Many of your clients are successful business owners, accomplished professionals and other well-educated people who are used to being in control. They can go anywhere and do anything they want. As a trusted advisor, you need to strike the balance between letting them be in control and, at the same time, guiding them to a set of options that’s going to come up with the best possible result.
As a good CPA, you’re essentially a “Libertarian Paternalist.” A what?
A libertarian is someone who believes at their core that people should be free to do whatever they want to do. A paternalist is someone who is dedicated to helping people and guiding them.
As Nobel Prize-winning economist Richard Thaler explains in his book Nudge: Improving Decisions About Health, Wealth and Happiness, people should have total free choice, but at the same time, they can be nudged in the right direction to guide them to better decision making.
The way this relates to our profession is that good CPAs are what Thaler would call “choice architects.” While we live and breathe taxes, balance sheets and accounting all day long, most clients don’t understand these things. But, when you give them choices about what they want to do (within your field), most of the time they have no idea what to do. Our job is not to overwhelm clients with choices; it’s to provide them with options in the form of advice.
Many of your colleagues have trouble wrapping their heads around this notion. They’ve spent so many years asking clients: “Mr. and Mrs. Jones, what do you want to do here?” Clients don’t know. They’re not paying you for options. Google delivers millions of options for free. They’re paying you to be their choice architect. Instead of asking clients what they want to do about a difficult financial decision, you should be taking the lead, as in: “Hey, Mr. and Mrs. Jones, I think A or B will be your two best options, I would do A if I were you. What do you think?”
You’re being a libertarian in the sense of: “I guide, you decide.” You’re telling clients: “We should do whatever you want to do. My job is to cipher through the data and put the best options in front of you that I possibly can.” You’re being a paternalist in the sense of telling clients: “I want to try to move you in the right direction based on the best information we have at hand.”
For more about guiding clients through tough decisions, see my article Don’t Succumb to Decision Fatigue.
I guide, you decide
When you’re selling professional services, at the end of the day, your client is the boss. They can do whatever they want to do (i.e., libertarian). At the same time, it’s your responsibility to put good decisions in front of them that will nudge them responsibly toward making the right decisions.
When you’re meeting with a client and an important decision is on the table, don’t put yes/no choices in front of them. Always make it A or B. I like to take it a step further by saying, “In my opinion, based on knowing what you’re trying to accomplish, this is what I would do and here is why. Let’s go with A. But, if I misunderstood your situation and we need to reestablish your goals, let’s go ahead and do that.”
Suppose you have a client who is planning to sell their business in a few years. But, in today’s business climate, when there are huge piles of acquisition money floating around, good businesses are going for very high multiples. Your client may have received an offer to sell right away for double what an independent valuation told him his business is worth. Now the decision gets more difficult. On one hand, your client wants to delay selling because he believes he can sell for even more in a few years if he keeps growing the business. On the other hand, you know the offer he received may not be there in a few years when your client is ready to sell. Further, you know that if he accepts the offer now, he’ll have more than enough to achieve all of his family’s financial goals without ever working again. You know your client very well. The nudge here is to remind him of his goals and financial plan. Selling today ensures he will meet all of his financial goals, but he might not be ready psychologically to live life without the business — his baby. And no amount of money in the bank can replace that feeling of purpose and accomplishment. That’s where you come in.
Again, nobody knows your clients better than you do. As their trusted advisor, you owe it to your clients to create a choice architecture that lets them maintain control, but ensures they understand the pros and cons carefully, of any decision they ultimately make.
Don’t be afraid to say, “This is what I would do if I were you.” That’s why they pay you.