Becoming a financial advisor was something I considered when coming out of school because in an ideal world I would just sit with clients all day talking about investments and helping them reach their goals. I never pursued this path because I found it to be mostly a sales job. I saw people I graduated with, marketing majors, who immediately jumped into these roles and it made me cringe to think that these people were going out and advising the elderly on how to invest for retirement. I’ve seen many people on AF say the same thing, advisors are salesmen, period.
There seems to be a trend in the advisory world however towards larger practices that use a specialization approach. This team of specialists include a salesman (the advisor) along with an investment specialist, a tax planner and a few others (insurance, legal, etc.). This larger team requires a larger scale, but allows each individual to perform their specific duties. The sales guy no longer has to worry about paperwork or rebalancing portfolios, his job is to focus on client relationship management and making contact more often. The other specialists free him to focus on what he does best. The investment specialist’s job is to focus on the markets and his client’s investments, etc.
I think its an interesting setup and something that recent college grads may want to be on the lookout for. Every advisory practice will be different but it certainly seems like there may be more opportunities in the future to work with individual families on their investments, without having to spend half your time on marketing and sales tactics. Make sure the advisor you work for has similar values as you as well, otherwise you’ll just be selling his cheap products for him.
That’s a fair point. But as you say these teams are smaller and everynoe has a specialty. Why would they bring a recent college grad on for with no work experience, specialty or connections in the field? Granted, people can learn a role but it’s highly specific and recent grads are higher risk hires for these roles, they either leave or they can’t hack it. The team structure you’re speaking of works better when everyone brings a network and skill to the team, thats why they’re so lean and customized. I agree you can definitely grab a nice slice of pie working in these roles though - provided you’re good and well connected.
This is nothing new. I did sales “Financial Planning” for a while about 9 years ago, and one of the suggestions in building your book was to reach out to a tax accountant, attorney, mortgage broker, etc… to “Build a team that you can offer your clients with each one a specialist”. This is a known sales tactic in itself.
It’s all bullshit. The underlying goal is simply to get access to more people with warm leads. You are simply referring your people to these others, and hoping they do the same in return. At the end of the day, its still just sales. If no one is getting new clients, no one benefits… so the bottom line is get on the phone and pitch. Not having to spend half of your time on marketing and sales tactics is a pipedream. And lets be real… the GOOD clients that you hope the attorney, lawyer, insurance guy refer to you? Those people typically already have a Broker/Planner/Money Manager. Your most likely leads to pick up are the Mom-and-Pop IRA/529 plan crowd that will give to 10k in assets to manage and weekly/monthy headaches about every market move… not to mention the GOOD clients will be wary about letting a wet-behind-the-ears college grad manage any real money.
So now really big shops are keeping it internal? Meaning its the bank’s loan officer, planner, tax planner, insurance guy… etc. All they are trying to do is pull as much business out of each client as possible.
I think I have said it before in post, that no matter which way you slice it, “Financial Planning” is all about sales. Your number one goal is gaining AUM, because if you don’t you will go out of business. You can inherit a $100mm book of buisness and think you’re made in the shade, but over time clients pass away, people see their brothers/sisters/cousins planner pulling in better returns and jump ship, or most of the time have no clue how the markets work and blame you when years like 2008/9 happen. AUM is natually outflowing… you need to make it inflowing. So as my manager used to say “Just get back on the phone, ok?”
Have you noticed these roles are often advertised with “No finc background necessary”? That’s because they want these marketing, history, polisci majors so they can pump you full of great ideas re: firm’s mutual funds and insurance products. They’ll tell you you’re not limited to proprietary products and you can “shop the market”, but the comp is so much less for other products, and anyway they’re “not a good deal for the client”. It’s all bullshit.
The only advantage of having any finc background is you don’t have to study at all for the 7/66. I saw kids who spent months studying for both tests and kept failing. Granted, some parts are tricky, but with the pass score in the 70s there really is no excuse for not passing after 2 weeks of study…
So yeah I’m one of those dumb grads that joined that nightmare. I actually thought I had a job. I’ve never really been motivated by thoughts of social justice, etc., but I have half a mind to go to my alma mater and advise students to stay away from financial planning. Not that there aren’t people who aren’t meant for that role–there is just a lack of clarity in the whole recruitment process that disgusts me. If you understand that this is a sales role, you’ll spend days trying to pick up money at a golf course/church/yuppie bar/walking your dog/grabbing lunch/elevator/airport/whatever go ahead, be a greaseball. Most people don’t realize that though, they think they’re getting a job in finance.
Try it, go to a “financial advisor” role interview like AXA or some BS shop. the first thing they want is your list of contacts friends, relatives, people who trust you… and list how much money these people make or are worth. they you’re told to milk these people try, selling them insurance or some BS equity products. then you realize you are on commission. then after you milked them, they tell you your bar for bringing in new business is $X (it will be a high bar that most fail), and if you miss you’re cut.
^ This is how the experienced advisors grow as well. The rookies bring in family and friends, are cut a short time later, the accounts then go to the experienced people. Easy peasy.
Most “Front Office” roles in Finance are sales related, whether your an Advisor who works directly with the client or work as a PM for a fund manufacturer etc. If your a PM, at the end of the day you still need to earn the right to manage the “Advisors” clients assets if the Advisor chooses to use managed solutions or mutual funds. As an Advisor you have two main roles; bring in new assets and clients and service your existing clients. Its sales oriented, but financial planning is also a big part of the business as well.
Most college grads who take on a role as an Advisor would likely find it diffcult to cut it in the business, which is due to many different factors. Each dealer (AXA, etc…) has their own business and compensation model. If a recent grad is interested in getting into PWM then I would suggest that you acquire some industry experience at the entry level with a non-hacksaw firm and learn the business.
Building a referal network with Lawyers and Accountants is important to an Advisory team so that the client can benefit from coordinating the financial planning for their taxes and estate etc where required. For example, it would be important to the Advisor to have a good Lawyer they can refer to who is knowedgeable or a specialist in estate planning so they take good care of your client.
IMO, the biggest issue that tends to dog the role of “Advisor” is the fact that the requirements to become licsensed is not as rigerous as it should be. In Canada at least (ONT), you don’t need a university degree, hell you don’t even need to graduate from high school. You need to pass a few courses and that is pretty much it. I think that in part, the big banks who have a lot of infleunce don’t want to see this change because they manage alot of money using MF which are sold in the branches by MFDA reps who used to work as a bank teller and then took a course or two and now they can sell the bank MF. Another big issue is that the average client doesn’t know what they are paying for and what service they should be getting so its difficult for them to assess the value they get for the fees they pay. Although this is in the process of changing now (again in ONT - CRM2)
Then there are dbags like me who approaches the smartest Advisor I know, and proceed to ask him, “Who would you trust to manage your money?” After getting that name, I say, “Thanks, I’ll give him a call.”
Some Advisors (i.e. the good ones) who meet with prospective clients ask a whole bunch of different types of questions to determine if both parties would mutually benefit from a long term advisor / client relationship.
Good Advisors tell DBs no thanks. DBs are the ones who won’t follow advise, think they know more than you, don’t want to particiapte in your process, aren’t nice to deal with.
Its amazing how toxic this career path has become. The views of several posters above are valid, however they are clearly biased in past experiences and not comprehending what I am saying. They have strong opinions which aren’t going to change. Yes, in the past and currently there are many crappy financial advisor positions where they will ask for your top 100 contacts…I’m not talking about that job. I’m also not talking about a job based off of commission. I’m also not talking about a job that existed 9 years ago. I’m also not talking about banks.
For those who would like to get into this field, I am telling you that there is a new shift in how this is done. Not at every firm, I only know of 2, but they are major firms. If sucessful, this model will grow quickly because they rely on scale. There are very few of these positions, but they are growing. Let me repeat that, this is a new structure and is growing, this is not a roll that many people have experience with because it has been rare up to this point. I am writing this post because I have come in contact with 4 advisors this week who are looking to make this shift and need someone to fill these responsibilities.
These are internal salary positions which require the employee to spend nearly all of their time meeting with clients, creating asset allocations, adjusting portfolios and answering investment related questions. These postiions are made available in firms which see the benefit of allowing the financial advisor to focus on sales. You would not be a financial advisor, you would be their investment specialist (the role name will vary by organization).
mk17, thank you for the comment. Yes, i agree that college grads may not be immediately qualified. I definitely think this may be a role that is suited for someone who is well on their way to earning the charter and/or CFP and has acquired the skills to explain the asset allocation and valuation process. For a college grad, this may mean working as a paraplanner for a year or two. This will help them get accustomed to the systems and the process at the firm. Obviously, in this field it is beneficial to have a network of potential clients, but that would not be a requirement for this role.
I do not work in a role like this, but have first hand experience with firms that are reorganizing and adding these postions. I posted this thread precisely because of the types of responses you see above. You can’t find many good things said about financial advisors on AF, and rightly so. Like I said originally, I wanted to be a FA but was turned off by the sell, sell, sell mentality that you had to have to succeed. I’m very encouraged by this new structure and for those who are interested I think it may make a great career path if these firms are sucessful.
In my opinion, fiancial advisors are asset gatherers. They just gather assets by selling some BS products tied to the market with insane fees.
But I do know few (very few) small independent shops that atually work in the best interest of the client… Invests in index funds and charge annual fee of 1% and no commissions. Sometimes they contruct portfolios consisting of indvidual stocks and bonds for clients. The founder went to my dream business school, Columbia and is also a charterholder. The firm is lean very professional.
Mike79, I agree with you that most “front office” finance jobs require sales skills. Meeting people, networking, bringing in new businesses… etc. This is sales right?
OP, to justify bringing on not just one advisor, but an investment specialist, tax specialist, estate planning specialist etc onto every client though requires scale, as you said. That means the advisors needs a lot of experience and a hell of a book, not to mention the expertise required for each of the specialists. And it needs to make sense re: clients too, ie you’re not going to spend the energy of three, four people for 10k rollover, right? So it might make sense for a major firm working with ultra high net worth individuals, but not for XYZ Wealth Management that wants to sell you life insurance.
And according to this new model, what does the FA do exactly? If the investment specialist is meeting with clients, creating asset allocations, answering questions, etc., what’s left for the FA to do? Just schmooze? I don’t know, call me naive and inexperienced, but I’m not going to give my money to some greaseball that is good at schmoozing but can’t answer investment related questions too. I don’t know if it makes sense to separate those two roles.
emichan, from what I’m seeing, these are larger practices (5-15 advisors) who want to free their advisors to spend more time on client acquisition, working seminars and travelling. By bringing in a team that can act in a collaborative effort, they can not only market a more holistic investment process, but they are able to pay someone less to do the work that is not their forte.
You’re right, the team wouldn’t be used for every client and this is happening at firms where the goal is complete financial planning, not ‘annuity of the month’ shop.
Also, I agree about your concern of separating the two roles. I dont imagine that many clients will just hand their money over to someone who has no investment experience, these advisors are usually very experienced. I believe the goal is for the advisor to pitch his teams qualifications and then use each of the specialists as necessary. In most cases the investment specialist gradually takes over the client interaction once they are in the door.
This format seems to be a response to the aging demographic in the world of financial advisors. These guys don’t want to retire but also don’t want to play all the roles that are required (sales, tax, investments, legal, small business owner, etc.). As these firms merge, the advisors are given the opportunity to focus on client acquisition, while their team handles the rest.
OP, just think about what you’re saying for a second. you say college grads should focus on “specialist roles” in these new financial advisors. first, new grads don’t know crap. the thought of a new grad tryign to advise and be a specialist to some older person in need for a specialist (tax or investments etc) is laughable. These specialist roles are best suited for those who have considerable work experience in their fields, and then transition into this “financial advisor” role because they want to break out on thier own, have their own clients and platform.
It’s the same reason why the “traditional financial advisor” roles work for certain people. someone who’s been working say in asset management for a long time, wanting to break out into their own managing private money and just needs a platform. Sure, AXA will work for that.
I don’t see there suddenly being many new openings for these junior “specialist” roles. It’s a job that will likely stay among the experienced folks, and remain rare for new grads, like: oil rubbing specialist for super models.
I guess that would make sense, but just from personal experience–from recruiting as well as actual working experience–I would be very, very skeptical. I have interviewed for position which is basically what you described–asset allocations, adjusting portfolios, etc. And that sounds very nice, like it’s a job that you can actually use your skills and hopefully grow as an investment professional, right? I think it is more realistic to view positions like that as a grooming position where the firm will pay you a salary for 2-3 years, then move you onto the FA role.
Not saying it’s a bad thing, really, but like I said, there needs to be clarity. And that is a good grooming path for a FA, much better model than hire as many people as you can and take all the names they have model which is more common. But the end goal is still the same.
If your client facing (Front Office) then yes you are apart of generating revenue and is a Sales role in some capacity (IMO).
FA role can be either broad or very focused; it depends. Some Advisors focus on IM and Financial Planning and then bring in an insurance and estate specialist where required. Some just like to focus on IM and have planners on staff or access to them as apart of the PWM team. It all depends on the dealer you work with and business model etc.
infinitybenzo: I’m not sure I understand your comment related to BS products. The fund manufacturer produces the product and the Advisor is licensed to sell them. Again, cost of service to the client will depend on a number of different factors that include the advisor business model, level of client assets, investment strategy (Active or Passive), Fee based vs commission or embedded commissions.
Some MF have high(er) MERs because they are actively managed. Advisor comp is only one component of this. The other costs include: manufacturer, OPEX, Dealerr cut, Tax, Advisor Comp.
Correct, new college grads are not qualified. I believe they would need several years of experience, however if this is a role that they desire, then they should be aware of it and seek the complementary experience. There are many paraplanner roles that exist, which combine back office paperwork with preperation for client meetings and basic financial planning. An individual who strives to enter a role like this can do many things, such as pusue the CFA designation.
As I’ve said, I know firsthand that these positions are becoming available, so those who are interested should prepare accordingly.
Financial advisors are realizing two things. 1, selling their practice and retiring is not good for their clients and 2, it is not good for the advisor who bought the practice. You can’t just hand off a practice and expect clients to remain with that new firm. The answer is consolidation and succession planning well before retirement age. I wish I had a statistic showing the rapid rise of advisor consolidation but I don’t. I have had conversations with advisor consultants who actually think that the total number of ‘advisors’ will shrink, as the number of clients per advisor expands rapidly.
I work at a large BD and have been approached by several advisors who are looking for someone who can handle these duties competently. I’ve also been approached by another outside firm. Believe it or not, they all highly value the CFA but also would like the CFP. I have many experiences, like you, where advisors and recruiting agencies hardly know what the CFA is, let alone list it as a desireable credential. Btw, both groups are reinventing the way they structure their practices because of a shift at one of the largest BD in the country.
I’m working in alternative investment research right now and want to stick with this role for awhile, but I could see myself doing something like this down the road. I enjoy helping families with their financial questions and have always pictured myself as an advisor someday, even if it meant rolling up my sleeves and dealing with the sales aspect. I’m uninterested in helping rich people make more money, that’s probably something I shouldn’t say in the interview, but I would like to work with younger families on college savings planning and get them on the right track to retirement. If you’re intersted in a role like this send me a pm, I can always inquire about an opportunity in your area with my firm.