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‘Sketch Guy’ Carl Richards Now Has a ‘Secret Society’ for Advisors

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Carl Richards, a certified financial planner, is best known for his decade-long New York Times “Sketch Guy” column, illustrated with his astute, doodle-like drawings that illuminate complex financial concepts. 

What perhaps isn’t as widely known is his work to help financial advisors.

One of Richards’ newest enterprises does just that: The Society of Advice, which he defines as “a secret society of real financial advisors.”

“We spend a lot of time on how to give advice in the face of irreducible uncertainty,” he tells ThinkAdvisor in an interview.

Richards, 49, says the key to avoiding behavioral mistakes is being aware of goals and why one’s investment portfolio is structured as it is.

Specifically, he recommends to FAs: “Diagnose before you prescribe.”

As defined by Richards, it is the “behavior gap” that lets investors’ emotions get in the way of making smart decisions.

In the interview, he discusses The Society of Advice, about a year and a half old and which now has 325 members. After benefiting from a program detailing what makes a “real financial advisor,” members are invited to a monthly Zoom call, which Richards has dubbed “the Worldwide Chapter Meeting of the Society of Advice.”

His popular Behavior Gap blog has morphed into The Weekly Letter. He does Behavior Gap Radio, a brief private podcast, six days a week. Each episode pivots on a single topic.

He started out as an advisor with Fidelity, then moved to Prudential and on to Merrill Lynch. In 2012, he sold his own shop, Prasada Capital Management, to Buckingham Asset Management. 

From 2012 to 2016, he was BAM Advisor Services’ director of investor education.

But it was his weekly New York Times essays and quirky educational sketches, from 2010 to 2020, that kick-started his now-famed franchise. He no longer gives advice directly to clients, though he maintains his CFP designation.

Spun off from his blog, Richards’ first book was “The Behavior Gap: Simple Ways to Stop Doing Dumb Things With Money” (2012).

His new book project is a coffee-table tome, due this fall, for advisors to give to clients. Only 100 copies at a time will be available for sale to each advisor — 10,000 copies will be published — owners acquire rights to use his 52 essays and 52 sketches in the book for their own presentations and marketing.

Richards, who began making Sharpie sketches to help his clients understand investing, has had exhibitions of such drawings in art galleries in the U.S., England, South Africa and other countries.

ThinkAdvisor recently held a phone interview with the CFP, who was speaking from his base in Park City, Utah. 

The conversation touched on one of the “dumb things” he says investors do: buying stocks touted by “financial pornography” magazines. 

He explains that term, then argues: “Financial pornography is what people think of when they think of our industry.”

Here are highlights of the interview: 

THINKADVISOR: Is The Society of Advice financial advisor training?

CARL RICHARDS: It’s like, anti-training. We think of it as the secret society of real financial advisors.

You enter through a program called The Fellowship, a 21-part manifesto of what a real financial advisor is.

What’s next?

You get invited to a monthly Zoom call named the Worldwide Chapter Meeting of The Society of Advice. We love names here!

The call is with an author or other expert on a specific topic, and I interview them on how their work applies to the job of a financial advisor.

For the last several years, you’ve been talking with FAs around the world. What do they and the society’s members need help with most?

One area is a deep sense that nobody knows exactly where they belong. The wirehouse folks don’t know if they belong with the independents, and the independents don’t know if they belong there.

Anything else?

There’s a [need] for general resilience. It’s a tough job. The job that you sign up for is to help people make incredibly important decisions with incomplete information. It’s hard dealing with the unknown. You don’t know how it’s going to turn out.

Your most important work will be done at the height of irreducible uncertainty. You must look people in the eye and say, “Let’s make this change.”

At a moment of crisis, you have to step in and say, “I’ve got you! Let’s go this way.”

So [in The Society of Advice], we spend a lot of time talking about how to give advice in the face of irreducible uncertainty.

What investor behavior trips up clients most often?

[The industry] talks about fear, greed, buying high and selling low. But those things feel like hacking at the branches of the problem. What we’re not talking about enough is the root of the problem, which is basic awareness: Why are you investing the way you are? What are your goals and why? 

It’s so hard for people to sort that out. Often, the rubber meets the road in the portfolio design.

When someone you first meet learns that you’re a CFP, what question do they ask you most frequently?

“What’s the market going to do?” One of my favorite questions to ask them back is: “Why is your money invested the way it is?”

The answers almost always are “I read about it in [what I call] a financial pornography magazine” or “I heard about it on CNBC.” The really smart people say, in hushed tones, “I read about it in The Economist.”

What would be an ideal answer to your question?

“The portfolio was carefully built to help me reach my goals.” 

It’s really hard to say no to hard-wired behavior like “I’ve got to sell when the market is down” if you don’t have a deeper yes. To me, the deeper yes is: Why are you really doing this?

By the way, what’s a “financial pornography” magazine?

I don’t know if they’re around anymore. But they’re the ones that use salacious words to attract attention and get you to act — like “10 Hot Funds!” or “Sizzling Funds You Need to Own Now!” 

In the old days, it would have been magazines like SmartMoney or Money. I believe it was Jane Bryant Quinn who first used that term. Financial pornography is what people think of when they think of our industry.

Do FAs ever inadvertently make clients’ investing behavior worse or muddy the waters for them?

That’s a huge problem. And the reason is that financial advisors are human, too. But the really good ones say, “We’re going to build great portfolios; and we’re only going to make changes based on the client’s life, not what goes on in the market.”

Why is that so important?

As an industry, we’ve trained people to think that our job is to debate whether [using an analogy] taking a plane, a train or an automobile on a trip is what matters. 

But what I’m trying to do is focus on real financial advice. Before we do that, can we decide where we’re going? Then we’ll debate which vehicle to use. Diagnose before you prescribe.

What’s the genesis of providing the sketches that accompany your essays?

Originally, there was a pragmatic need. When a client would ask me certain questions, I’d explain the answer, but all I got were stares. These were intelligent people. So it wasn’t their problem; it was mine. 

One time, out of desperation I said, “It’s like this — and I drew something with a Sharpie on a whiteboard. I have no art background, which should be obvious! But the client appreciated seeing the drawing and said, “Oh, I get it now.”

How did you go from there to publication in The New York Times?

I started doing them in public: Every time I got asked a question more than once by a client or prospect, I’d give them the answer and a Sharpie sketch, and then put it up on my blog, Behavior Gap.

After about a year, Ron Lieber [the Times’ “Your Money” columnist] asked me to do some. Eventually, that grew into a weekly column I did for 10 years.

What was your aim?

To take seemingly complex financial concepts and make them simple. The goal was to get at the root of what really mattered about the [investment] decision.

Then I’d wrap it up with a nice Sharpie drawing as a souvenir of the learning experience.

Pictured: Carl Richards