Three Candid Questions With Millennial Planners: Round Two

Bryan, Luke, and I answer three questions about transitioning from college, CFP® exam studying, and reading:

1) What has been your biggest surprise since transitioning from college to work as it relates to your job?

Bryan: Most of your peers will not share the amount of passion that you have for your particular career. You’ll find that some people merely followed the path of least resistance and “just took a job” after college, as compared to some of you who may have taken a leap of faith in yourself and followed your passion. Regardless of where you fall on that scale, it’s important for you to find the others who are like you and surround yourself with them to learn and grow.

Luke: My biggest surprise since transitioning from college to work has to be the difficulties of communication, and the attention that must be given to how information is delivered. Peer-to-peer explanations are easy; explaining an investment concept to a fellow investing buff requires little effort since you are both on a level playing field and have a similar foundation of knowledge. The same investment concept proves to be far more difficult to effectively deliver to a client; a financial planner must have a good understanding of who the client is and how they are going to interpret/respond to the information. There are many hidden preconceived notions and biases that often do not show themselves until a client’s beliefs are questioned by new information.

Joe: Understanding the technical side of financial planning does not matter if you cannot communicate effectively. This makes sense, but I had not thought of it until I started getting involved outside of the academic setting. The real skill is in explaining a complicated topic in simple terms. Storytelling, analogies, etc are important.

2) What is your number one piece of advice for preparing for the CFP® examination? 

Bryan: I’m a firm advocate of training your brain for the exam. On the morning of the exam, you want no surprises. You don’t have control over the exact questions that you will be faced with, but you do have complete control over the external factors, which include good sleep patterns, mental sharpness at 8am in the morning, and a test taking strategy. These exercises and practices are not only for test day; they are learned and implemented weeks and/or months in advance. I want to place extra emphasis on mental sharpness during morning hours by asking a question: if your exam begins at 8am and consists of 170 multiple-choice questions, when is the most appropriate time to study and what is the most appropriate form of practice for the exam?

Luke: I am currently studying for the November CFP examination. I feel that I gave myself much more time than most (~6m). This extra time has given me a chance to experiment with different study techniques to determine how I absorb mass quantities of data best. (Depending on results) I would recommend patiently trying out different study methods and honing in on what techniques maximize your productivity and effectiveness. 

Joe: Have a very detailed plan. Understand your plan will likely change over time.

3) What book have you read that you recommend others read too? 

Bryan: I recently heard (from what I would consider to be) a successful person say, “I don’t know any successful people who don’t read.” Yes, I have my favorites. But rather than give you one book suggestion, my ultimate suggestion would be to simply read. For those who want to learn and grow into their best potential at an exceedingly fast pace, there is no excuse for not reading most days of the week. My recommendation: read anything, today.

Luke: Book recommendations are tough. I have my favorites for both non-fiction and fiction. I am in my early twenties and I have to say Fooled by Randomness by Nassim Taleb has probably had the most profound effect on me. 

Joe: Quiet: The Power of Introverts in a World That Can’t Stop Talking by Susan Cain. A must-read if you are an introvert. Still good if you are an extrovert.

Being Mortal

In the book Being Mortal: Medicine and What Matters in the End the author, Atul Gawande, talks about three types of medical professional-patient relationships:
 
“The oldest, most traditional kind is a paternalistic relationship - we are medical authorities aiming to ensure that patients receive what we believe best for them. We have the knowledge and experience. We make the critical choices. If there were a red pill and a blue pill, we would tell you, ‘Take the red pill. It will be good for you.’ We might tell you about the blue pill; but then again, we might not. We tell you only what we believe you need to know. It is the priestly, doctor-knows-best model, and although often denounced it remains a common mode, especially with vulnerable patients - the frail, the poor, the elderly, and anyone else who tends to do what they’re told.
 
The second type of relationship the authors termed ‘informative.’ It’s the opposite of the paternalistic relationship. We tell you the facts and figures. The rest is up to you. ‘Here’s what the red pill does, and here’s what the blue pill does,’ we would say. ‘Which one do you want?’ It’s a retail relationship. The doctor is the technical expert. The patient is the consumer. The job of the doctors is to supply up-to-date knowledge and skills. The job of the patients is to supply the decisions. This is the increasingly common way for doctors to be, and it tends to drive us to become ever more specialized. We know less and less about our patients but more and more about our science. Overall, this kind of relationship can work beautifully, especially when the choices are clear, the trade-offs are straightforward, and people have clear preferences. You get only the tests, the pills, the operations, the risks that you want and accept. You have complete autonomy.
 
In truth, neither type is quite what people desire. We want information and control, but we also want guidance. The Emanuels described a third type of doctor-patient relationship, which they called ‘interpretive.’ Here the doctor’s role is to help patients determine what they want. Interpretive doctors ask, ‘What is most important to you? What are your worries?’ Then, when they know the answers, they tell you about the red pill and the blue pill and which one would most help achieve your priorities. Experts have come to call this shared decision making.”
 
The parallels for financial advisors are clear. As it pertains to the informative type of relationship, it is tempting to want to impress others, especially when one’s knowledge is that of an expert in a niche area. However, the skill is not in presenting impressive analysis on duration, alpha, technical analysis, etc, but rather explaining complex ideas in simple terms.
 
As in the medical field, the third type of relationship, shared decision making, is superior to the first two. A financial advisor must understand the client’s goals, concerns, and priorities in order to tailor the advice around such information. The ultimate form of financial planning is specific to the individual. This may include helping a client determine what they want when they haven’t put much thought into it themselves. I’ve had experienced advisors tell me before, half-jokingly and half serious, that a financial planning degree is best paired with a psychology degree. Point being, there is more to a financial advisor-client relationship than the advisor presenting option A, B, and C with the various pros and cons. As Atul Gawande makes evident in Being Mortal, shared decision making results in the most successful type of relationship, whether it be medical professional and patient or financial advisor and client.

One Piece of Advice for the CFP® Examination

One of my favorites excerpts from Principles by Ray Dalio goes as follows:

199) Distinguish the important things from the unimportant things and deal with the important things first.

• 199a) Don’t be a perfectionist, because perfectionists often spend too much time on little differences at the margins at the expense of other big, important things. Be an effective imperfectionist. Solutions that broadly work well (e.g., how people should contact each other in the event of crises) are generally better than highly specialized solutions (e.g., how each person should contact each other in the event of every conceivable crisis), especially in the early stages of a plan. There generally isn’t much gained by lots of detail relative to a good broad solution. Complicated procedures are tough to remember, and it takes a lot of time to make such detailed plans (so they might not even be ready when needed).
• 199b) Since 80% of the juice can be gotten with the first 20% of the squeezing, there are relatively few (typically less than five) important things to consider in making a decision. For each of them, the marginal gains of studying them past a certain point are limited.
• 199c) Watch out for “detail anxiety,” i.e., worrying inappropriately about unimportant, small things. 
• 199d) Don’t mistake small things for unimportant things, because some small things can be very important (e.g., hugging a loved one).

Understand aiming for a perfect score on the CFP® examination will not help your studying process - it will hurt it. Shooting for perfection is a losing strategy. This is not to say that you should shy away from the hard topics; it is a good idea to focus on what you don’t know. Rather, the point is to understand you only have a limited amount of time to study. Use that time efficiently. Don’t waste time on the obscure stuff. There may even be questions that the CFP® board is experimenting with which you have never heard before. I recommend accepting this and focusing your efforts on material that you know you will see. The bottom line is this: you only have a finite amount of time to study, and due to the breadth of the exam questions, that time must be used in an efficient manner.