Episode #013 – The Fiduciary Standard: How to put other people first and still come out ahead

You're listening to the REI Marketing Nerds podcast, the leading resource for real estate investors who want to dominate their market online. Dan Barrett is the founder of Ad Words Nerds, a high tech digital agency focusing exclusively on helping real estate investors like you get more leads and deals online, outsmart your competition and live a freer, more awesome life. And now, your host, Dan Barrett.

Dan: Alright, hello everybody, and welcome to this week's episode of the REI Marketing Nerds podcast. What is up? As always I'm Daniel Barrett, here from oldsite.adwordsnerds.com reaching out to you saying hello; hope you are having an awesome week. We are doing so many things behind the scenes. It's really wild. We are testing things in the investing spaces. We have been dipping our toe into the real estate agent space with listings. I have been working with mentorship students. We have had a lot of things happening and it's been really, really sort of a busy couple of months. Not to mention the fact that I moved and all these wild things.

There is a single concept that has continued to come up and it's come up as our level of work has gone up, as the level of marketing stuff that we need to do for our clients as increased and it's something that I want to put as the 12th episode, I think this either the 12th or 13th episode of this podcast. I am going to kind of cap off this recent run that we have been doing and I'm going to end it with something that is probably the most important kind of concept behind the Adwords Nerds business, something that I directly attribute a lot of our success to, and something that you can immediately apply to your investing business. You don't have to be technical to do this. You don't need to worry about figuring out how to do stuff on the computer. You don't need to worry about conversion rate. It's something that you can do literally just within yourself. It's something that is going to have over time a massive, positive effect on your business but also how you feel about your business, how people feel about you. It's one of these major quality of life improvements that is incredibly simple to do but has major, major ramifications long term. And that is this concept of the fiduciary standard.

Now the fiduciary standard, it's in the finance industry and basically certain kinds of financial advisors have to legally adhere by this standard and the standard is pretty simple. The standard is you need to do what is in your client's' best interest at all times regardless whether it is in your best interest. This comes out in the finance industry specifically because the way that it was set up was that if I'm a financial planner a lot of times I can make a recommendation to you buy certain stock or buy into a certain fund. I, the planner or the agent, will receive a commission for selling you that fund. Now look even in situations where the financial planner absolutely does not mean to do this and is not trying to sway you in any one direction or the other, they think they are being completely objective. But even in those situations, when you create an environment when you give someone a reason to go in a certain direction, you incentivize them to do a certain thing; you say I will give you money when you get someone to buy this stock or fund. When you put someone in that situation, all people, all people will subconsciously start to steer their decision making process in a direction that benefits them. So the case of the agent or the planner, most of the time, much of the time what's going to happen is that they are going to suddenly start to rationalize to themselves reasons why yes the stock or the fund or the plan that gets me the highest commission is in fact the best for my client. Again this is not something where they are setting out to deceive you and they are trying to be tricky. This is something that happens subconsciously, we all as people seek to maximize our own wellbeing and we will rationalize that even if we know deep down it's not really the best thing for the client, we will think of reasons to convince ourselves that we are making the right decision in sort of directing them to this outcome that is going to benefit us. This is just human nature. We all do this. You do this. I do this. Everybody does this.

As an investor, you are going to be put in so many situations where you have the opportunity to push someone into an outcome that is not actually the best for them but that directly benefits you. This is inherent. It is an intrinsic part of the business that you are in and indirectly it's an intrinsic part of the business that I am because I work with investors, I help investors to speak to more sellers, I help the investors to do more deals, and so I put my clients in those situations. Not to mention just the fact that when I get on the phone with an investor in my own business I have to decide is this marketing, this kind of online marketing, is this right for them? Is it right for them to work with us? I have to make that decision. Obviously I stand to benefit when somebody works with me. I get money from that. There is always an incentive for me to convince an investor to work with us just like as an investor there is always an incentive, often times a huge incentive to convince someone to sell to you. We are all in this situation. The fact of the matter is, that moment in which you make the decision to sway your potential client in a certain direction or to send them in a direction that is right for them regardless of whether it benefits you that is the moment in which our character as entrepreneurs, as investors, as marketers, as people, our character is demonstrated and is revealed in that moment. It's probably the most important moment in your business life. Because each time you reinforce your nature, your character, your moral fiber, every time you make this decision and not only that but you reinforce a sense of your reputation. Your reputation is really nothing more than what people think of about all the decision you have made. If you've got a reputation of being a real jerk that's because you have made many tiny decisions that have reinforced that reputation over time. One of my favorite quotes, I can't remember if it's Warren Buffet or it's Charlie Monger and I'm going to paraphrase it here because I'm not good at remembering quotes but one of the things that I think about all of the time is this quote from one of those two gentlemen that says, "Your reputation takes a life time to build and it takes a second to destroy." If you are trying as an investor to build a reputation as an honest person, as someone who is out there to help as many people as you can as someone who is out there to – yes – make a significant profit, make a really great living, do a lot of deals, yes, of course but you are also someone that people can trust. If that's the goal to build that reputation every single time you get into this situation where you have to make the decision, okay do I sway this person to sell to me no matter what or do I send them down the path that is the best for them regardless of whether or not it benefits me. Every time you make that decision you are reinforcing or destroying your own reputation. Every time I get on the phone with an investor, if an investor calls me or they call Lou, who works on our team here, and they get on the phone with us and we do a strategy session and we talk to them about their market and the kind of budget that they have and we figure out about their life and what their goals are and we figure out what their competitors are doing and we figure out what the housing market is doing, we take all that information and if we know deep down look it's not the right time for this person, the market is not great for this kind of marketing for them, they do not have the budget, they are going to put everything on a credit card, they are going to risk their livelihood to do this. If we know deep down it's not a good fit and we sell that person anyway, we will seriously damage our reputation. Our reputation or the reputation that I want to build for Adwords Nerds in this market is as truly honest brokers. We don't take people we don't think we can do significant work on. We don't take people, we think are bad fits. We don't take people who are putting themselves into debt to run their marketing. We don't. That reputation built over time, yes, it might cost me money on a single call. I might get on a call with someone and say look I would love to work with you but it's just not a good fit. I'm not going to pressure you into making this decision because it's not going to be good for you and that person might leave that call, they might be a little irritated at that decision, and I’m not going to make that money. But long term what ends up happening is that people are comfortable getting on the phone with us. They are comfortable taking our advice. They are comfortable believing in what we say because I will tell them multiple times to do things that clearly do not benefit me or the company in any way. That means when I do recommend, "Hey I think this is right for you, I think it's the right time for you, PPC is a good investment, I think SEO is a good investment, whatever it is." If I make that recommendation, people will believe me. Because I know that I don't always make that recommendation. In about 40% of the people that apply to have a call with us, we don't take at all. We just don't get on the phone because I say look I know this is not a good fit. You need to do something else. 40% calls we cancel every single week.

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Dan: Now for you as an investor thinking through what that reputation is going to be and what your red line is, what your bright red line is. What kind of clients you will not take, what kinds of deals will not do, what qualifies someone as a really good fit for you? And it's beyond do the numbers and the deal makes sense. Can I flip this house? Can I wholesale this house? It's beyond that, beyond the financial. But knowing what your red line for who you can't work with because it's not good for them, who you won't work with because you know they can do something else that will serve them better. Know that and then hold yourself to that fiduciary standard. This idea that you will very consciously make a decision that very consciously in the moment think this through; make a commitment to saying I will do what is in my clients' best interest regardless of whether it is in my interest. That's an incredibly powerful tool. For one, you're going to feel. You're going to go home every day feeling amazing. You really are. You're going to go home every day knowing that you did the right thing. I cannot tell you the extent to which guilt and shame will eat you alive as a person if you let that stuff fester in your life. This is not like a religious thing. It doesn't even have to be a moral thing. You will hurt your own quality of life over time by consistently doing the wrong thing when you know you should be doing something else. It's just a fact. It's a physical, physio, biological fact that stress will eat you alive. But the difference is that if you make that right decision to uphold that fiduciary standard, man, when you go home you can rest easy. You just feel good. You feel good.

And the second thing is purely selfishly; this is an incredibly marketing tool. If you can build that reputation for really doing what's right for your clients, people will feel more comfortable coming to you. They will feel more comfortable calling you. Your conversion rates will go up. Your cost per lead will go down. Your close rates will go up. Literally, everything will improve. It takes time. It takes time but I have to tell you as someone who came to the investing space from the outside. I didn't know about real estate investing when I started working with investors. I didn't intend to only do real estate investing clients when I started doing marketing that just kind of happened naturally. Coming into this industry from the outside, the single biggest issue you have to face as an investor that is doing marketing to get motivated sellers, the single biggest issue you have to face is the fact that people are scared of investors. And if you haven't thought about this in a while, it's absolutely true. People see bandit signs and their red flags go up because for one it kind of sounds too good to be true. I'm going to buy your house cash, geez my house has been on the market for three months, I haven't even shown it yet. This guy is just going to walk up and give me cash, something is fishy about that. Right, that's what they think, something is fishy about that. Then secondly, if you are truly motivated, if you really need to sell this house, if you know you're in a weak position, this is something we all acknowledge. The motivated seller is in a weakened negotiating position. And if you know you are in a weak position, how comfortable are you putting yourself in a situation where someone has got to get you on the phone, they are going to come to your house. I don't even let door-to-door candy salespeople come to my house. I'm going to let this person into my house. They know more about it than I do. They know more about these deals than I do. I am already in a weakened bargaining position; they are going to take my house from me. They are going to take my house. I'm going to get almost nothing. I'm going to get ripped off. All my friends are going to think I got ripped off. My wife, my husband is going to think I made a terrible decision. That's what's going through their heads. This is why so many people will say, "My online leads are all junk. I think it's my competitors. People filled out the form but the phone number doesn't work or it's the wrong address." I got to tell you most of the time those are real people. The reason they are not giving you their information is because they know they need help but they are afraid of you. It's like I know I want this guy to sell my house but I'm afraid to give him my real phone number. I'm afraid to give her my address. They are afraid. If you can put yourself in their shoes, you're going to get that. You'll understand why they are afraid. Nothing will help these people reach out to you. These are the most motivated people. Nothing will help these people reach out to you more; nothing will help them do business with more; nothing will make them seek you out more than your reputation for doing what is in their best interest regardless whether it is in yours. This is a principle I have tried to apply to almost my entire life. It's a principle that every single person that works at Adwords Nerds, it's the very first thing I tell them about working here. Whenever someone comes to work for me, they get a document and it says what it's like to work at Adwords Nerds, number one is the fiduciary standard. I'm going to tell you if you can make this the number one principle in your investing business for one it is an advantage that almost nobody else is bothering to use even though it's available to everyone. It's truly going to differentiate you. And two, it is going to have not only a positive impact on your bottom line, it's going to have an impact on the quality of your life. It's massive. It's truly, truly massive. Now does this mean you never make mistakes? No. Does this mean that every single deal you do is a success? No. Does it mean that every client that we work with has massive success? No. We are all humans. We are all human beings. We all make mistakes. We all make bad decisions. What matters is your commitment to doing what you can to uphold that standard. And if you can adopt that into your own life, I'm telling you the positive impact, the positive benefits to you, they are going to just outstrip anything you have ever done in your business.

You guys have been listening to this podcast for 12 or 13 episodes in. You have heard me talk about marketing. I'd say if you only listen to one episode, this is the one. And if you only take something away from me, rattling on about computers and marketing and motivated sellers and all this stuff, this is what I want you to take away. Adopting the fiduciary standard in your business is the key to not only better business results but a better quality of life.

I hope that makes sense. Let me know what you think. Send me a note, send me a comment. I would love to hear it. As always, thank you so much for listening to this podcast. You can see all the past episodes of this podcast at oldsite.adwordsnerds.com/podcast, got all our past podcasts and show notes. Come say, "Hi". We've got a free Facebook group, the REI Marketing Nerds Facebook group where tons of awesome investors share tips and tricks. I do free trainings in there every single week. That's AdwordNerds.com/group that will take you right to the Facebook group. oldsite.adwordsnerds.com/group. Hope you guys are having an awesome day. I'll talk to you next week. Cheers.