This should hardly sound revolutionary, or even mildly controversial, but I think if you are going to act as someone’s financial advisor or financial planner, you need to quickly become an expert at it.
Most people enter this field either after working for a financial company in a different capacity or they come into it in mid-life as a 2d career, from a field totally unrelated to it. Many of those people sit for their securities and insurance exams and a couple of months later they are working as a financial advisor and selling products to the world.
I understand the economics of it. People need jobs and they need to make money. There are very few opportunities with financial firms, like there are in law or accounting, where people actually learn what they are doing before being responsible for bringing in clients.
Lawyers don’t start as rainmakers. They become rainmakers after they have made a name for themselves and enough people know how good they are. Our industry is completely backward in that regard and it’s one of the things keeping us from being a true profession.
Those companies that do hire financial advisors can only spend so much time and money on their new recruits, because they employ a somewhat unusual business model for companies that want their employees to be seen as trusted professionals.
They bring in people from various career backgrounds and set sales hurdles so high that they know that most of them are going to fail. The Regional Vice-President that hired me said 80% of my recruiting class wouldn’t be working in the industry in 5 years and he was right.
If you bring in a class of recruits knowing that most of them won’t be working for you 5, 3 or even 1 year down the road because they can’t reach their sales goals, how much time and money are you going to spend training them to become better-qualified professional financial advisors?
Not much. If they can’t bring clients in fast enough, they can’t make it. Few new advisors will bring in enough new clients. Any time the firms spend on those advisors who don’t make it is wasted.
The result is that new advisors need to cram for their exams and quickly learn how to get prospects in the door, or they will soon be embarking on a 3rd career.
Many years ago when I was starting in the brokerage world, my sales manager pretty much refused to answer any questions I had other than sales and marketing ones. His answer was always something like, “you get them in the door and we’ll show you what to do.”
As you are embarking on this as a career and surveying the field, let me be clear about something. I understand those challenges and they are real and highly relevant to you. Don’t let them stand in your way of doing good work for your clients and raising the standards for our industry so that it can become a profession.
You need to become an expert. You need to quickly know much more than the average woman who reads Kiplinger’s or Money Magazine every month because she is interested in it, and the man that buys stocks in his accounts because he likes to follow the market.
Based on the advice you provide, people are going to make significant life decisions. Many of those decisions are either irreversible or would entail significant risks and costs to unwind. I had clients come in yesterday to discuss taking a new job and moving their family across the country. They wanted my input. That’s a big responsibility and it shows the importance of the work we do. If you are in the business of advising people, make sure you know what you are doing!
You have made the decision to enter this field. You probably weren’t given a very clear idea of exactly how hard it is for most people to succeed in it. Unfortunately, those are the cards you have been dealt and know you have to handle the situation. You can’t give bad advice and hurt people just because your job is hard. (When I was starting at the brokerage firm and trying to support my family, I worked on weekends as a doorman, bar back and occasional bartender. I would often be standing at the door reading my CFP® Exam study materials and when a new customer would walk in, I would look up and ask them for ID. So I get it.)
If you are in college, or haven’t started it yet, if you want to enter this field, you need to major in financial planning, finance or accounting, and take multiple classes in all three disciplines, and if you can, find an internship to gain some experience.
If you have already graduated and obviously can’t unwind your life, you need to study those three areas plus the rest of the financial planning subjects now. That means reading and learning every day of your life. It should still be a long time before you feel confident that you are usually giving good advice and at least know the context in which you can frame the decisions you and your clients need to make.
For some perspective, I started my career as a financial advisor 16 years ago this month. I majored in Finance in college and in getting my MBA. In law school I took corporate finance and multiple tax and estate planning courses. In my two lawyer jobs before becoming a broker I had to do some estate planning and tax work. When I started in the brokerage world I had to pass the securities (Series 7 and 66) and insurance (Life, Accident and Health) exams before they would give me my “number” and I would go into “production.” (All these years later, I still hate that industry jargon.)
For someone entering the advisory world, that’s a pretty broad educational experience and a lot of study and courses passed. I still knew very little about actual financial planning, and maybe a little more about investments. I knew practically nothing about the logistics of how investments and financial things worked in the real world. I was “in production” when I finally got an answer from my sales manager on how the different mutual fund share classes worked.
Outside of school, I think the most practical course you can take would be one that would enable you to apply for the CFP® Exam, and after meeting the experience and other requirements, become a CFP® Certificant.
Becoming a CFP® Certificant is the best start, but it is only a start. You need to read the new books, follow the right blogs, go to the right conferences, and follow the smart people in this industry to keep up. It means reading every day and spending many dozens of additional hours with live continuing education.
Over time between what you learn and experience, you will actually become reasonably competent. It is not easy, but the licensing exams and the CFP® Exam materials are really just the start. It’s up to you to become an expert.
In my next post I will tell you the most important books to read and who to follow so you can learn more efficiently and do so quicker than I did.
