Minimum Requirements
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Just a quick addition: My recommendation that a rep’s record of financial disclosures and arbitrations (not education except for licensing) IS available to the public at finra.org by using the broker check function. I have directed clients to this site when asked about my background and recommended that they use it for any registered rep they consider doing business with. Usually the recommendation alone is enough to silence doubt. The industry is just so saturated with credentials (over 100 “designations…”) that none of them have any branding or value.
i think you guys fail to realize that Jones recruits brokers to be successful in their model. Jones knows a good broker simply needs the ability to put his/her head down and run into the wall a thousand times and not ask questions on the 1001st attempt. this business is not about measurable intelligence for the most part. it is getting people to like you, trust you, and in the end, do business with you. an undergraduate degree, mba, cpa, cfp etc etc is not going to make or break you, prospecting is. those willing to prospect harder than the guy next door will likely win. not picking on Jones, but they are not building a wealth management/wealth transfer business where advanced level panning is needed. from day 1 all that matters is “How hard are you gonna work?”
[quote=theironhorse]i think you guys fail to realize that Jones recruits brokers to be successful in their model. Jones knows a good broker simply needs the ability to put his/her head down and run into the wall a thousand times and not ask questions on the 1001st attempt. this business is not about measurable intelligence for the most part. it is getting people to like you, trust you, and in the end, do business with you. an undergraduate degree, mba, cpa, cfp etc etc is not going to make or break you, prospecting is. those willing to prospect harder than the guy next door will likely win. not picking on Jones, but they are not building a wealth management/wealth transfer business where advanced level panning is needed. from day 1 all that matters is “How hard are you gonna work?”[/quote]
What he said. Double.
I think this industry’s image is a result of a lack of product knowledge and forced ethical issues, not a lack of education. Everybody pays lip service to doing the right thing for the client. The manner in which a rookie (not to include those that are lucky enough to come from money) has to survive can put him/her in direct conflict with “do the right thing” With a 90% attrition rate, huge pressure to produce commissions and the amount of time required for prospecting I think the vast majority are clueless out of the gate and must learn along the way. You take a guy a few months intro production that’s been prospecting 12 hours a day and he gets a good lead with $100k that needs fixed income. This guy has a family and a quota that’s based on production, it’s toward the end of the month and he has little or no production this month.
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What’s the first product that pops into his thoughts? A CD? I think not.
I’m thinking if you truly wanted to improve the image and professionalism of this industry some sort of minimum salary that’s above the financial edge of disaster and a required mentoring period of time that’s measured in years not months that requires and holds responsible the mentor for the actions of the rookie. Something like a new physician must go through. That would also reduce the toss as much mud on the wall recruiting practices most firms use to compensate for the nine of ten that ultimately wash out.
[quote=Gaddock]
I’m thinking if you truly wanted to improve the image and professionalism of this industry some sort of minimum salary that’s above the financial edge of disaster and a required mentoring period of time that’s measured in years not months that requires and holds responsible the mentor for the actions of the rookie. Something like a new physician must go through. That would also reduce the toss as much mud on the wall recruiting practices most firms use to compensate for the nine of ten that ultimately wash out.
[/quote]Interesting thoughts, Gad. I understand your very valid concern with the current state of affairs, but how could there possibly be a minimum salary without moving to, say, Russia? That sounds both utopian and socialistic. Not the sort of path I'm interested in.
Perhaps some sort of required mentoring period as you suggest would get you pretty close, though, together with improved & more selective recruiting/hiring. If firms knew they would be on the hook for some salary for a substantial period of time - absent malfeasance, etc. - they might have a financial incentive to actually help more rookies survive.
Let's face it: 90% attrition rates are a pretty clear indication something ain't working now.
“but how could there possibly be a minimum salary without moving to, say, Russia?”
The vast majority of occupations are not 100% commission and come with a decent salary. Not saying I have the anwers either. Just a couple thoughts.I agree with the minimum salary. It doesn’t have to be much, but I’ve seen how paralyzing working on straight commission can be for folks when they’ve had a few bad months in a row.
Many are often doing the work, and will probably eventually be successful, but they panic and quit before they are around long enough to build a book.I just re-read my post, and, duh, who in this business would like a guaranteed salary? Anyway, I think it would make a difference in the attrition rates. However, would our production drop as a result?
I've heard of a "draw" being used in brokerage firms. How does that work?I have an MBA and feel it means very little. In all my years in the business I have discovered the person with the politician personality does great and knowledge means very little to the clients. Even when we elect the President for the country it has become a popularity contest.
I have a RL that does about 3 times the business as me and had no background in finance but the people love him so it doesn't matter.[quote=iceco1d][quote=Brian1960]I have an MBA and feel it means very little. In all my years in the business I have discovered the person with the politician personality does great and knowledge means very little to the clients. Even when we elect the President for the country it has become a popularity contest.
I have a RL that does about 3 times the business as me and had no background in finance but the people love him so it doesn't matter. [/quote] Exactly. Don't you find that to be wrong? You don't go to a financial advisor because you need a laugh, or to flirt, or because they are attractive or not...You pick your doctor based on their ability to cure you. You pick your lawyer based on whether or not they can fix your legal problems. But the guy coming up with your retirement plan was picked based on his personality? Seriously...if I (god forbid) ever get cancer, I couldn't care less if my doctor is a prick. And if I'm every on trial for murder, I don't care if my lawyer has jokes, nor do I care if he sends me a birthday card.[/quote]Agreed, but that's oversimplifying. The more pertinent issue is how does a consumer DETERMINE who is the best doctor, lawyer or financial advisor?
If it were easy to know this one is really good, and that one is just a snake-oil salesman, there would be no problem.
The truth is it is not so easy to know this. As a result, people are left to make judgments themselves, when often they don't understand enough to even ask the right questions. That's when they 'go with their gut' and make decisions based on subjective impressions, and why that guy in the next office with a great smile but little upstairs sometimes does much better than the guy with tons of knowledge but no ability to make prospects want to hire him.
It ain't right, it ain't pretty, but it is what it is.
The reason behind this is due to the high level of regulation due to culpability that exits regarding Doctors and Lawyers.
The key to improving the quality of financial service provided by FA’s would be following the same direction as Doctors, Lawyers and CPA’s. IMO I feel it is imperative that the CFP designation require as much accountability as a Juris Doctorate (LSAT, BAR EXAM) or CPA which requires a minimum of a BA,BS and passing the UCPA exam.
Our Agency requires all new candidates to have a Bachelors Degree (minimum), and steps are being taken to limit those degrees that have a direct relationship with the financial services industry (Business, Finance, Accounting). Yes the nubes start off with getting their insurance exams, 7 and 66, however the road to CFP takes 3 years in the business as well as taking the specified courses and passing the required exams.
The older reps at the agency have been given the push to become CFP’s are find another job.
So in short you are advocating increased regulation as a remedy for what you perceive to be a failing of the free market system? Be careful of what you ask for, as the cure may be much worse than the disease.
Reminds me of one of the Gipper’s many great quotes: "The nine most terrifying words in the English language are: ‘I’m from the government and I’m here to help.’"
Government, FINRA, SEC, whoever …
No, I am advocating a self regulation to ensure a higher standard of quality. The 1999 consolidation party created the opportunity for companies to show up and pay lip service to fiduciary responsibility. If the industry heavyweights begin to enforce their own standards at these levels, than others will follow until the level of service provided improves.
However these standards need to be advertised as well. Instead of focusing on how much better one house is vs other, or how well XYZ fund performs over others, the need is to create customer awareness through recognition activities geared to educate the public in regards to choosing a Financial Advisor.
The CPA designation has had over 100 years to meld into consumer consciousness, which allows for an automatic sense of credibility. If someone is a CPA they have a lower branding threshhold due to implied credibility.
However if a Primerica/WFG/Ameriprise “wannabe” goes out implying that they are doing exactly what Merryl Lynch/Morgan Stanley/Lehman Bros are, than it creates industry confusion. Most customers have little to know understanding of what transpires beyond the walls of any of these companies. They may fathom the basics of what their financial vehicles do, but they are mostly relying on their FA to provide them the best ethical service possible.
Amerprise evangelists want to explain how great they are and they are on the same level in service quality as any of the established names in the industry, but this is simply not true. If you examine the number of actions taken against companies like Primerica,Ameriprise,WFG vs the Stalwarts, it isn’t even close. The answer to this is simple.
1. Recruiting Standards
2. Education requirements after entry
3. Proprietary Product Sales vs Needs Based business platform
Sure Ameriprise among others may boast the largest number of Reps in the business, but what does that really say about the company? I mean Walmart may have hundreds of thousands of more employees than Neiman Marcus, but what are you really getting at Walmart?
The more our business self regulates the better service we can provide for our clients. I never want to have to explain to a client why their former FA was either a crook or even worse an ignorant product pusher (crooks reflect bad on the individual and maybe the firm, ignorant product pushers reflect badly on the entire industry)
[quote=DJRoss]
However if a Primerica/WFG/Ameriprise “wannabe” goes out implying that they are doing exactly what Merryl Lynch/Morgan Stanley/Lehman Bros are, than it creates industry confusion. Most customers have little to know understanding of what transpires beyond the walls of any of these companies. They may fathom the basics of what their financial vehicles do, but they are mostly relying on their FA to provide them the best ethical service possible.
Amerprise evangelists want to explain how great they are and they are on the same level in service quality as any of the established names in the industry, but this is simply not true. If you examine the number of actions taken against companies like Primerica,Ameriprise,WFG vs the Stalwarts, it isn’t even close. The answer to this is simple.
1. Recruiting Standards
2. Education requirements after entry
3. Proprietary Product Sales vs Needs Based business platform
Sure Ameriprise among others may boast the largest number of Reps in the business, but what does that really say about the company? I mean Walmart may have hundreds of thousands of more employees than Neiman Marcus, but what are you really getting at Walmart?
[/quote]
Exactly- The problem I have with the firms you cite is that even if the rep has good intentions(and frankly I think often they don’t) I am concerned that management’s one and only concern is making a profit, regardless of the impact on clients. As well, even when their reps have good intentions, they don’t give them the tools(product, software, education) to be able to do the right thing for many folks…
I don’t agree that because someone attended college and got a degree in law and passed a bar exam that they are a competent attorney. I have found just the opposite. Most attorneys are incompetent and are strugling so hard to make a living that they will take any case where they can make a dollar and couldn’t care less about the client.
I also realize that many advisors fall into the same pit.[quote=Brian1960]I don’t agree that because someone attended college and got a degree in law and passed a bar exam that they are a competent attorney. I have found just the opposite. Most attorneys are incompetent and are strugling so hard to make a living that they will take any case where they can make a dollar and couldn’t care less about the client.
I also realize that many advisors fall into the same pit. [/quote]That is why there are levels of credibility built into which school you went to, which firm you interned at and which firm hired you.
I mean you can be one of the top students at Texas Southern, Whittier or Western New England, and still not get a summer position, while the number of Harvard only law firms in Boston are well represented.
It may sound harsh, but reality is that you will more likely find statistically more dynamic professionals who are better prepared to serve their clients at a higher level amongst those who attended a top ranked school and who have been groomed at the best companies, firms, medical facilities, etc.
There is a stark reason for their well deserved reputation.
We can all bring up examples of this rep and that rep that 1. do not have a college education, and are one of the "best" at your office, and 2. College grad who couldn't hack it and was clueless on everything about the business.
We need to remember however, that the examples we bring out to illustrate the exception to the rule are often skewed by our own limitations or lack thereof.
What is interesting regarding the college is not necessary crowd, is that the majority of the argument seems to be geared toward just how much money or how well these reps build a book. Of course a reps book size or yearly commissions is not necessarily a reflection on how well they serve their clientèle. It can be an indicator of their ability to serve, but not without clarity as we have seen in the past many savvy individuals use their salesmanship to padding their wallets vs. doing what is right.
I've lurked in this thread for quiet some time now, mainly because I have more in common with the tractor salesman than the intellecutally elite in here. It seems to me that the majority that are in favor of these absolutey exclusionary requirements fundementally fear a person like myself. You fear that someone of my background will poison the marketplace by committing a legal or ethical faux pas that will tarnish your reputations. I know that you are all well intention, but nothing any of us blue collar Registered Reps could do, could tarnish your reputaion. LOL What most seem to loose sight of is that a Registered Rep like myself isn't going after your cleint. I'm more than likely going after a new market that hasn't even been explored yet. So our paths shall not cross, so relax.
Just for the record, while a degree is an achievement, it's not the only education out there.[quote=OneCleverCookie]
I’ve lurked in this thread for quiet some time now, mainly because I have more in common with the tractor salesman than the intellecutally elite in here. It seems to me that the majority that are in favor of these absolutey exclusionary requirements fundementally fear a person like myself. You fear that someone of my background will poison the marketplace by committing a legal or ethical faux pas that will tarnish your reputations. I know that you are all well intention, but nothing any of us blue collar Registered Reps could do, could tarnish your reputaion. LOL What most seem to loose sight of is that a Registered Rep like myself isn’t going after your cleint. I’m more than likely going after a new market that hasn’t even been explored yet. So our paths shall not cross, so relax.
Just for the record, while a degree is an achievement, it's not the only education out there.[/quote]Before I reply just wanted to give you kudos on your avatar. That looks sharp.
Now, to respond to your statement I can assure you that the market place has already been poisoned by years of one scandal after the next. Yet, here we are still able to put food on the table. So I would say that it is not an issue of fearing "blue collar contamination." This is a silly argument.
Many of us are concerned however that the industry allows individuals to exercise great stewardship with only a minimum requisite standard. The potential for violating that stewardship through intentional fraud, selfish motives and worst of all ignorance.
Fraud and selfish motives can be dealt with and are through regulatory agencies both local and federal. However ignorance is something that can only be handled through an insistence of standards. A collegiate education should be the base for such standards, not the bar, but the base. The bar deals with what is garnered in house through further education as a candidate (like lawyers, doctors and other professionals) gains experience.
Auntie Mae is 50 years old and currently has a 3 Million Dollar 20 year Term Life policy. She has had it since she was 35. She has 1 Million in a 401K that is about to rollover since Auntie Mae doesn't want to work anymore. She recently inherited her brother's estate as being his only surviving relative, and that includes a home valued at 1.5 Million dollars with 80% equity, 100K in T-bills, 500K in IBM shares, Roth IRA holding 83K in growth company shares. Auntie Mae also has a spot market trading account where she currently has sold 5K in the USD/EUR contract.
Autie Mae wants to eliminate as much tax burden as possible, she wants to begin trading S&P Index Futures but wants to buffer the risk. She doesn't want the home and would like to live off of 2000 a month. This needs to happen by the time she turns 56 because she promised her best friend that they will spend that entire year traveling around the globe visiting over 50 countries. Auntie Mae currently earns 5000K per month.
Bob is the major share holder in a small company that employs 200. He is about ready to retire and is looking for an exit strategy. The other partners are aware of this and are on board for having the entire company sold. Bob will not retire for another 3 years. Using a revenue based valuation formula with the companies PE value at 7, the company could fetch a 56 Million price tag if it were on the block today. Certain things have been ignored or not prioritized in this company, and they are having a difficult time in keeping staff. Their rotation is 12 employees per month in and out. They are also a bit worried since one of the major partners has not been himself lately and he is a key cog that makes everything work.
Joey and Carol have just finished college. Joey just passed his exams and is now interning at the local hospital. He is looking to go into reconstructive surgery. They have a baby on the way, and Carol wants to stay home. They both know that it will be tight, but Carol has gotten a part time gig writing articles for the local newspaper and Joey's parents were sentient enough to set up an education trust that helps pay the bills while going to school. In spite of all this, the cost of rent in New York is high and Carol's insistence on consuming only organically grown foods means they will have very little extra money to work with until Joey can get contracted.
John is looking for work during the winter. He is a cement layer and is great at his job. He is well known throughout the local economy and whenever contractors need a job done, he is usually the first one that gets called. His wife Nancy is a stay at home. They have credit issues because his wife is a spendaholic and they have barely avoided personal bankruptcy twice. Nancy has gone to counciling and things have been stable the past ten months, and all bills have been paid on time. Nancy has actually begun to put away a small amount ($20) every month in savings. It is winter time and John is looking for something to bring in some money during the slow season.
Which of these potential clients would not need the skills of a highly qualified professional. To assume that you are not going after my client or vice versa is ludicrous. Regardless of which market you are exploring, assuming that some clients don't need a highly qualified professional and others do is like saying a homeless guy who needs emergency surgery should get the guy who took some online courses through some Caribbean based medical school paper mill to cut into him vs. The guy who got a full ride scholarship at UCLA isn't interested nor can he be bothered by the needs of the indigent.
I don't care who you are or what your financial status is. Everyone who takes a leap of faith and puts their millions or their widows mite into the hands of a FA should get the services of a highly qualified skilled professional. No bones about that.
(I don't care who you are or what your financial status is. Everyone who takes a leap of faith and puts their millions or their widows mite into the hands of a FA should get the services of a highly qualified skilled professional. No bones about that.) "quote"
I agree completely but it seems to me that in this business the term "highly qualified skilled professional" is the guy that wins the popularity contest and uses his personality to gain trust and then uses that trust to create wealth for himself and over a period of times convince themselves they are doing a great job for their clients. Greed has a way of doing that.