Episode summary
Breaking Bad News To A Client About Prior Problematic Financial Decisions - Kitces & Carl Ep 199
Financial Advisor Success (Kitces)
· · 32 min · Hosts: Michael Kitces · Guests: Carl Richards
Summary
The discussion focused on how an advisor should respond when a new client arrives with a financial past that looks suboptimal or even plainly bad, such as a large whole life policy that crowded out retirement saving. Carl Richards argued that the first move is not to judge the decision, but to widen the frame and ask, “bad relative to what?” He said the client was probably doing the best he could with the information and incentives he had at the time, and the advisor should start from empathy rather than criticism.
Richards suggested beginning with neutral questions like, “Tell me a little bit about that,” to understand the goal behind the decision before trying to fix anything. Once the backstory is clear, he recommended shifting to planning: define the client’s actual situation, then compare it with the ideal and ask permission to be professionally candid.
He also emphasized that even when a product was sold by someone with strong incentives, the advisor should stay factual, avoid slamming prior decisions, and focus on the path forward. In more serious cases, such as abusive trading or clear misconduct, he said the advisor may need to encourage the client to escalate to the firm or a lawyer.
Key takeaways
- Carl Richards says advisors should start by asking “bad relative to what?” before labeling a client’s past decisions as poor.
- Richards recommends a two-step process: first understand the backstory, then compare the client’s actual position with the ideal plan.
- He said it is often more useful to ask permission to be professionally candid than to lead with criticism.
- In Richards’s view, clients usually made the best decision they could with the information and incentives available at the time.
- For blatant misconduct, the host noted that escalation to the firm or a lawyer may be appropriate.
Notable quotes
“bad says who? You know, like look bad because it wasn't as good as the optimal plan that you could have created for Dan if you'd met him 10 years ago”
“Can we lose the language around bad, poor, bad decisions? I bet Dan was doing the I I can almost guarantee you Dan was doing the best thing he thought he could do at the time”
“Tell me a little bit about that. Okay, great. Then depending on what I learn, I would”
“do I have permission to be professionally candid now? Is it okay if I Do I have permission? And I would always ask”
How the episode opens
Greetings, Carl. — Hello, Michael. How are you doing? — I'm doing well. I'm doing well. We are chugging through the summer, probably early fall by the time this episode comes forth. So, enjoying the enjoying the summer season, which actually is not that enjoyable here in DC. We're more of a spring or the fall area, but we're getting a little bit of museums and stuff downtown cuz it's uh air conditioned, which is which is really nice.
Right. Right. Right. Very good. Yeah, it's it's um It's been hot out west, too. And I just got back from a long motorcycle trip with my son. And uh one day of it was almost unbearable. Like trying to find water anywhere out in the desert of Wyoming is impossible. So, but super
So, you're motorcycling across Wyoming? — Well, from We went Yeah, we went from Utah through a little bit Idaho and then up through across Montana. And then back into Wyoming. And then he rode to New York to to school. And I rode home.
What? He rode to New York from Wyoming? — Well, he drove from uh home. But first we went Yeah, we left from Utah, went east or sorry, went north. And then he rode across a little bit north, uh like through Chicago, like that that area. All the way to Brooklyn to Pratt.
Which is like a week? How long does it take? — Think I think Well, it was more than that. I think it was Including the days with me, I think he's he'll be out 14 days. — Wow. — Yeah. So, fun. But anyway, hot. Gave me lots of time to think. I I thought Well, cuz I don't have any music in my helmet.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- client communication
- financial planning decisions
- handling past mistakes
- curiosity and compassion
- priority realignment
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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Financial Advisor Success (Kitces), this episode and its artwork belong to Michael Kitces. Octagon is not affiliated with the show; this page is an independent summary.
