Financial Planning

I currently work for a financial planning firm and have a somewhat negative view of the industry. I feel like it is filled with people who think they know what they are talking about, who really know little more than the average investor if they would just read a book on basic investing and personal finance. It is like the blind leading the blind. I have recently been trying to land a job in institutional asset management but the finance industry is not very strong my city so all I can seem to find are more of the same financial planning type job doing bs work like running personal cash flow projections and asset allocating with mutual funds, and painting a rosy picture for clients. Am I just disgruntled or is this the reality of the industry I am in and should I just accept it and collect my pay check or continue trying to find a job in higher finance?

Congratulations. You just described essentially all jobs in finance. From a business perspective, the appearance of credibility is often more important than knowledge.

You’re not disgruntled. It’s the way the retail world works. I was brought into my company three years ago because they wanted to “professionalize” the way they handled client assets. While I’ve made progress, they still make investment decisions based on their relationships with mutual fund wholesalers and what their gut is telling them. I plan to be out of here in two more years.

It’s the nature of how the business is structured, the interests of the client and the advisor are not well aligned. Unless you’re fee only with annual set fee; which I’ve never heard of. At the end of the day, it’s like a real estate agent and a buyer; the buyer wants the best price but the agent wants the biggest commission. There is some incongruity there.

Actually, real estate agents often want the fastest transaction and turnover over the highest price/commission. They’re often willing to take a lower price if it will get the deal done faster. That’s especially true for sellers agents. For buyers agents, a higher price will often close the deal faster, as well as jack up the commission. There are fee-only advisors out there, and I suspect that business model may gain more traction as it gets disseminated. However, those in the industry would rather make money on AUM if they can, so we’ll see how it evolves.

The chapter on Real Estate agents in Freakonomics should be required reading.

what’s wrong with a fee on AUM? isn’t that the best way to align the interests of the advisor and the client? if the value of the accounts go up, you make more, if the value goes down, you make less. frequency of trades is irrelevant and you’ll only do what’s best for the client. all respectable wealth managers are going in this direction, if not already there… the problem lies with small accounts that don’t and can’t receive the same service as those with 300k+. no advisor is going to spend time on a 50k account because even at 2%, you’re only getting paid 1k and for most respectable advisors/teams, their targeted minimum per client based on service provided is 3-6k or its not worth it. so these small investors are stuck with guys who can live with jacking 4% out in trading fees plus a 1.5% trailer on MFs every year because nobody with self-respect will take them.

@bchad, I second sweep the leg; please read or watch freakonomics! They have a second on real estate agents.

i guess what i’m trying to say is that its not all bad on the sell side. if you can get on a higher net worth team or build a higher net worth business, you can feel a lot better about the service you provide, also, a higher net worth business means you need better understanding of tax code and derivatives as many of your clients are business owners or have concentrated stock positions.

Real estate agents are just stoopid salesman.

OK, I’ll look at Freakonomics. :wink:

best way to align interest is to have the fund manager committed in a major way financially. just having fees means they may not take the right amount of risk. this is one of the reasons why I feel most managers underperform, they just wnat to keep their job by tracking the market.