is dropping, and you’re selling, selling, selling, selling, selling, selling.
Micah Shilanski: What do you think that does to your retirement portfolio? It devastates it. This is what we want to avoid. We want to have sustainable retirement income. So, great news. We have a strategy that’s going to help with that. So, the first thing we want to do is we need to have a bucket of money, and we need to have cash. Now, inside of cash, what I want to see, I want to see one to two years of distributions. Now, what does this distributions mean? This means the money you need to pull out of the account. However much money you need to pull out a month, I want one to two years inside of this bucket, and guess what? This bucket is going to earn a whopping .9. right?
Matthew Jarvis: Mm-hmm.
Micah Shilanski: Just like cash in your bank account, this isn’t going to earn any money, but that’s not its job. Its job is to be here to provide you a monthly income to make sure you have it coming in your bank account.
Matthew Jarvis: Yep.
Micah Shilanski: So, it’s going to do its job really well. Then the second bucket we want to have is we want to have an income bucket. Now, our income bucket, this could be bonds. This could be CDs. This is something else, but really, this is going to be… So, I want five years, so this is going to be somewhere between three to five years of money that’s set aside inside of this income bucket. So, now between the cash bucket and income, we now have five years of money, which is protected, which is outside of the stock market that’s there because the stock market, it’s going to be volatile.
Matthew Jarvis: Yeah.
Micah Shilanski: It’s going to move up and down, which is great. Mr. and Mrs. Client, this is how you got a million dollars of investment savings, is by having a long-term approach and allowing that money to grow, and we need to keep that into retirement, and so we’re going to call this our growth bucket. Inside of our growth bucket, you’re going to buy and the market’s going to go up, and the market’s going to go down, and it’s going to be volatile, and it’s going to be all over the place. That’s inside of here. The biggest thing in this growth bucket is time. We’ve got to have this money have time to allow it to be invested, to allow it to grow so that, not if, when the stock market is down in value, we can keep taking money out of cash, and if cash starts running a little bit low, we can take money out of income, we can put it into cash, and we can keep sending you your monthly income that you’re never going to outlive. This is the importance of our retirement strategy. This make sense?
Matthew Jarvis: Yeah. There’s so many pieces. We could do entire webinars on this. In fact, we have done entire webinars for our Backstage Pass and Invictus members. You can log in and see those. For everyone else in the Nation, you can join us this Wednesday, but these kind of communications… Now, Micah, I’m curious, when you’ve had this drawing, and then you’ve had other things, and you asked a client or prospect, “Hey, any of these you’d like to take home versus me shredding them for you?” which one do they always take?
Micah Shilanski: They want the drawings.
Matthew Jarvis: They take the drawing every time. I even had clients bring their own version of the drawing back in that they drew. They say, “Hey, I was drawing this for my spouse. What did I miss?” “Oh, you’ve got… Most of it’s really good. Let’s just add a couple little things.”
Micah Shilanski: I love it.
Matthew Jarvis: You’ve also, Micah, pulled so many discussions off the table. We haven’t talked about Morningstar Ratings. We haven’t talked about asset location optimization. There’s so many things that we haven’t tried to cloud their mind with. The decision we need them to make is, “Can I retire? Do I trust Micah to guide me to retirement?” This gets us there faster than anything else.
Micah Shilanski: Now, Jarvis, in here, how much money a month did I say that they could pull out of their portfolio?
Matthew Jarvis: I haven’t heard a dollar amount yet.
Micah Shilanski: You haven’t heard a dollar amount.
Matthew Jarvis: Yeah.
Micah Shilanski: Right?
Matthew Jarvis: Yeah.
Micah Shilanski: This is intentional because if they don’t believe in the concept that we’re talking about, if we don’t have a 30,000-foot-view agreement on this, then there’s no point in talking about these dollar amounts. That’s right here. So, the first thing is we need to have a concept. If a client doesn’t want to do this strategy, they don’t want to have five years of protected income, they are not an ideal client for me. This is our model. So, step one is we got to agree on the concept.
Matthew Jarvis: There’s so much to unpack there as well because had you given a dollar amount, now the dollar amount’s up for discussion. Now if they’re talking to another advisor or they read something online, now we’re on this discussion. There’s no assumed rate of return. There’s no assumed interest rate. There’s no assumed inflation, tax rate, because all those become these little nuanced points, and especially when people are lost, they try to… Like someone who’s drowning, they try to grab onto whatever they can. So, if they don’t understand your concept and you say, “Well, the inflation assumption’s 3.5%,” “Oh, wait. Hang on a second. I heard 9% is the number,” and then we’ve lost the whole subject on that one thing.
Micah Shilanski: Yep, and now it’s a super easy discussion. When it comes time for the dollar amount, it’s a super easy discussion. Let’s say for simplicity that we need to pull $5,000 a month, let’s just say gross just to make math easy, $5,000 a month out. Okay, great. That’s 60 grand. Okay. I want two years in here. Now we have $120,000 in that bucket. I want three years in here, so now we have $180,000 in that bucket, and boom, here’s our five years of distributions that are right there. But they know the formula. They know what to expect, and the other part that I’m just geeking out [crosstalk 00:24:36]-
Matthew Jarvis: Yes. Yeah. Please, please.
Micah Shilanski: … but one of the things that I love about this is this plants a seed in their mind-
Matthew Jarvis: I was going to say that. Yep.
Micah Shilanski: … for when they have future distribution needs. Hey, Micah, in about four years we’re thinking about buying this RV. We’re thinking about moving. Do we need to change our cash [inaudible 00:24:50]? Oh, that’s a great question. We’d love to pay cash for our new house at $800,000. How does this money move over? Great. Let’s chat about that because it plants in their mind what they need to be thinking about. If I led with a dollar amount, that does not help them in planning. Now they say, “Great. There’s $5,000 a month, but I’m going to go ahead and pull 400 grand out of my growth account because I want to buy this RV.” That effects the 5,000 a month in income coming in. So, I got to show them the formula for this thought process, and it smooths out so many discussions and gives clients, boy, so much confidence in their own retirement because they understand this.
Matthew Jarvis: There’s so many other things that have been eliminated here. If we go with Monte Carlo probability of success, well, 93, well, can I do 91, 98, 87, 86, 32? So, that’s taking away… By the way, not only is this effective for communicating with prospects, this is laying the foundation, Micah, for everything you’re going to do with this client for the rest of their lives. This is not hyperbole here. This lays the foundation. I want to buy an RV. Cool. Let’s look at how the guardrails or the buckets work. I want to go to cash because I’m worried the market’s going to collapse. Well, we’ve got five years. Do you think that’s enough? No, I think we need six years. Cool. Let’s bump this out just a little bit. We’re not going to cash in the growth bucket until we have an issue here. So much is going on here that doesn’t meet the eye.
Micah Shilanski: One of the other things that will often come up is, how do we refill the buckets?
Matthew Jarvis: Yes.
Micah Shilanski: That’s a constant conversation, which is great, and says, “Well, the great news is when you talk about that concept of diversification, I’m sure heard of it.” “Oh, yeah, yeah. I’ve heard of diversification.” “Great. This is your diversification. We’re going to do some other stuff as well, but we have money in these different pots, which is super important, and it’s really easy. When,” I never say if, “when the market is down, we’re just going to take money out of your income. We’re going to take money out of cash. We have five years for that market to recover, and great news is when the market does recover, then we can look at it and we can take some money out.” But you know what? We’re also not going to be greedy. If all of a sudden next year that market just takes off and goes up, we might say, “Hey, we can do [inaudible 00:26:48] and do some other things. We might want to take some profits off and start replenishing things. Great news is you have the flexibility and the protection for when that market goes down.”
Matthew Jarvis: Micah, we’ll go into this more this week on The Prospect Process, but if I’m going through buckets or guardrails with a more do-it-yourself type of client and they say, “Oh, I think I could just do this on my own,” I say, “You probably could, but a couple things.” As you know, the IRS makes everything more complicated, and so while we illustrated one bucket, you actually have five different buckets. We’re going to have to slice each bucket accordingly. We’re going to have to take money from each one. So, where I want things to be really simple strategically, as soon as people start to begin this, “Oh, I could do this,” then I pour the fuel on.
Matthew Jarvis: Then I say, “Well, there’s this, and there’s this, and there’s this, and there’s this, and there’s this, and there’s this.” That’s when I’m going to open up. What advisors make the mistake on is they open up the fire hose from day one, from moment one. Nope. I need to offer them a glass of water, and if they say, “I think I can get my own glass of water,” well, out comes the fire hose. So, we’ve got to have both things ready. Don’t lead with a fire hose.
Micah Shilanski: Don’t lead with a fire hose. They made a decision to come and see you as a financial advisor because something was complex, and our job is not to dump our knowledge in them. Our job is to guide them on a path to meet their goals. Now, [inaudible 00:28:01] we’ve already had goals discussions [crosstalk 00:28:02]-
Matthew Jarvis: Yes, of course.
Micah Shilanski: … before that. This is only on this. Well, we do a whole thing on this, but simplify it. Whatever you’re doing, cut it in half.
Matthew Jarvis: Yeah.
Micah Shilanski: How do you simplify this conversation with a client?
Matthew Jarvis: I love it. Micah, let’s pivot into some action items so that we can wrap this podcast up. I would say action item number one, it is very, very, very, very difficult, took Micah and I years and decades of our careers to be able to translate technical knowledge into easy-to-explain things. So, while you could go and read great articles in a journey and from all these industry experts, translating into clients is very difficult to do. So, the action item is find a system that you resonate with, buckets, guardrails, whatever it is, find advisors who are doing that and say, “Show me how you do that,” and rip off and deploy, copy what it is they’re doing. It’s just going to take too long to figure out on your own how to take Monte Carlo analysis and translate it into client speak.
Micah Shilanski: I love that. I’m also going to add to that, if I may.
Matthew Jarvis: Yes, please.
Micah Shilanski: It was added at the client lens. So, often, when we’re bouncing around as advisors and we start talking about things, saying, “Okay, great. I do a 5% distribution,” blah, blah, blah, we know this stuff in the back of our mind, but that person’s not in a client mode, and what I want to see is sit down with them in client mode, how would they present this information? What questions are they going to ask?
Matthew Jarvis: Yeah. We could do a whole podcast on this, Micah. When you and I are reading technical articles on kitces.com or wherever, I can immediately tell without having looked at the bios who’s writing the article as soon as we get to the scripts. I can tell you when an advisor either is not an advisor because they’ve never met with clients, or they have a very small practice because the scripts they are using, no prospect or not many will say yes to that. So, it’s immediately apparent to you and I. For different advisors, it’s not apparent. So, again, look and say, “I only want to take script advice from people who are seeing clients. Technical knowledge? Yeah, I want the nerds for the technical knowledge.”
Micah Shilanski: Absolutely.
Matthew Jarvis: But I need advisors to teach me how to be an advisor.
Micah Shilanski: Second thing I want to do is whatever you’re presenting in your client meetings, short and [inaudible 00:29:48] of them just being stellar, clients raving about them, et cetera, and then actively wanting to take pieces with it. Cut it in half.
Matthew Jarvis: Yes.
Micah Shilanski: Cut your data in half. Now, when I go into a client meeting, just to be fair, I am prepared with a whole lot. Maybe that’s just for my own head trash that I have to solve. I’m prepared for a whole lot. I only pull out what is directly valuable right then in that client situation to go through, but cut your deliverables in half.
Matthew Jarvis: Third and final action item, go to theperfectria.com and register for this week’s Power Session where we are going to talk about how to double the effectiveness of your prospect process, a.k.a. get twice as many clients, and how to avoid the five mistakes advisors make in prospect meetings. If you are a Backstage Pass member or an Invictus member already, you’ll be automatically signed up. If you’re not a Backstage Pass or Invictus member, what’s wrong with you? But this is your chance as well. When we do these nation webinars, we open up for just once or twice a year to become a member and to get access to all of this great content.
Micah Shilanski: Awesome. Until next time, happy planning.
Matthew Jarvis: Happy planning.
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