Me: How do you utilize passive investment strategies throughout your practice?
Her: What is passive investing? What do you mean by that?
Me: Great question. Passive investment strategies seek to replicate the returns of well known major market indexes, and are quite common strategies in the industry since there is a lot of research out there that suggests that for most domestic large-cap equity asset classes, active management routinely fails to outperform the benchmark.
Her: I don’t seek to replicate anything, I build these portfolios myself with the goal of making my clients money.
Me: Could you elaborate on your portfolio construction process?
Her: I use different ETFs/MFs
Me: I don’t think these portfolios will be a fit for your clients. I hope you have a great rest of your day (hangs up).
How the heck do these people convince other human beings to manage their money? This is crazy. Don’t you have to pass the 7 to become a FA? Someday I hope to read a headline, “How millennials killed the financial advisor”.
None of this is directed at you Greenman, I know you’re not a snake, but the other 9/10 FAs in your field are.
You called her? Assuming that’s right i think you need to give her some respect -as she’s doing with you answering your unsolicited questions. Develop some commonality, make sure you understand her process (using etfs/mfs could very well mean she is already deploying some form of passive investing), and then start to challenge her process but convey it in a way that shows you want to help her.
“I hope you don’t mind my inquiries, I think i can help you with your client acquisition efforts while maintaining the principal focus of wealth creation. Many other WMs I’m speaking with are looking to refine their holistic goals-based approach but face challenges with respect to fees. Fee compression is an ubiquitous topic among the clients we help - is this paradigm shift impacting you?”
One of those topics will resonate and from there you can build some trust and leverage that connection to build some form of relationship. I’m not certain what business you’re in - blackrock etfs or something similar? - but you need to want to help out.
Good luck and try and develop a little more patience, it’ll go a long way.
let’s be clear that this “FA” is not a real FA. selling MFs to $50k accounts and providing no advice is not what an FA does. this person is clearly in business development and not an FA. there will always be a place for real FAs just in the same way that there will always be a place for real lawyers.
She literally told me that she builds her clients portfolios herself, and that things were great and that she doesn’t want any help. I’m not buying it that she is skilled enough to construct a well built portfolio for her clients on her own, al the meanwhile not having any clue what “passive investing” is.
I’m about to be, cuz damn! Although, the last thing I need is the SEC on my ass for investing my clients in leveraged S&P vehicles.
So, you hit the nail exactly on the head - bravo, and job well done - however, what you missed is that I gave you the abridged analyst forum version of this story. That is, short and to the point so that you guys would actually read it. That conversation went on for almost 12 minutes (before I realized she was totally retarded). She also only had a book of about $8M, which at 100 bps, she’s not exactly killing it. I will say though, that everything you mentioned is spot on, and totally a worthwhile attitude with advisors who know what they’re talking about, and they’re out there (I talk to them all the time).
i think he just finds it sad that this fin advisor who manages the assets of even dumber people. dont really know basic things like passive vs active. its like a car salesman who doesnt really know much about the car hes selling.
First off, I would say that it is really tough just cold calling advisors and trying to pitch them your investments / strategy. We get calls like this almost daily from existing wholesalers we already have relationships with, and, new firms trying to get us interested in their solution.
Like the advisor you called, most use a general investment philosophy / strategy to manage client investments. Some may be open to hearing new ideas if it could compliment their overall existing strategy already in place.
You may have some success in pitching your ideas to advisors who are looking to transition to a fee only model (in U.S.). In this case, the current advisory model would be embedded commissions, and switching to using your investment can help save on fees.
