Executive Summary
Although “statements of purpose” have, in one form or another, been around for centuries, it wasn’t until the 1970s (and especially into the 1980s) that the corporate mission statement really began to gain traction as a tool for businesses to state publicly what they do and who they do it for. It wasn’t long after that mission (and vision) statements began to elicit eye rolls, particularly from those who were all too familiar with businesses that would go through the motions of writing up such a statement… and then completely ignore it in practice (as Enron infamously included “Integrity” as a core value… right up until it collapsed in an accounting scandal). Yet, the practice of creating mission statements has persisted. And for the plethora of financial advisors who are striking out to become first-time entrepreneurs and are facing a mountain of tasks that need completing and decisions that need to be made, the question arises: is it really worthwhile to take the time and effort to come up with a mission statement (when starting the firm, or later once it is more established?).
In our 62nd episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards discuss what it means for financial advisors to have a mission statement in the first place, some of the key benefits mission statements bring to the table, and some practical and actionable ways that financial advisors can uncover and codify their core principles and personal code, both as advisors and as business owners.
As a first step, it’s important to recognize that most financial advisors who started their own practices did so because they decided that the only way they could help the clients they wanted to help in the way they wanted to help them was by simply going out and doing it themselves. In other words, there’s some core reason that they get out of bed in the morning, and that, in effect, is the anchor for a mission statement that clearly defines what it is that the financial advisor can uniquely do that their clients can’t get anywhere else.
From a practical perspective, the biggest benefit that a mission statement brings to the table for financial advisors is that it makes subsequent business decision-making exponentially easier. Because in practice, a mission statement can serve as a filter through which advisors can be intentional with the choices they make as they build their practices. Without a clearly articulated vision, it’s hard to be consistent when making key business decisions… which can eventually result in the business losing traction.
When it’s time to actually codify a mission statement, advisors have a few options. A less formal approach could be a brainstorming session facilitated by a series of questions that starts with, “Why does this firm exist?” and then digging into that answer by asking, “Why is that?” and “Why is that…” and “Why is that!”, several times over to uncover the advisor’s (and firm’s) underlying Why. Advisors who prefer a more structured approach can look into the EOS framework, which relies heavily on establishing a foundation of purpose and value, from which literally everything else that the firm does is built.
Ultimately, the key point is that a financial advisor’s mission statement is something that is already in them and is being used to make business decisions, regardless of whether they are aware of it or not. But without being cognizant of what that mission is, it’s easy to unwittingly make business decisions that aren’t well aligned. Thus, by discovering and articulating what that mission is, the financial advisor can gain the clarity of purpose that makes all the subsequent decisions around owning and operating an advisory firm much easier. In turn, when the advisor starts to add team members, the mission statement becomes even more important, because once there are more team members than can be practically managed by the advisor/owner (which usually happens once the headcount reaches about five or six), then the mission statement becomes the reference point from which the rest of the team can base their decisions on as well. As in the end, when team members have the tools to make the same decisions as the advisor/owner would make, it gets much easier to take the practice to the next levels.
Authors:
***Editor’s Note: Can’t get enough of Kitces & Carl? Neither can we, which is why we’ve released it as a podcast as well! Check it out on all the usual podcast platforms, including Apple Podcasts (iTunes), Spotify, and Stitcher.
Show Notes
Kitces & Carl Podcast Transcript
Michael: Well, greetings, Carl.
Carl: Hello, Michael. How’s it going?
Michael: I’m doing well. I’m doing well. Just chugging along here. We’re slowly watching the world begin to reopen. I’m kind of excited about it.
Carl: Yeah, very, very exciting things around here, for sure. Yeah. Better not talk about that. We could talk for hours about reopening, and masks, and vaccines, and all that stuff. So, let’s just skip it.
Michael: Yeah. But it’s a good theme, I think, for today’s conversation. You know? We talked last episode about sort of that dynamic of what happens when you want to take a leap. You want to go start a thing. You want to go start your own firm. It’s scary. You may not have capital. Sometimes we really don’t have capital. Sometimes it’s kind of the excuse we use just because it’s scary.
I’m certainly seeing, in general, just as we come out of the pandemic, a lot of people I think are just looking at the world with a fresh set of eyes. Just, I’m seeing a lot of like, “I’m ready to take my life in a different direction,” here, whether that’s moving, relocating. But a lot of that is switching platforms, starting firms, going out on their own.
And so, in that theme actually, one of the questions that we had that came in was, “I’m starting my own firm, and I hear all this stuff out there about mission statements, and core values, and vision.” I thought that the person had a really good question. Do I need to do all that stuff if I’m just trying to go out and be an advisor? Do I actually need to worry about all that stuff?
So, I’m curious for your thoughts around this. I don’t know if you’re a mission statements, and vision, and core values guy or not. We’ve never really had this conversation before, so I have no idea where this discussion is going to go.
Do Financial Advisors Really Need Mission And Value Statements? [02:53]
Carl: It might be trouble. Here’s the problem. I was born and raised in Utah. Utah is the home of Stephen Covey, and the Franklin Day Planner people, and that. And so, I was in…I had friends who had hip harnesses of day planners. Right? You could pull them out, like, in a holster. I was in that age in college where it was like chaos. So, I was just hammered by mission statements and values. And so, you can hear the disdain that comes out, because it’s just like “Aaaagh”.
Michael: I was going to say, you’re not exactly setting this up in the most positive of ways.
Carl: No. But it’s really funny, as you mentioned it, I sort of was realizing, like, “You know what? I do have those, and we just call it something different.” At Behavior Gap, we have a document called The Code, and it’s basically just sort of our operating…It was really…when I hired my COO, she was like, “Well, wait, why do you do that?” And I was like, “Well, because I’m only…I have a rule. My rule is I’m nice.” And we were talking about it on Twitter.
I was like, “Why don’t you, like, engage?” And I’m like, “Because I’m nice on Twitter. I’m nice.” She was like, “Oh, we should write that down.” She wrote it down. She was like, “Would you record a video on what you think about nice?” So, we started doing this. Now we’ve got this huge document of the things of code. We take responsibility. Right? That’s another line in The Code. We take responsibility, which really means if somebody says something negative about my work online, we don’t fight. We look for…This is what it says in The Code. We look for…even if they’re only 1% right. That’s the way we phrased it. Even if they’re 99% wrong, we look for the 1% and we talk about that. Like, “Oh, that’s a good point. Thank you for that. I appreciate it. It will make my work better.” Because that’s true. Right?
And we found the other things turned it…So, that’s part of The Code. Right? And so, I think it actually is…It really pains me to say this. But I actually think it is really important, because it’s important, even if you’re a solo person, to just sort of codify. Right? Is that the right word? I think it is.
Michael: Yeah.
Carl: Figure out, why do you behave the way you behave? And in the context of starting your own firm, you’re probably doing this because you have an opinion. Right? You have an opinion that…a hunch. I like an opinion. Right? You have an opinion that something should be done differently than the way you’re currently doing it, or the way you’re allowed to currently do it. Why not just write those opinions down?
Now, one thing I’ll mention, and I’ll turn it back to you is, it’s okay if they’re just guesses. Right? You may not know. And sometimes it feels like it’s not carved in stone. It’s not meant to be. You’re never done with this stuff. The Code, we’re updating it all the time. So, it’s not meant to be carved in stone. Just a draft is awesome, because then you go back and revisit, and revisit, and revisit. So, that’s my…I guess I’ve come around. I’m okay with these things. Just don’t make me carry it on my hip in a little planner.
Michael: In a little day planner. Yeah, I’ll admit, I’ve kind of come full circle around on these as well. I’ll admit, really early in my career, I would just say I just… it doesn’t feel like I got it. I did some exercises of trying to create mission statements and vision statements. You know? I did it with some firms I was involved with early on. I did it for some non-profit groups. I do remember a fateful day-long meeting with a board of my FPA chapter 15 years ago where we sat down and spent, like, seven hours trying to come up with an updated mission statement for our chapter. I’m like, I have no idea what the value was of that day. We spent a lot of hours, then came out of that room doing exactly what we were doing before.
Carl: I’m actually realizing as I’m listening to you, like, seeing you over in the corner with an abacus trying to work out what it is.
Michael: No, no, Carl. I do it all on spreadsheets now.
Carl: “Wait! This does not fit in the spreadsheet. I don’t know…what are you people talking about!?”
Michael: But it has changed for me. What I realized, at least for me, my aversion to things like vision statements and mission statements was because my only experience was with organizations that said it and didn’t really live it and do it.
Carl: Oh, yeah, yeah.
Michael: And then, well, it really is literally very meaningless. Then it’s meaningless. Why am I doing this? It’s rah-rah, it’s fluff, it’s useless, it means nothing, because it didn’t. But when it does, it does.
What Mission And Value Statements Really Mean And The Purpose They Really Serve [08:04]
What I find is powerful about this is just when you get clear on what it is you’re trying to do on this earth…And I think you put it beautifully. You’ve got some opinion. Right? Virtually every advisor I’ve ever met who went out and started their own firm, at the end of the day, it was something to the effect of, “I just couldn’t do it the way I thought it should be done where I was before, and I realized the only way it could be done the way I think it should be done is that I’m going to have to start my own firm and do it myself.”
And I think, as you so beautifully put it, you have an opinion about how this should be done, whatever this is, your version of advising for whoever it is that you serve. And to me, that is the core of your mission. That is the core of what you’re there for. You know? I’m a big fan of EOS. EOS tends to call this your purpose, cause, or passion.
Carl: Mm-hmm. Yeah, that’s nice.
Michael: It’s your why. It’s your thing. We have lots of different words we can use. I think you can just say it’s your opinion. It’s that opinionated view that you think planning and advice should be done a certain way for a certain kind of people, and in a certain manner. That forms the anchor of your purpose, cause, or passion and your why, and then what it is that you’re going to do, that you can uniquely do, that you can bring to the table that says anybody who comes to work with us, they’re going to get this from me that they don’t get anywhere else.
And just having that to form a nucleus, to me, just…what happens, you know, I love this statement from Stephanie Bogan, “When the vision is clear, the decisions get easy.” One of the biggest challenges I see for advisors when they’re getting started, their vision isn’t actually clear. Either it’s not clear, or they haven’t really gone all in to commit to it. Maybe it’s in their head, but they haven’t articulated it, tried to write it down, say, “Yes, that’s it. I’m doing that.”
And so, clarity of vision becomes a filter for you. I want to do this, which means, “Okay, well, I need these tools. I need this platform. I need to structure my business this way. I’m going to do this thing that adds value in the world.” And when we don’t have clarity, it’s, “Well I don’t know which software to use. I don’t know which platform to join.” When we don’t have the clarity, the rest of the decisions get harder. When the vision gets clearer, the decisions get easier. And so, I tend to think of this as basically it becomes your filter. And the more that you own it and step into it, the easier all the decisions get.
Like, “I’m just doing this thing, and I just only want to serve these types of clients. And I’m just only going to do it this way.” You know? If you just say, “I just only want to do comprehensive financial planning for people who are nice to work with.” And you step into that and own that, unabashedly bravely own it, you will be amazed how easy decisions actually get. “Oh, I had this client, and it’s a pretty big opportunity, but they’re kind of painful to work with, and it was really tedious. But it’s a lot of money. I don’t know if I want to do it. No, no, wait.”
“My vision is to do comprehensive financial planning for people who are nice to work with, and this person is unpleasant and only wants some investment portfolio help. Like, no. The answer is no. This is really easy now. The answer is no. This is not who I’m here to work with. This is not what I’m here to do.”
Carl: Is it striking to you that how similar this is to a statement of financial purpose for a client, or obviously clarifying some sort of value, whatever you want to call it. I call it a statement of financial purpose. Yeah, those are totally worthless if you set them on the shelf. Your financial plan is totally worthless if you set it on the shelf. That’s why so many people are frustrated with our…speaking broadly, not this audience, but our industry broadly is because they sell a plan. And, well, it’s never picked up again. It’s worthless. And what we’re saying here is this becomes an operating manual that needs to be reviewed.
The idea of opinion to me…I just think of any…The only kind of business I’m interested in running is a business…the business is the vehicle for forcibly inserting an opinion into the world. Right? That’s the way I think of business. It’s just a vehicle for forcibly inserting an opinion. So, my question is, what’s your opinion? Flesh it out a bit, and then it becomes a touchstone that you can come back to, because it makes decisions far easier. It makes strategy far easier. It allows you to save time. And, of course, it’s going to evolve over time.
Go into it knowing that, because then you can be a little more playful with it. That’s the part I don’t really love about those. Like, “We’ve got to nail this. We’ve got to sit around and do this, and use that word right.” And you can just be a little more playful with it. Seven hours sounds like misery. But could you spend 90 minutes on it, and then pick it up again in a month?
Michael: It’s a version of the financial planning process itself. Right? Yes, I do want to formulate a clear plan of where I’m going. And yes, I fully acknowledge that the moment the client leaves the office, the plan will never again be right and on target, and it is going to change and iterate, and that doesn’t make it useless to create the plan in the first place. Right?
It’s actually really helpful to create the plan so we can start creating the road map of where we’re going and the decisions that we need to make to get there. But we also openly acknowledge, like, when we sit down again in a month with the client, it’s all going to be different, and it will be every month again thereafter as we just react to life and life happens.
So, to me it’s the same thing here, although I do find for most people that go down this road is, the more you iterate on what that vision is and you start doing things consistent with that, the easier the decisions get, the more a weight feels like it’s lifted, and the easier it is to then get even more focused and just kind of start doubling down further, because you start finding what actually works for you.
Like, “This isn’t the right word. This actually captures the essence of what we do. And now that I’ve said it, I’m like…that’s a magical word! I never would have thought of it a year ago, or three years ago, or whenever I was making it. But now I’ve realized that this is the thing that I do.” And then you get even more clarity, and then the decisions get easier, and your filters get better, and you continue down that road.
How To Develop Effective Mission And Value Statements [14:45]
Carl: Let’s talk real quickly about practical…How do you do it? Real quick, just to wrap this thing up. Let me give you one example of that. A word that we use a lot internally, and it’s in The Code, is “We play “righteous tricks”. I didn’t know that three years ago. I didn’t know that 10 years ago. And the difference between a righteous trick…and we’re very careful about this, and we don’t always get it right. But we’re very careful. The difference between a righteous trick and a bait and switch. Right? And trying to figure out when, “Oh, jeez, is that a bait and switch?”
Another one is “We’re not an emergency room”. So, we work really hard on limiting urgent language. If somebody on the team sends something with three exclamation marks, we say, “Hey, I’m not sure…” Like, we don’t need ASAP in caps. We don’t want that language in the world. We’re trying to eliminate scarcity, too, and we believe “We price for impact”. Right? “We put people over profit.” Those are the kind of things that have shown up on our…in The Code. So, how would you do that?
To me, I would just sit down and pretend…And you could even have somebody do this. Just have somebody really press you. Ask the seven whys. “Why does this firm exist? Why are you starting this firm?” Whatever. “Why does this firm exist? Why does this firm exist? Why is that? Why is that?” Go seven layers deep, and just whiteboard those out. Right?
Michael: Yep.
Carl: Full brainstorm session, no wrong answer, no stupid things. Just no fear, just write it all out. Take it, collate it in the thing. Ours exists mainly in video. The team just says, “Hey, record a video.” So, that video is embedded in a Google document. That’s how simple ours is. Other people think of them as like a manifesto, a list of commandments, you know, ten statements. What advice would you give people that actually go do this thing?
Michael: In part now, because I’ve done it for a while with a couple of different businesses, I’m a fan of how EOS, Entrepreneurial Operating System, frames this because I think it’s a pretty straightforward framework. They essentially boil it down to two things. They call it your Purpose and your Niche, which isn’t quite maybe the same as how we tend to talk about niche, like, you know, I’m going to specialize in 40-year-old physicians.
Purpose is just, like, “What’s your purpose, cause, or passion?” Just the thing that gets you out of bed to do what you do every day. As you said, the thing you have an opinion about. And then, what is it that you do to accomplish that? The purpose is the Why, the niche is the What. And to me, it really just is writing that stuff out. Put it on a whiteboard, put it on a piece of paper. Just write it down and look at it and ask, like, “Is that a good description of why I went and launched this thing, and what I’m doing that adds value?”
And one of the great things that EOS I know advocates, in particular, is that that core focus is not something you create. It’s something you discover. You do know it. It is inside of you, because you are using it, recognized or not, to make the business decisions that you make. When you say, “I am going to do this thing, and I’m not going to do that other thing.” It is there. Once you articulate it, and you find some of the words, and you put it down, you get a lot more clarity and the decisions get even easier. But it is in you now.
So, I think it’s just starting to try to write it down, the Why and the What. And I love your framing of have someone ask you why about those several times, just to force you to keep drilling down to say, “What really is the essence here?”
Carl: Mm-hmm. The person who did that to me the best ever was Ron Lieber, my editor and good friend. I remember…And he got relatively aggressive about it once. It was really cool. He was like, “No, no, I’m not buying it. We’re not there yet.” He was like, “No, really, why?” And it got to the point where I was like, “Aaah!” It was like this. You know? Like, a thing came out. And, yeah, find somebody like that. Find somebody who will really push on you, because I believe those things are there, or else you probably wouldn’t have done this thing.
And then, let me back up from that. That’s a punch in the face. Here’s an empathetic hug. Maybe not. Maybe you’re like Tom Brokaw’s greatest generation. We have clients like that. And you’re just like, “I just want to build a good business.” You know what? That’s totally okay, too. You don’t have to be a revolutionary to have a vision statement. That’s totally okay, too.
Michael: It doesn’t have to be a totally revolutionary thing. But there is…
Carl: Totally.
Michael: You made your thing and didn’t go work at someone else’s thing. You’ve got an opinion. You do have an opinion about something, as I think you said, Carl, and so well. So, again, to me, we usually have it. A lot of the time we just don’t want to say it. We don’t want to admit it. Sometimes even getting back to our last podcast, like, it feels risky to say it and commit to it.
Carl: Yeah, that’s a very interesting point. I don’t want to dive too deep on it, but Seth Godin talks about that as, like, we’re hesitant to put ourselves on the hook. Once we say it, we’ve sort of put ourselves on the hook for something, and that can feel risky. And you don’t have to do it publicly. Nobody else has to know about this. It just…So, if this is important to you, walk gently into it and get it done.
How Mission And Value Statements Become Even More Important As A Firm Adds Additional Team Members [20:56]
Michael: The one piece I will add to that quickly, just in terms of as you said, like, this doesn’t…this can be for you. It doesn’t have to be public. And I think that is true when you’re getting started. There does come a point, though, when this actually becomes much more important in your business. And I find it’s usually about five or six team members. And the reason why that becomes a magic number is for most people that’s your span of management control before you run out of time and capacity to manage people.
So, when it’s you, you may or may not have articulated, but you know what that thing is. It’s in your brain deep down. You’re using it when you make your decisions, even if you never realized it before. And when you hire someone, it’s actually still fine, because they come to you for all the decisions, so everything still routes through you. And when you add a second, and a third, and even a fourth person, usually as the founder, you’re still at the center of the business and everybody reports to you. So, every decision is still running through that filter, whether you’ve articulated it out of your brain or not.
When you get to five or six people is usually when you have to hire…someone in your firm starts managing someone else in your firm who no longer reports to you. And the moment that happens, if you have not figured out how to articulate this, people start making different decisions than the decision you would have made in that situation. And if you haven’t gotten clear on what the vision is and being able to articulate it, either they’re going to start making decisions you don’t like and you’re going to be unhappy. They’re going to start making decisions you don’t like, and then you’re not going to want to hire anyone else, and then you’re going to stop the growth of your business, or you’re otherwise going to start making yourself stuck.
So, if you want to see everybody else make the decisions that you would have made in that situation, to me that is the very essence of what mission statements and vision are all about. The clearer you get on that and the clearer you articulate it to everyone else, the more clear they will be able to make the same decision you would have made in that situation, and that’s what actually makes it easier to get to the next level.
Carl: Yeah. No, I totally agree. That’s why The Code started happening here, because my COO was smart enough to say, “Hey, we’re trying to kind of make decisions like you at scale, and we need this in an operating sort of manual. We’ll call it The Code, because we are fancy-feely and we can’t have the mission statement. And so, yeah, now everybody who works with us gets access to The Code.
Michael: Cool.
Carl: Totally. Super awesome. Thanks, Michael.
Michael: Awesome. Thank you, Carl.
Carl: Yeah. See you.
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