I’ve been reading The Guru Gap by David McKnight, and it reminded me of a question advisors deal with every day.
A client has an extra $20,000 a year.
What should they do with it?
What's interesting isn't the question. It's the number of different answers a client might receive depending on who they ask.
One advisor might recommend paying down the mortgage. Another might want to maximize retirement contributions. An investment-focused advisor may see an opportunity to build a taxable portfolio. An insurance professional may identify a protection gap that needs attention.
The interesting part is that any one of them could be right.
That's one of the central ideas I took from The Guru Gap. Consumers are surrounded by smart people offering very different advice. Dave Ramsey built a massive following around debt elimination and behavioral discipline. The Boglehead community has made a compelling case for simplicity, diversification, and low costs. Other professionals focus on tax efficiency, risk management, investment management, or estate planning.
Most of those perspectives contain a lot of good thinking.
The problem begins when a good financial principle becomes a universal financial rule.
That's an important distinction for those of us building advisory practices because we're not immune to the same tendency.
The challenge is that most of us built our careers by becoming experts. The better we get at a particular discipline, the more likely we are to view new situations through that discipline.
If you've spent twenty years managing portfolios, it's hard not to see investment opportunities everywhere. If you've spent years helping clients solve protection issues, you'll naturally notice risks that others overlook. If tax planning is your specialty, tax efficiency tends to become a priority in nearly every conversation.
None of that is wrong.
It's simply human nature. We tend to see the world through the lens we know best.
As our practices grow, I think the challenge changes. Early on, most of our energy is spent learning solutions and becoming technically proficient. Over time, the greater opportunity is becoming better at diagnosis.
Not just knowing what to recommend.
Knowing which problem actually needs solving.
Consider two families.
One earns $150,000 per year, carries significant consumer debt, has little emergency savings, and spends nearly everything it earns.
The other earns $600,000, has substantial assets, stock compensation, multiple insurance policies, and competing goals involving retirement, children, and estate planning.
Both families could walk into our office and ask the same question:
"What should we do with our money?"
But they don't have the same problem.
For the first family, the primary obstacle may be behavior. They may not need sophisticated modeling or advanced tax strategies. They may need structure, accountability, and a straightforward system for getting control of their finances. A Ramsey-style approach could create tremendous value.
The second family may already have excellent financial habits. Their challenge is coordination. Tax decisions affect investment decisions. Investment decisions affect liquidity. Liquidity affects flexibility. Protection planning affects everything else. Applying the same rigid rules that helped the first family could actually create worse outcomes for the second.
That's where the question changes.
Instead of immediately asking, "What's the best strategy?" perhaps we should start by asking, "What's actually preventing this client from getting where they want to go?"
That sounds obvious.
But it isn't always how our industry operates.
A client tells us they have an additional $20,000 of annual cash flow. The temptation is to demonstrate value by immediately finding somewhere to put it.
A better instinct may be to start asking questions.
- How much liquidity does the family have?
- What does their debt cost?
- What tax bracket are they in today?
- How secure is their income?
- Are they adequately protected?
- How much flexibility do they want?
- How disciplined are they as investors?
· What are they ultimately trying to accomplish?
Suddenly, the original question isn't simple at all.
This is one reason I like using a balance-sheet-oriented planning process through The Living Balance Sheet. Looking at assets, liabilities, cash flow, and protection together makes it harder to pretend financial decisions occur in isolation.
But the same warning applies to my planning framework as it does to every other philosophy.
The framework should improve the questions.
It should not determine the answers.
If every client who enters a planning process ultimately receives roughly the same recommendation, we should be willing to ask ourselves an uncomfortable question:
Are we actually diagnosing the client's situation, or are we using planning to validate a conclusion we already preferred?
That's a question worth sitting with.
Because sometimes the right recommendation isn't the solution we personally favor.
In some situations, a simple portfolio of low-cost index funds may be exactly what's needed.
In others, debt reduction may create the most value.
And sometimes a client genuinely benefits from having an advisor coordinate investments, insurance, cash flow, taxes, retirement planning, and estate considerations.
The goal shouldn't be proving that one approach is superior.
The goal is determining which approach best fits the person sitting across the table.
I think there's a business lesson in that as well.
As advisors, we're constantly thinking about growth. We want to serve more clients, build stronger teams, expand our capabilities, and create more scalable practices.
But sustainable growth isn't just about doing more business.
It's about becoming increasingly clear about who we serve best, where we create the most value, and when another solution may be more appropriate.
That clarity can actually make a practice easier to scale.
It allows us to build repeatable processes without turning those processes into predetermined recommendations. It helps us identify the clients for whom our capabilities matter most. And it gives us permission to occasionally say:
"You may not need everything we offer."
I think clients notice that.
It also changes the nature of the advisor-client relationship.
Instead of trying to prove our philosophy is always right, we can spend more time helping clients understand their choices and the trade-offs that come with them.
The barrier to finding financial opinions has essentially disappeared. A client can get a dozen answers to almost any financial question in a matter of minutes.
What remains difficult is finding context.
- · Paying off a mortgage can be excellent advice.
- · Keeping the mortgage and investing can also be excellent advice.
- · Holding more cash can be prudent.
- · Holding too much cash can quietly undermine long-term goals.
The quality of the advice depends on the circumstances surrounding it.
And I think that's an important consideration as we build the next generation of advisory practices.
Our competitive advantage won't come from knowing more financial facts than our clients.
Information has become increasingly accessible.
Judgment hasn't.
The advisors who ultimately separate themselves will be the ones who listen carefully, diagnose before prescribing, challenge their own assumptions, and clearly explain the trade-offs behind a recommendation.
That's what I took away from The Guru Gap.
The goal isn't to become the next financial guru with another universal answer.
It's to become good enough at asking questions that clients get the right answer for them.
Those aren't always the same thing.
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