Call it Dave Ramsey’s Road to Damascus, an epiphany that only comes after the hard lessons of “losing it all” early on.
It’s a familiar story. The narcissism of youth led Ramsey to indulge in many of the trappings of modern life; high income but loads of debt and a massive overextension in questionable investments in an effort to live a life and project an image that simply wasn’t real.
While the story is familiar, his response wasn’t—radical honesty and a back-to-basics approach that served as the foundation for who he is today; author, speaker and how-to high priest who dispenses consumer-oriented budgeting and savings advice with an evangelical zeal.
Indeed, it’s in his mission statement: “Ramsey Solutions provides biblically based, common-sense education and empowerment that give hope to everyone in every walk of life.”
It was this type of self-induced behavior modification that advisors wish more 401k participants would undertake, and Ramsey is dedicated to spreading the good word through his bestselling books, nationally syndicated radio show, podcasts, educational platforms, live events, e-newsletters and more.
This past September saw the unveiling of his new headquarters outside of Nashville, a financial mecca of sorts (to borrow from a sister faith) with notable politicians and personalities on hand to help celebrate his success.
His past battle with the demons of debt resonate with Americans today and is a major focus—if not the focus—of many financial wellness offerings currently available to plan sponsors. Ramsey’s own, SmartDollar, is used by high-profile 401k product providers, broker-dealers and advisors, with one RIA candidly admitting that Ramsey’s name recognition fuels participant adoption and utilization.
The discipline and self-reliance he preaches is ubiquitous throughout his message and company. It’s also the underpinning of one of his other popular programs, EntreLeadership, specifically geared to business owners and executives that’s equal parts Calvinist condemnation (“the problem is you”) and entrepreneurial encouragement in a no-nonsense approach to building a business.
It’s particularly relevant for 401k advisors looking to go “all in” on the growth and success of their respective firms, and Ramsey was eager to explain what it is and how it’s applied.
EntreLeadership
“EntreLeadership is the process of leading a venture to grow and prosper,” he said. “An EntreLeader is someone who embodies the pioneering spirit of an entrepreneur and the humble spirit of a leader.”
Good investment professionals and 401k advisors, he added, have the “heart of a teacher,” a phrase oft-repeated throughout the book of the same name.
“They want to help people grow their money, which requires trust, vision for the client’s success, integrity, humility—and they passionately seek those things out.
That is EntreLeadership. Even if you had all the best financial information in the world packed into your brain, it wouldn’t help you be a great advisor without also being an EntreLeader,” Ramsey said.
Claiming to know many advisors who have this kind of passion for serving, who are both courageous and humble in business, “when they talk about building wealth, their faces light up. They can’t help talking about wealth building in an exciting way, and their clients catch the excitement, too. For them, business is always about a whole lot more than making money. People matter the most to them, and the money follows.”
The entrepreneurial nature that’s endemic to 401k professionals, of course, means they like to be in control. Ramsey himself confessed to wrestling with control issues early in his career, which made delegating that much more difficult. So how do they let go?
“A lot of entrepreneurial types get delegation wrong,” he argued. “Delegation isn’t blindly handing off tasks you don’t want to fool with and hoping it all turns out all right.”
Rather, to successfully delegate, they must trust their team members’ integrity and competency—not always easy, but critically important.
“We call it ‘mastering the rope.’ Visualize a rope attached to you and your team member, and the more worthy of trust the team member has proven to be, the more rope you release. If the team member does something to break your trust, you pull the rope back in. And you never release the rope. You’re always watching and measuring integrity and competency.”
Proper delegation begins with hiring the right people, something he calls “finding thoroughbreds.”
“If you have a stable full of donkeys, no wonder you don’t delegate. I wouldn’t either! So, I say to 401k professionals, hire team members with integrity—people you can trust who in time prove their competency. You can let go because you are wise, and it’s wise to build a team that you can release to; otherwise you have to do everything yourself and that’s no fun.”
Intentional interview
The first, and often the largest, mistake 401k advisors make when looking to hire the thoroughbreds to whom Ramsey referred is not taking enough time to properly interview candidates. The fault is attributed to a small business owner’s lack of time.
“Doing everything yourself and completely overwhelmed, it can be easy to just hire someone to help you,” Ramsey noted. “So, you begin to hire quickly because you really don’t have time for the interview. Before you know it, you’ve hired an ‘employee’—someone who comes in late and doesn’t care as much as you do, instead of a team member. That’s why it’s so important to invest time in the interview process.”
He created an “Intentional Employee Interview Checklist” to help EntreLeaders prepare for the right way to interview. For example, consider questions the advisor needs to know versus wants to know, the pace and timing of the interview, and the interviewer’s favorite go-to question that gets to the “heart of a person” and can be asked at any time.
“It helps interviewers know the right questions to ask, so you’re weeding out the ‘donkeys’ quickly and potentially saving hundreds of thousands, maybe even millions of dollars lost in productivity and lost opportunity.”
A bad hire that leads to potentially millions of dollars in lost productivity had us wondering about other mistakes he sees advisors make, and how they’re effectively avoided.
“The biggest mistake financial advisors make is the same mistake many people in business make, and that is being merely transactional and not relational,” he said in a nod to the RIA model. “People aren’t units of production; they have dreams, goals, hurts and crises. Your customers need to be engaged relationally. They want to make smart decisions about their money and their future. They don’t want to be sold something by a slick talker.”
Again, referencing the heart of a teacher, he only recommends advisors who can clearly explain their investment philosophy and take their client’s opinion into account.
“I tell our listeners to be very comfortable with the fact that this is their money. Financial advisors need to remember that their job is not to intimidate, but to teach and advise. Do that, and you’ll earn more business.”
Financial wellness
Financial wellness is all the rage, with more companies adopting the health and wellness techniques of decades past for better financial security for their employees.
For 401k advisors, it’s a key ingredient for more successful participant outcomes, one reason for its current popularity.
But what role, specifically, does it play in keeping employees focused and therefore productive, reducing stress and positively impacting the employer’s bottom line? And what trends is Ramsey currently seeing that an offering like SmartDollar can address?
Financial wellness is a broad term that means many things, and it must be done right.
“One thing we’re seeing that’s downright dangerous is the trend away from changing behavior and toward making people feel comfortable,” Ramsey bluntly stated.
He referenced companies that offer employees access to loans and payday advances to help them “deal with whatever mess they’re currently in,” and one that offered a payment plan for big-screen TVs.
“This kind of thing is being promoted under the deceptive name of ‘financial flexibility.’ We call it stupid. Look, nearly 80% of your people are living paycheck-to-paycheck. Forty percent of them can’t cover a $400 emergency without borrowing money. Workers are stressed about money, and they don’t leave that stress at home. It leads to distracted workers, higher turnover and health care costs, and it spills over into retirement plans, leading to lower contributions and people borrowing from their 401ks. We’ve been doing this for 30 years and we’ve learned that unless there’s behavior change, all the programs in the world aren’t going to help.”
SmartDollar is offered by thousands of companies, he noted, and walks participants, step by step, through how to save for emergencies, retire debt, develop a budget and save for retirement.
“People who never thought they’d retire are on track to do that. People who never thought they could put a kid through college or live debt-free are doing it. It’s awesome. What a great way to show your team you really care about them and their families, not by digging them another hole, but by showing them a way out.”
We concluded by coming full circle, wondering what advice he would give 401k advisors who want to do a better job for their clients and their teams.
“Financial advising has evolved from a sales and product-driven profession to one centered on providing meaningful financial advice,” he said. “So, we already talked about having the heart of a teacher with your clients. You’ve got to do that.”
And with teams?
“Remember, bosses push, leaders pull. People will allow themselves to be led when they feel valued and treated with dignity. If you want your business to soar, practice fanatical integrity. It will unify your team, and loyalty will naturally follow. In short, serve both your clients and your team.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
