Money Talk

Episode 43

The Future of The Professions

Today’s episode is about The Future of the Professions, a book authored by a father and son team, the Susskinds, back in 2015. It was prescient, in other words, what was projected has come to pass. The book addresses a multitude of professions: health, education, divinity, law, journalism, management, consulting, tax, accounting, and architecture. So, what is the impact of technology on the future of the professions?

Welcome to our listener-supported podcast, Money Talk, uncompromised, absolute financial truths behind financial perceptions, with hosts Ed Sutkowski and Chuck LeFebvre. Let’s listen in.

Chuck LeFebvre: I’m Chuck.

Ed Sutkowski: And I’m Ed. Today’s episode will deal with The Future of the Professions. That is, is there a future of the professions?

Chuck: It’s a title of a book.

Ed: That’s the title of the book, and it’s authored by a father and son team back in 2015.

Chuck: The Susskinds.

Ed: It was prescient, that is what was projected has come to pass. The book addresses the several professions: health, education, divinity, law, journalism, management, consulting, tax, accounting, and architecture. Any lesson, do you think without going into the detail, Chuck, the impact of technology on the future of the professions?

Chuck: Well, we’ve seen some things that have been pretty remarkable and dramatic not necessarily in those particular fields. But like, for instance, I remember in the early days when Tesla really got their factories up and running, and there was some interview with Elon Musk where he pointed out that, “Look, we don’t actually need to have lights on in our factories.” It was a completely automated factory, building automobiles. There were no auto workers involved at all other than walking through and picking up bolts that got dropped and putting them back in the bins where the robots could build these cars again.

We’re seeing inroads into these so-called white-collar professions as well. I keep watching and waiting for us to see the kind of impact I hope for with respect to the investment management field. There are definitely some inroads there with companies like Betterment, as they’re not a sponsor or anything, but it’s just an example, where they do the robo-investing for ordinary investors. The attempt there is to make inroads into these fields that are typically more relationship management fields. You look at things like the accounting profession, nobody really thinks of this as a big change although it frankly is.

The fact that people are using more and more software to prepare their tax returns and relying on their accountants less and less, and that’s becoming easier and easier to do because of the automation that’s built into payroll systems and the IRS’s system and so on where you can go online. I know you don’t prepare your own tax return Ed, but for people who do, they can go online, and they can pay a fee to TurboTax. The program will actually directly access and download their W-2 information and all kinds of other information and do a lot of the inputting automatically now. We’re seeing this happen.

Ed: I just want to comment about the observation I have to my own tax return. I have it for a lot of years. The reason is, my theory is I never do anything that someone else can do. That leaves me with doing only things that– I can only go to the dentist.

Chuck: Right. Right.

Ed: If I could arrange that, I would have someone else go to the dentist for me.

Chuck: When you figure it out, let me know.

Ed: Yes. The point is this delegation, there may always be, at least the book seems to suggest, room for a warm advisor, even though the fees being paid are obnoxious.

Chuck: Right.

Ed: We seem to get that, irrespective of the background teaching of the owner of the asset, the warm advisor, the friend is necessary. As far as law is concerned, I see there’s always going to be room when we have to deal with a divorce, personal injury, worker’s comp or collection matters. It’s fear, greed, the government and revenge will need human beings. But aside from that, would you tell your grandchild to become a lawyer?

Chuck: Oh, well you might have asked the wrong person that. I really enjoy practicing law, but I think that for many lawyers, it is not the panacea that they imagine when they enter law school. Largely, because of the reasons that we’re talking about and particularly so much of what used to be bespoke type work in the practice of law has largely become commoditized. That’s definitely…

Ed: Real estate transactions, residential real estate transactions.

Chuck: Right. We’re to the point now where really the only logical way to handle those is for lawyers to not be involved. I know lawyers have to be involved in many cases, and that’s because the system isn’t quite as efficient as it should be, and they end up being injected there as a necessity. In certain parts of the country, you just rarely see lawyers involved in real estate transactions at all.

Ed: I’m speaking residential transactions. The commercial transaction is different because you got financing issues and the like.

Chuck: Right. But, seriously, these are all basically forms that are identical from one transaction to another, and the title work is done by title companies. What on earth are lawyers really doing there? We’re seeing that disappear in those situations. In cases where a lawyer is still involved, the fee pressure is extremely– there’s tremendous pressure for the fees to be low because it’s just kinda understood that the work is largely automatic.

Ed: Yes, it seems to me and the takeaway, the lesson from that book and having been around for more than a few decades, is that unless the individual, whether it’s a doctor, lawyer, divinity representative, journalist, can create value– I think of value as a two-sided coin, the value in the quantitative sense, dollars and cents, or the qualitative sense, the feel-good opportunity. Unless you can hopefully do one or the other or perhaps both, you better go do something else, and nothing wrong with driving an Uber or selling shoes or whatever.

The point is the opportunity to make a living, you’re not going to be wealthy practicing any of these professions, at least I don’t think so, is to be able to focus on the creation of quantitative value, how this individual can better their position tax-wise, investment-wise, but then qualitative. Do you really understand what’s going on? We spend 80% of the time thinking about a solution, listening, what are your concerns, and only 20% of the time actually doing it. Is that fair?

Chuck: Yes, it is.

Ed: The lesson or takeaway is, is there a future for the professions and your answer is?

Chuck: Well, I think there is, but it’s a smaller future than the past is probably the best way to put it, or it’s a different future than the past because a great deal of what many of these professions have done traditionally can now be automated. Practitioners have to shift. They have to shift their focus to being more attentive to, I guess you’d say, the human side of the equation in order to add real value.

Ed: Are people equipped to do that? Let me hit on accountants for a minute, my favorite, although I deal with–

Chuck: You do accountants, then I’ll do doctors.

Ed: Okay. By definition, someone going into accounting has different color eyes. Nothing wrong with that. I’m talking about the DNA, the need for order, to have things afoot, to make sure the government doesn’t intercede, tax returns are filed properly, and there’s no risk. That person, I am not sure that person can create qualitative value.

Chuck: Right.

Ed: The folks are putting themselves into a corner of– Quantitative people are all over.

Chuck: Right. Right.

Ed: What the accounting firms are doing, and some law firms I think, are managing money and charging a percent of that.

Chuck: Yes, they’re doing that. They’re doing trust administration. They’re branching out into all of these, I guess, what you would call related fields, and I think that’s a recognition that their core business is eroding.

Ed: Yes, but the problem I have is that their DNA is not suited for these other revenue streams.

Chuck: Oh, I agree completely. Yes.

Ed: Yes, it’s occurring. Lawyers should not be doing income tax returns.

Chuck: In fact, I would go one step further and I would say that if you’ve got an accountant who’s got the right kind of DNA to be well suited for these other things, that person is probably practicing accounting in a manner where their practice is not at risk. They’re providing real value because they’re doing more than just sort of putting numbers. They’re giving genuine and thoughtful advice to people along the way.

Ed: For example, visiting with a client that’s not fee sensitive, and that’s always the issue. Every quarter looking at the compilations, “Hey, we can do this,” listening to what the client has, there’s the creation of value.

Chuck: Right.

Ed: To do the tax returns at the end of the year, there’s no value there.

Chuck: No, no. If you look at these engagement letters that most of these firms send out, the engagement letters are designed to ensure that in case you were mistaken into believing there is some value there, there’s no value there.

Ed: Man, as a matter of fact, that happens to be my pet peeve.

Chuck: That’s why I brought it up.

Ed: I see these letters, and I can’t believe it.

Chuck: “We’re not responsible for anything if anything goes wrong.”

Ed: “It’s your problem.”

Chuck: “If we make any mistake, our liability is limited to the amount of the fees that you pay us.”

Ed: You got to file within three days or something. It’s incredible. I think it is because the accounts have been sued by indigent fee lawyers if you mess up.

Chuck: Right.

Ed: Why do you want a client that requires an engagement letter of that degree of difficulty?

Chuck: Right.

Ed: Do you want that client?

Chuck: We think that you would not want that client, and you also wouldn’t want to– What they really want is for people to sign these engagement letters and be bound by these engagement letters but to not actually read these engagement letters.

Ed: Well, you can’t just because it’s single space.

Chuck: Yes, because if you read the engagement letter, the underlying message there is, “I don’t have any confidence in my own work product, and I’m going to offload 100% of the risk on you.”

Ed: “You’re going to indemnify us if there’s a mistake. “

Chuck: Right.

Ed: If we have to testify in court, you’re going to pay us.

Chuck: Yes. I have serious doubts that those types of terms are enforceable in many cases, but it definitely sends the wrong message regarding how the accountant views his or her own value when they’re communicating to a potential client via the mechanism of this engagement letter. It’s really just kind of incredible.

Ed: Oh, it is.

Chuck: You would never sit across the table from a prospective client and tell them the things that the engagement letter says.

Ed: Yes. If you have full disclosure, the accountant should sit down with the client and go through the engagement letter and understand, but instead that never occurs.

Chuck: Right.

Ed: The response is, “Well, the General Counsel insists on it, and we’re not going to do the return unless you sign this.

Chuck: Right.

Ed: ” Guess what?

Chuck: Yes, exactly.

Ed: “We’re not signing it, and we’ll go to someone else that doesn’t insist on that engagement letter.”

Chuck:  Right. You and I have been through this a number of times. One recent incident comes to mind here where this accountant agreed to do a tax return, had done tax returns in the past without an engagement letter, and then this time was, “Oh, I’m not going to prepare this tax return unless you sign the engagement letter.” I said, “Okay, well, can we talk about the terms of the engagement letter? If you want me to sign it, there’s certain things here we really need to be able to negotiate on.” “Oh, no, it wouldn’t be worth the trouble to go through the negotiations.”

Ed: What choice do you have?

Chuck: Right, exactly. It’s the definition of a contract of adhesion, and many of the terms are, frankly, unconscionable.

Ed: It’s an anti-marketing device. We do not want your business.

Chuck: Right. The service you’re describing in this engagement letter has a value of about $100, but you want to charge me $1,500 for the service, which means the engagement letter has to be different. Anyway, that’s also my pet peeve in case you haven’t picked up on that yet. It’s just incredible.

Ed: Let’s talk about the other side that you get a kick out of, the medical.

Chuck: Yes, the medical. This is something I’ve noticed in the last few years which is more and more you’ll have a conversation with the doctor who will say, “Well, your blood work came back and it shows X, and here’s the next thing we have to do, and then after that depending on this we do this, then we do this and we do this.” You try to have a conversation about that protocol and the answer is, “Well this is what the insurance company requires.”

The role of the doctor is definitely changing because they have offloaded the decision about how to treat a condition or investigate a potential condition to health insurance companies. The doctors are no longer exercising any discretion. As far as I can observe, they’re not exercising any discretion with respect to those decisions. They serve the role of creating a diagnostic, and then once the diagnosis is done, everything is automated. You’re told the decisions by a human being, but it might as well be a computer because it’s every bit as set in stone, and there’s no room for a conversation about this stuff.

Ed: Oh, you’re assuming that you’re going to be able to see a doctor.

Chuck: Well, that is another issue. Yes.

Ed: Then let’s assume you can see a doctor after X months, and you’re going to see someone– An example, a good friend of mine wanted to see a doctor, and it was a two-month waiting period, so he had to go to the emergency room. Is that the right way to practice medicine, working out of an emergency room?

Chuck: Right, it’s incredible how often that is the case. You and I, I think, both share an affinity for the Mayo Clinic. We’ve both been up there. I’m always encouraging people that if you’ve got anything that has the potential to be serious, just go there, and you can get your diagnostics done quickly and be face-to-face with a doctor and so on. It’s kind of incredible to me how few people are willing to do that.

Ed: I don’t understand it, but they are. I agree. Frankly, I go there every 18 months. I’ve got a very low number. They kick part of intake like, “Well, you got a low number here. Well, you’re an old guy.”

Ed: “Well, yes, I’m a senior citizen, but I’m still coming here.” The point is I’m outlasting all the internal medicine guys. I think I’m on my fourth one.

You’re right. That’s not just Mayo. You’ve got some eastern organizations, you’ve got Cleveland Clinic,

Chuck: Right.

Ed: You’ve got Texas MD Anderson. Now the problem is they’re not taking everyone off the street

Chuck: Right.

Ed: So you have to establish a relationship.

Chuck: Right.Now, that’s very true, but the idea, I think, has to be to find that magnet organization that is available to serve you wherever you live. Then that’s when you have something that is serious enough that you think, “Well, gosh, I really want to make sure that I’m confident that I’m seeing a good doctor and getting all the right tests done and so on.” If someone says, “Well, you have to wait three months to get in,” then go to that magnet instead and say, “I’m going to go where I know I can get treated quickly and see somebody who I’m not going to doubt I have confidence in.”

Ed: The option is this concierge service where you pay the practitioner X dollars a year and you have immediate access. Again, we’re talking money honey here. You got to have some money to get these results. On the other hand, I’d rather buy a new car. Why don’t you think about putting part of your resources into a care arrangement with a professional that’s going to result in a better lifestyle for you? Why do you want to go out for a beer every Tuesday? Why do you want to dissipate what you have?

Chuck: Right.

Ed: I’m not sure that’s ever going to change, Chuck. I think we’re whistling Dixie. People are going to be going to resident investment advisors with outrageous fees. Lawyers are going to be scoundrels. People are going to be overcharging. We are not going to change the attitude of the recipient of these services that are perceived to be valuable. Guess what?

Chuck: What?

Ed: You can find the right people and do the right thing if you’re willing to spend the time to get educated and enjoy the opportunity of working with someone who can create value, a warm advisor.

Chuck: Yes, I agree.

Ed: That story is one that we should watch out for. I don’t know the solution, do you?

Chuck: Well, I think that it’s just an individual circumstances basis that people should be willing to, for instance, like we did with this accountant we were talking about, to turn away from folks that are engaging in business practices that just don’t feel right and look for alternatives.

Ed: There are alternatives. You will find a trusted advisor if you’re willing to spend the time and energy. We find the best clients are those that come in from other clients.

Chuck: Right.

Ed: If it’s advertised, don’t need it, and if it’s a service, don’t use it.

Chuck: Right.

Ed: Now, there are exceptions, but generally speaking, that’s the rule of thumb that has worked for me.

Chuck: Yes, same here.

Ed: Well, I am pleased that we’ve castigated everyone in the world.

Chuck: We’ve made more friends.

Ed: At least I’m not, I don’t think you are either, getting a lot of referrals from those people we beat up. The point is look in the mirror, and if you can feel that you’re creating value for a reasonable price, you have a responsibility to the client in our case, you’re a fiduciary. You’ve got to do it to the best interest of the client,

Chuck: Right.

Ed: not in your economic best interest. Can you make a living doing that? It’s not easy, but on the other hand, it’s worth the effort I think.

Chuck: I agree.

Ed: Well, it’s been fun. As I say, I’m watching out, so no one’s going to run over me on my way out of here and not abuse me, but that’s okay. You got to stand in the line if you want to abuse me. Chuck, I think by associating with me you’re finding that’s the same thing, right?

Chuck: Yes, I am.

Ed: But, you know what, it’s fun.

Chuck: It is.

Ed: Thank you. Talk to you later.

Chuck: See you.

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