Root Ready
A podcast for growth-minded financial advisors
Root Ready
Your Role as an Advisor Is Not What You Think It Is
A simple question from my dad years ago completely transformed my approach to financial advising: "What is your role as an advisor to your clients?" After several incorrect guesses, his answer stunned me with its clarity and wisdom - "Your role is to help organize your clients' thinking."
This perspective shifted everything. While many of us excel at helping clients understand financial trade-offs, I've come to believe that's actually step two in the process. The first and most crucial step is helping clients organize their thinking strategically before diving into tactical solutions. When someone asks whether they should contribute to a Roth or traditional 401(k), the immediate temptation is to analyze tax brackets and run projections. But what if we're missing bigger questions? Are they saving the right amount? Should retirement even be their priority? Might a brokerage account better serve their early retirement goals? Could funding a business venture yield a higher ROI?
The art of advising requires developing sensitivity for when to provide direct answers versus when to elevate the conversation. Sometimes clients genuinely need straightforward tactical guidance, while other times they benefit from being gently guided to more strategic thinking. Our greatest value often comes from helping clients see beyond single-track thinking and illuminating blind spots they didn't know existed - not by telling them what they're missing, but by asking the questions that reveal new possibilities.
Have you noticed areas where your clients might benefit from more strategic organization of their thinking? What questions could you ask to help them see their finances from a fresh perspective? Submit your thoughts and questions for future episodes via the link in the show notes - I'd love to address your specific challenges in upcoming Q&A segments.
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Several years ago I was having a conversation with my dad and that conversation changed a lot about the way I view my role as an advisor. We were having dinner together and he asked me a very simple question. He said, james, what is your role as an advisor to your clients? And I sat there kind of quiet, thinking this is such an absurdly obvious question that it has to be a trick question. After thinking about it, I said my role is to advise. I'm a financial advisor. My role is to advise my clients. He said no. I said okay, then my role is to be a planner. I help them plan the things that are important to them. Again, he said no and I said fine, is it objectivity, is it connection? Is it trust? And it was no and no and no. And so finally I said at least, the role of an advisor is to clients. And he looked at me and he said your role as an advisor is to help organize your clients' thinking. And I thought about it for a second and I said yeah, I think that's exactly right. Our role as advisors is to help organize clients' thinking. And now, as I say this, this is not some ironclad physical law, this is simply a way of thinking that has helped to change my approach, the way I think about our roles advisors and our clients' lives, and I think it might be helpful for you too. So this is going to be a recurring theme and the way that I talk about our roles advisors and our clients' lives, and I'm going to explain what I mean here, because I think you'll hear me use this phrase in many episodes going forward. But when clients ask us questions should I buy that stock, should I sell my rental property? How many more years should I work A lot of times us advisors will say our role is to help them understand the trade-offs, and I fully agree.
James Conole:Our role is to help them manage trade-offs or to understand the trade-offs. But that's step two. Trade-offs is more of a tactical thing. Step number one, first and foremost, is we have to help them organize the way they think about things. Not think for them, not make decisions for them, not control their thinking, but help them organize the way they think about things, because by doing that, we're starting by thinking strategically before moving into the tactical, which is that trade-off management. So let me use a very basic example.
James Conole:I was talking to someone the other day I was a guest on his podcast and he said James, I'm a 24 percenter is what he referred to it as Many people like me were in this tax bracket where we're making good money, we're squarely in the 24 percent tax bracket and I'll probably be there for a very long time. He then asked where should I be saving money? Should I be saving to my Roth 401k or should I be saving to my traditional 401k? So he's asking for tax advice around what's going to be the best thing to get him to his retirement goals. Now there's one of two ways I could answer this. Number one I could go right into the trade-offs. I could say well, if you contribute to the traditional 401k today, then you're going to save 24 cents on the dollar in federal taxes plus whatever state taxes are. And let's then compare that to what is your future tax bracket going to be when you start spending these funds? Is it going to be higher? Is it going to be lower? We start projecting out all these things. You might even run a calculation to see where might you be in the future, and technically you're correct. That is the right answer.
James Conole:But if we miss the bigger picture a better way to go back to the strategic way of thinking, to help organize thinking is understanding when they might want to retire. Are you even saving the right amount to retirement? So, for example, are you even on track for retirement? Because I don't care if you nailed the tax piece and you save lots of money in taxes by doing so. If you haven't saved enough, you failed. Or if you've over-saved, maybe you could even consider that in some ways a failure. So are you even saving the right amount would be one way of pulling things big picture to say let's make sure we've asked the right questions first before getting tactical. I might even ask are you saving to the right account? Maybe early retirement is a goal. So if you save way too much to your 401k, great, you're good in terms of the tax trade-off if you're just looking long-term. But have we missed the bigger picture? Because now all of your money is tied up in a 401k and you can't retire early, you don't have the flexibility. So in that case maybe the advice would have been to save a bit to the 401k to get the match, but maybe we should actually prioritize the brokerage account.
James Conole:So your question is it 401k traditional or 401k Roth? The answer might be neither in this example, or maybe I've learned that he wants to start a business. Well, that business could be his highest ROI investment that he ever makes, far outpacing the best strategy combined between traditional and Roth 401k. But to start it he needs startup capital. To get things done, he needs some operating capital to fund his monthly expenses while things get off the ground. That is a completely different scenario where I'm probably going to recommend store up money in cash and, yes, maybe get the 401k match, but I'm not going to be worried about you saving too much to that, or I'm not going to recommend that you save too much to that, because the bigger investment is your business. But to fund the business we need to have some cash to get things off the ground. So you can look at this and say you're splitting cares and in some cases you certainly could be doing so. But I think that you'll start to see that this way of thinking even if it's just a mental checklist that you go through, checkbox number one are what now is the right tactical answer as we start to manage trade-offs? So make sure we're making the right strategic decision first and then understand the tactical and then help them to understand the trade-offs. Now one word of warning with this you do have to be careful.
James Conole:I think sometimes, as advisors, we can get too much into this. Sometimes people just want a direct answer. They might say, hey, what about a Roth versus traditional? And we say, okay, well, let me pull things back big picture. Let about a Roth versus traditional? And we say, okay, well, let me pull things back big picture, let me talk to you.
James Conole:What does money mean to you? What was your first memory of money? How did your experience around money shape the way you spend money today? That's great. There's a time and a place for those types of questions, but not right now. Sometimes people just want that direct answer and we go too high and lofty and too high and it depends, and too high and well, this and that, and sometimes people just need a simple answer. So you do have to understand the context, know when to respond directly to the question at hand, because it's not necessary to go deeper or it's not going to add any meaningful way to the depth of the conversation or the action items that you walk away with. But then also know when you should be going big picture, when the better thing is to go big picture.
James Conole:So there's no formula for when you should do either. Sometimes you should have a direct answer. Here's the trade-offs, here's the tactical response versus sometimes, go bigger picture, think more strategically. So just be mindful of what question is the client asking in simultaneously, be mindful of the more important big picture questions that they should be asking and you'll start to get a feel for when is one more important than the other. But just to recap what I've said so far yes, we are absolutely in the business of helping clients to understand and manage trade-offs, but the step before that is to help them organize their thinking.
James Conole:Now here's the next thing I'll say. Sometimes you're already on the same page. So, to use my example before of, are you even saving the right amount to retirement? Before thinking about traditional 401k versus Roth 401k? You might say, yeah, james, I'm already saving 10% or 15% to my 401k for retirement. Awesome, go right to trade-offs. Maybe you already knew that information. But if not, start by properly organizing people's thinking, helping them to organize their own thinking about what are the right questions to ask, what's the right direction to be thinking through before getting down to the tactical and some of the nitty gritty.
James Conole:Other examples where this might come up should I save my brokerage account or 401k leading up to retirement? Again, it's very tempting to fall into the trap of okay, well, this is a tax question, one's going to save you taxes today. One's after tax, here's some flexibility stuff. Well, the better question might be helping them to understand do you even need to save anymore? I know we work with a lot of clients that are already funded enough. They already have enough money in their portfolio to retire, but they're continuing to work. Maybe they enjoy it. Maybe they don't know what they want to do in retirement yet. Maybe there's some other things that they're working through.
James Conole:So my question to them might be well, before asking where should we save, let's start by seeing do you even need to save anymore? Or instead, can you take the money that you would have saved for retirement, which, again, is already funded? Can you use that to start taking trips? Can you use that to start doing cool things with your family now? Can you use that to fully enjoy? And you start getting that bigger picture of what's actually possible with this money, instead of being in that one track, thinking of this money coming in has to be saved. And the only question to ask is where should I save it to?
James Conole:So when we notice that, when we notice that our clients are getting in that one track way of thinking which, by the way, all of us fall into that, all of us fall into that outside of just the financial planning realm, but in the way we think of many things. So understand that it's very common for our clients to think like this and our job as advisors is to pull them out of that. Pull them out of that, help them see the big picture, help them to consider other tracks as opposed to just what account should I save to? What are the other possibilities? What are the other things, client, that you have shared with me, you really want to do?
James Conole:We all have blind spots, which, by definition, means we don't know when they exist or where they exist. So what we can do as advisors is we can help clients see their blind spots in their thinking, not by saying, hey, you've got a blind spot here, but by asking the right questions that show them some other possibilities maybe they hadn't previously considered, and that helps them to align their thoughts in a constructive way. So what does this come down to and how can you ensure that you're doing this for your client. Start by understanding that trade-offs is a huge part of our job as advisors managing those trade-offs, but trade-offs is addressing their questions specifically more often. Organizing their thinking is helping them to ask the right questions in the first place that you can then understand the trade-offs from. So reorient their thinking, help them keep the main thing, the main thing. Help them to think strategically before they start thinking tactically and make sure we're asking the right questions, because the right question is oftentimes the key to the right result.
James Conole:Now, before we wrap up, sometimes I think it might be easy to hear this and say, well duh, that's painfully obvious, but that's no help. Part of that is because we're so entrenched in the work that we do. We see things so clearly because this is what we do all day, every day, that we forget how important this is. And occasionally you have these experiences where you are in the client seat and you're working in another industry or another project, something that's outside of your wheelhouse or outside of your domain of expertise, and you see this, but in reverse, when someone helps to do it for you. So I remember when we were redoing our website a few years ago we were looking at this and I was saying, okay, well, what images, what graphics, how many pages should we have? What should we do with our logo? And I came to our web designer with those questions and, very simply, he said well, let's start by understanding. What are we actually trying to accomplish? Let's ask the right questions first. And it hit me like a ton of bricks of duh. Of course, you're supposed to do that, and now that I'm operating outside of my domain of expertise, I see how much more important it is.
James Conole:It's easy for me to see this in the financial planning realm and easy to think oh, this is so painfully obvious that's maybe not even worth mentioning. But that's just because we are experts in this, that's just because we are in this all day, every day, that we forget that these simple things are the big things. These simple things are the foundational things that everything else stems from. Being an expert means that you have the ability to think strategically about something and you have the ability to hold that thought in your head while conversing with a client and understanding when does it make sense to ask the right question to get them to start thinking strategically again, versus when does it make sense to meet them where they are and to be more direct with yes, that's the tactical answer we're looking for or yes, that's the trade-off answer that you're looking for, and carry both of those and start to understand the nuances of when is it most appropriate to ask which question or to go in which direction. So, yes, in some cases this may seem incredibly basic and it might seem like we're splitting hairs. In some instances it is, but in others it can absolutely make all the difference.
James Conole:And so what we're doing today in this third episode of the Root Ready podcast is I'm laying the foundation. So episode number one I want to talk about why are we doing this podcast? What's the goal of this? Episode? Number two is how do we define what it means to be great advisors? Because my guess is, if you're listening to this podcast, you're either an advisor internally, at root and I know you want to be the absolute best or you're an advisor externally, at some other firm, and you are also seeking to be the best. How do we define that and what does that mean? So we know what we're working towards. And then today, this episode is all about how do we understand what our main role is as an advisor, so that in future episodes, as we start thinking about more tactical things, we can relate them back strategically to what are we doing. How is this helping us to be a great advisor? How is this helping us to fulfill our primary role as an advisor? So many more things to come Now, before we wrap up.
James Conole:If you've not already done so, make sure you subscribe to the show Now, before we wrap up. If you've not already done so, make sure you subscribe to the show Spotify, apple Podcasts, wherever you're listening In the show notes there is a link to the URL for where this podcast is gonna be hosted On that podcast page. I encourage you to please go submit questions. A big part of this podcast isn't me just telling you the thoughts that I have and what I want to be going over. I want to hear from you what are your challenges, what are the opportunities in front of you, what are the things that you think that you need to learn more of to be the best possible advisor that you can. So if you submit those, a big part of this show will become Q&A me answering the questions that you have on this podcast. So hope this is helpful. Thank you, to all of you who've listened, and I'll see you soon on the next episode.