The Psychology of Capitalism for Financial Advisors

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Let’s invest some time discussing the psychology of capitalism as it relates to introductions. I spend a few minutes on it in my presentation “Becoming an Introduction Machine” and in the book with Dr. Stolk “Choices: Creating a Financial Services Career”, but given failures of faith and action recently of some Reps I worked with I believe we need an in-depth discussion on the subject.

First off, a definition.

Capitalism (noun): an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, especially as contrasted to cooperatively or state-owned means of wealth.

This is from and is a good technical, broad definition but I have a working one that I like because of how we can break down the components further. My personal operational definition of capitalism is:

A system of free exchange of items or services of value for profit.

Let’s break this down into the building blocks.

System: an interacting group of components that function to create outputs.

Free exchange: interactions are chosen by the participants, as opposed to being forced to work together. NB: a client can choose to not work with you, but you can choose to not accept or even fire a bad client.

Items or services: physical goods or intangible items such as intellectual property based upon knowledge, experience, and insight.

Of value: useful and/or holding pecuniary worth.

For profit: a situation where all parties to the transaction feel like they got what they needed.

I want to really explore these last two pieces (of value for profit) because this is the crux of the issue when it comes to financial advisors asking for introductions.

Value is different than price paid because of the individual interpretation of value. Paying an attorney $240 an hour for 5 hours equates to a price paid tag of $1,200, but if that is what the dollar cost was to establish a scholarship fund in the name of your parents it is fairly obvious that the value exceeds the price paid. We have all paid $5 or $50 for something and then said “that was a waste of money”, and we have spent nothing for a walk in the park with someone we loved and that memory is cherished and valued immensely. Do not confuse the exchange of dollars for the value of something: preventing a client from making a half-million-dollar mistake is worth over half a million bucks to them, whether they pay $10,000 or even no dollars for it. Value is in the mind and heart more than the wallet.

As to “for profit”, this concept derives from value but extends it in that we need to take into account multiple additional economic factors as well as several psychological ones. One consideration is the economic value received, and what was exchanged for it. An economic value received of a few hundred dollars for an hour of time sacrificed is generally profitable, especially if what is gained will continue to generate benefits. This could be skills acquired, compounding interest, tax breaks that carry forward, or productivity hacks. Anything that keeps producing value with little or no additional investment is highly profitable over time.

Another dimension to profit is the psychological avoidance of failure. Knowing that you have a plan in place for prevention of a data breach and the nightmare that could ensue, or that your kid’s college is all set as long as you stay on course, or that you will run your first marathon as long as you stick with the training program and don’t get injured are of great value. Removing doubt is an important service. Insurance is the financial removal of doubt via contract. Removing mental doubts should be compensated appropriately too. What is being able to sleep at night worth?

Avoiding a loss can be financially modeled as to its value in many instances, but we all make gut check assessments on this parameter. As a financial advisor, you create tremendous profit for clients every single day, helping them avoid losses of six and seven figures with your guidance even if they don’t buy a product from you. A CPA or LLM will charge them hundreds an hour for that and the client will pay these professionals without blinking an eye because they know the value of the losses avoided and calculate the profit in relation to the cost, and how much peace of mind they derive from knowing that they are “all set”. They should be valuing your time similarly, as should you.

A further aspect of “profitable” is the desire to do business again in the future as there are emotional, relational, and other benefits beyond monetary around the relationship itself. Trust is a component of this, as is respect. If your client likes and respects you, and believes that you acted in their best long-range interests as opposed to trying to maximize your short-term cash flow via a transaction, they will see advantage and profit in working with you over time. We all know that acquiring a new client is difficult, time-consuming, and costly no matter what the industry. It is difficult for the client too from an emotional investment perspective, so making sure that you are doing the right things to ensure future work with them is critical to creating a profitable relationship for all involved.

Now that we have broken down, explored, and rebuilt the idea of Capitalism we are in a position to analyze mentally embracing the value of it for your business. Financial services is the easiest place to make a quarter of a million dollars a year and the hardest place to make $50k a year. But truly believing in the free exchange of value for profit is what will get you to that quarter million and beyond, because the only limiting factor for an insurance and investment professional like yourself is the limitations you are self-imposing by not being paid properly for your time via introductions.

“But I didn’t sell them anything.”
“I’ll wait until the time is right.”
“We ran out of time.”
“It didn’t feel right asking.”
All BS excuses because you don’t believe in your core that you added value to this person in that meeting and deserve compensation. YOU imposing a limit on your earnings because of doubt.

Did you bring them value in that meeting?

Take out a piece of paper. Now. Right now. Stop reading this and grab a piece of paper, so you can write 10 ways you bring value to a potential client in an initial meeting. Some examples:
1. Did you suggest they update their beneficiary designations? You potentially saved their heirs dozens of hours and thousands of dollars.
2. Get basic legal paperwork in order or updated? Immense psychological relief and many hours of legal fees avoided if anything happens.
3. Contribute more to their employer-sponsored plan to get more match? That is FREE money you now have going into their future.
4. Recommend they take advantage of an employer-sponsored benefit? They are getting additional coverage or value, don’t you deserve to receive value for this?
5. Initiate a discussion of savings philosophy between spouses that they have never had? You might have just headed off a divorce as monetary miscommunication is one of the leading factors in marriages ending. How much did you just save them?!

These are five very high-value examples, with ten minutes you can come up with a dozen more easily. Keep this list you create and refer to it, as it is your creation and as such more valuable to you convincing yourself than my external ideas. And remember this concept of self-selling, as it is useful on clients as their rationale is more powerful than anything you can tell them.

How much value are you creating for that potential client in an initial meeting? $10,000? $25,000? More?

Isn’t five figures of value from you to them worth something? You DESERVE and EARNED five introductions for what you have done. You just need to get that person you are sitting with to acknowledge this by literally asking “Was this time well invested? Did I create value for our time together? What was the most valuable to you?”

Then shut your mouth and let them tell you what a good job you have already done for them in that first meeting. This is incredibly psychologically important because it is their words, their voice, them convincing themselves how much value they have derived. You can comment and guide them slightly, but the majority of these few minutes needs to be them expressing your impact on them.

Then ASK! It doesn’t matter if you feed them back names from your questionnaire of people they mentioned, feed them categories (like attorney, boss, godparents to the kids, etc) or hand them a list of their associates from your research (my favored approach). You can even say “whip out your cell, who are the last five people you called?”

Just ASK, and make it easy for them to pay you with names of other high-quality people that you should talk to.

If you have done a decent job of helping them so far and believe in yourself and the value you have brought to the table, five introductions should be a non-issue. They could keep going and naming people they want you to call, and a dozen or more is not unusual if you focus on making your potential client’s life better with your knowledge and positive mindset.

Understand the impact you have, the intrinsic value of your guidance, and know in your soul you deserve to be properly compensated for it.

We have stripped some of the neurochemical basis out of this discussion but it all hinges on this: sell yourself on your value, create value for the client, then collect your payment in introductions.

And that is the difference between making $50k and $250k. Embrace your Capitalistic nature and demand you be fairly paid for the value you bring.


For a great talk on why Capitalism is important, watch this vid by my associate Patrick Bet David, founder of PHP:

I especially love his reason #10: Capitalism forgives. It doesn’t matter that you used to not believe you deserved introductions for helping someone in an initial meeting, it matters what you believe and do now. It doesn’t matter that in the past you failed to get referrals because you didn’t think you deserved them for only pointing out five ways to improve your client’s life that had nothing to do with buying a product from you, today you know better and realize you saved them tens of thousands of dollars in taxes and deserve to be paid for it.

1 Comment
  1. Dr. John Ballard says

    A fantastic article! Joe Templin creates a compelling case as to why a financial advisor’s services are of great value, what your services are actually worth, and finally, Mr. Templin points out the often unseen creation of value in consultative meetings for clients! Dr. John Ballard, PsyD, MS, NYS L&H Agent.

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