What % of RIAs fail?
I’m in my early 40s and have always had an interest in financial planning. Has anyone ever seen a study on how RIAs do, in particular career changers? I’ve seen figures stating that 90% of people who go into financial planning leave the profession in 5 years, but I have to assume a lot of that is people being run through the meat grinder at the wirehouses. I’m not interested in wirehouses. My interest would be only in the kind of business I’d actually patronize: a fee-only independent.
Has anyone seen studies or do they have guestimates on what % of the people who become independents get to the point where they have a stable practice bringing in say 75K profit/year? What % are 100K+?
Most people think they’re going to be the exception (“if you believe it you can do it,” etc.). That’s true whether they’re trying to become the next big thing in Nashville or LA (failure rate: 99.9%-- good idea to have a plan B) or they want to carve out a successful career in my specific technical field (which I’d guess has a failure rate of 50-60%). It’s one thing to be in the 60 percentile, another to be in the 90 percentile or the 99.8 percentile. Therefore, I was just curious if anyone had data (anecdotal or study-based) of what has been experienced by others as far as failure rates in your field. It’s interesting to me from a risk management perspective.
Some clarification please, Joshi. Are you asking about the odds for someone entirely new to the business, with no relevant experience and no existing client base, starting their own, solo RIA offering fee only services?
And when you say bringing in $75 or $100K “profit” per year, do you mean profit before you take a salary for yourself or after? Net of all operating expenses? Or are you really talking about gross revenue?
And while you’re clarifying, how much money do you have saved for this? Do you have capital to finance the start up capital costs? And how many months could you survive without taking any compensation?
Yes, I’m asking about someone new to the business, starting out w/a startup, or someone new to the business starting out working for an independent firm (we’ll even include in that a Raymond James-type place where you can have an affiliated but mostly independent practice). I would not be bringing along a book. What
percentage of newbies in 5 years will be making the income I
specified? Obviously this is a rough guestimate.
By profit, I mean the net income after expenses and assuming I am
paying myself $0 in salary and $0 loan expense. And yes, I have the money to finance the
startup costs-- that won’t be a problem… I could survive three years
minimum w/out compensation.
It’d likely a fee-based business with retainer, possibly AUM, but I have not worked out a business plan since the time isn’t right yet to move forward with it. This is more
of a “down the road” idea. I’m just looking for some broad input at this point.
[quote=iceco1d]I’m going to assume you haven’t done a ton of research
yet, because vets making 75K a year in this business…well, really
doesn’t exist. I think it would be almost impossible to make 75K a
year after say, year 5, and still have a job anywhere. [/quote]
I don’t really understand this comment. Could you elaborate? When I say 75K, I’m saying this is money that you are bringing home or (if you own your own business) could bring home from cash flow if you wanted to extract it.
[quote=Joshi]
Yes, I’m asking about someone new to the business, starting out w/a startup, or someone new to the business starting out working for an independent firm (we’ll even include in that a Raymond James-type place where you can have an affiliated but mostly independent practice). I would not be bringing along a book. What
percentage of newbies in 5 years will be making the income I
specified? Obviously this is a rough guestimate.
By profit, I mean the net income after expenses and assuming I am
paying myself $0 in salary and $0 loan expense. And yes, I have the money to finance the
startup costs-- that won’t be a problem… I could survive three years
minimum w/out compensation.
It’d likely a fee-based business with retainer, possibly AUM, but I have not worked out a business plan since the time isn’t right yet to move forward with it. This is more
of a “down the road” idea. I’m just looking for some broad input at this point.
[quote=iceco1d]I’m going to assume you haven’t done a ton of research
yet, because vets making 75K a year in this business…well, really
doesn’t exist. I think it would be almost impossible to make 75K a
year after say, year 5, and still have a job anywhere. [/quote]
I don’t really understand this comment. Could you elaborate? When I say 75K, I’m saying this is money that you are bringing home or (if you own your own business) could bring home from cash flow if you wanted to extract it.
[/quote]
THere’s no way in hell any indy firm will take on an unproven rookie. That’s not what they’re set up for.
One more question Joshi. What type of professional experience do you have, i.e. what type of work have you done/are you doing currently?
I come from an IT background. No professional experience in financial planning, just running my own and advising informally on planning and investment strategies for the past 10+ years. It’s a hobby and an area of interest. If I decided to move into this career, I’d be looking to start out by finding a school and start working toward a cfp cert.
[quote]Joshi…What I mean is if you DON’T wash out of the business in 5
years, you’d have to try VERY hard to make ONLY 75K. Heck, if your
QUARTERLY profit, going balls to the wall, after year 5 isn’t 75K, you
should consider yourself a failure IMO. There is absolutely no limit
on earnings potential in this business. There are plenty of people,
making multi-millions - it’s really pretty much binary. You either
fail out and make crap, or you make it past year 5 and make at least a
few hundred thousand. [/quote]
I have not discussed this with brokerage firms or done extensive research on what is available other than look at a few books such as “So You Want to Be a Financial Planner.” I haven’t seriously explored the career yet as I am getting started with a franchising venture at this time. To restate my question based on what you said above: From what you’ve seen, what % of people “fall out and make crap” and what % are making a few hundred K?
To be honest with you Joshi, the odds of success based on the information you’ve provided are significantly stacked against you. I’m not aware of specific studies pertaining exclusively to RIAs, but I have seen studies that show upwards of 90-95% washout rate at wirehouses within 5 years.
Given that wirehouses (and similar smaller b/ds) also generally provide newbies with basic training which you would not receive if you started a firm on your own, I would expect the survival rate to be worse for new, new RIAs, with one caveat: some RIAs continue to exist a long time but only in name; having spent the money to set up the legal entity, get registered, and begin operating, sometimes those who make little to no revenue simply prefer to keep their RIA alive legally rather than withdraw from registration and shut it down formally.
You’d be surprised at the number of RIAs run by CFPs who don’t make enough to pay the phone bill in their home office, but continue to “operate.” For some, they don’t need the money as much as the illusion that they are “financial planners” or whatever. You’ll never see this at wirehouses because the b/ds won’t subside this silliness and will put these poor people out of their misery even if they can’t or won’t do it themselves.
But if you focus on the odds for those RIAs who survive as a viable, profitable concern (say at least the $75K you mentioned) having started from scratch with no prior experience and no existing book, I would have to guess that would be a very low number, certainly less than 2%. In other words, the odds are not good.
Consider the question from this perspective Joshi: what would you say if I told you that I have long loved computers and have helped a bunch of my friends and family troubleshoot their computers, and I wanted to start my own computer consulting/servicing firm? Not join an established firm, where I might get hands-on training and mentorship while potentially building a network of people as potential future clients, but start my own independent firm.
Would you give me much better odds if I said I would first study and earn my Microsoft certification, or whatever certification is considered relevant?
Keep this in mind also: unlike working IT in a large corporation, the critical skill in order to survive the start up and short run period is NOT technical skills about investments or financial planning - it is your ability to get clients. In a word, sales skills.
That won’t be enough over the long run to thrive, of course, since if you don’t know what the heck you’re doing clients will leave you once they realize that. But you’re asking about surviving 5 years. The CFP won’t help you do that - being an excellent salesman and closer will. And I didn’t hear you mention anything about sales experience either.
If you’re serious about this industry, you need to be realistic. You need to consider paths that get you into the business while you receive training and build a book of clients. A start up RIA is not a good way to enter this industry - it is a good place for some to progress to down the road. You have to walk before you can run.
I hate to rain on your dreams, Joshi, but going from no relevant experience to operating a successful company operating independently is simply not realistic in this business. Better you should know that now rather than later.
[quote=Morphius]To be honest with you Joshi, the odds of success based on the information you’ve provided are significantly stacked against you. I’m not aware of specific studies pertaining exclusively to RIAs, but I have seen studies that show upwards of 90-95% washout rate at wirehouses within 5 years.
Given that wirehouses (and similar smaller b/ds) also generally provide newbies with basic training which you would not receive if you started a firm on your own, I would expect the survival rate to be worse for new, new RIAs, with one caveat: some RIAs continue to exist a long time but only in name; having spent the money to set up the legal entity, get registered, and begin operating, sometimes those who make little to no revenue simply prefer to keep their RIA alive legally rather than withdraw from registration and shut it down formally.
You’d be surprised at the number of RIAs run by CFPs who don’t make enough to pay the phone bill in their home office, but continue to “operate.” For some, they don’t need the money as much as the illusion that they are “financial planners” or whatever. You’ll never see this at wirehouses because the b/ds won’t subside this silliness and will put these poor people out of their misery even if they can’t or won’t do it themselves.
But if you focus on the odds for those RIAs who survive as a viable, profitable concern (say at least the $75K you mentioned) having started from scratch with no prior experience and no existing book, I would have to guess that would be a very low number, certainly less than 2%. In other words, the odds are not good.
Consider the question from this perspective Joshi: what would you say if I told you that I have long loved computers and have helped a bunch of my friends and family troubleshoot their computers, and I wanted to start my own computer consulting/servicing firm? Not join an established firm, where I might get hands-on training and mentorship while potentially building a network of people as potential future clients, but start my own independent firm.
Would you give me much better odds if I said I would first study and earn my Microsoft certification, or whatever certification is considered relevant?
Keep this in mind also: unlike working IT in a large corporation, the critical skill in order to survive the start up and short run period is NOT technical skills about investments or financial planning - it is your ability to get clients. In a word, sales skills.
That won’t be enough over the long run to thrive, of course, since if you don’t know what the heck you’re doing clients will leave you once they realize that. But you’re asking about surviving 5 years. The CFP won’t help you do that - being an excellent salesman and closer will. And I didn’t hear you mention anything about sales experience either.
If you’re serious about this industry, you need to be realistic. You need to consider paths that get you into the business while you receive training and build a book of clients. A start up RIA is not a good way to enter this industry - it is a good place for some to progress to down the road. You have to walk before you can run.
I hate to rain on your dreams, Joshi, but going from no relevant experience to operating a successful company operating independently is simply not realistic in this business. Better you should know that now rather than later.
[/quote]
How much time did you waste, banging that out?
HobbyBull, what’s with the condescension? I’m sure you feel you’re superior to a doofus asking a few questions, but how about using your energies elsewhere? I’m glad you’re not my planner with that attitude.
[quote=Hobby Bull] How much time did you waste, banging that out?[/quote]
I guess that depends on how you define wasting time, Bobby.
If it is a waste of time to try and help someone as you seem to think, a lot of us here are just wasting our time, just as those who shared their time and helped mentor us over the years must have been just wasting their time.
Waste of time? Perhaps. But I can live with that.
[quote=Morphius]To be honest with you Joshi, the odds of success based on the information you’ve provided are significantly stacked against you. I’m not aware of specific studies pertaining exclusively to RIAs, but I have seen studies that show upwards of 90-95% washout rate at wirehouses within 5 years. … But if you focus on the odds for those RIAs who survive as a
viable, profitable concern (say at least the $75K you mentioned) having
started from scratch with no prior experience and no existing book, I
would have to guess that would be a very low number, certainly less
than 2%. In other words, the odds are not good.[/quote]
Thanks for this. I was just wondering if that washout rate was skewed because there are college grads at places like Ameriprise. I would be more interested in a business based on referrals, seminars, community relationships, etc., not from cold calling or making unsolicited ventures into local businesses (both are pet peeves- it’s just me). I’ve read of many people who were burned out by the Ameriprises. That, and my desire to align my interests with the customers (which I think is complicated by commission selling), are why I may have seemed “anti-wirehouse.” I’m not though.
Another example may clarify the gist of the original question. My wife is a journalist. If you ask how much a journalist makes in her particular field, she could tell you anywhere from zero to millions. However, 95% of them make between $25K-$60K and, anecdotally, most journalists she knows have have left the biz. I can give you similar stories about PMs in many industries. I know the range where 95% of them are. I know the range that contractors pay. I know generally what s/w developers and QA people make. I can give anecdotal evidence of failure rates. Etc. And so I was just looking for that from pfp’s.
[quote]Consider the question from this perspective Joshi: what would you say if I told you that I have long loved computers and have helped a bunch of my friends and family troubleshoot their computers, and I wanted to start my own computer consulting/servicing firm? Not join an established firm, where I might get hands-on training and mentorship while potentially building a network of people as potential future clients, but start my own independent firm.[/quote]
Well, I was in software development and operations IT, not servicing, but I’d say you could make a go of it if you know how to, or can learn to, run a business, if you have sufficient capital, a decent competitive landscape, a proforma that works, etc. (I’m speaking here of servicing equipment). However, I get your point!
[quote]Would you give me much better odds if I said I would first study and
earn my Microsoft certification, or whatever certification is
considered relevant?[/quote]
Certainly. I’m a PMP so I know a bit about certifications. They are a good thing to have and I’m glad I have mine, but they don’t necessarily correlate with quality.
[quote]Keep this in mind also: unlike working IT in a large corporation, the critical skill in order to survive the start up and short run period is NOT technical skills about investments or financial planning - it is your ability to get clients. In a word, sales skills. [/quote]
Going off topic a bit, you hit on my biggest question mark: can I sell? I’ve never done it professionally. However… I could get a job tomorrow at a computer store or a nursery/hardware store, etc, and I think be a great salesman. I’d know my stuff, I’d be able to communicate it, and people would trust my advice. But in those cases, people are coming to you, you aren’t soliciting them. And that leads to my question: Do you think a good pfp needs to be an extrovert? As an IT project manager I led and directed teams, but my success always came more through working relationships based on trust and problem solving skills. In other words, if I go to a party and don’t know anyone, I’m not naturally the kind of guy who will walk around glad handing and making small talk. However, teaching a class or mentoring people or guiding a team are things I do well. And people trust my advice.
[quote]If you’re serious about this industry, you need to be realistic. You need to consider paths that get you into the business while you receive training and build a book of clients. A start up RIA is not a good way to enter this industry - it is a good place for some to progress to down the road. You have to walk before you can run. I hate to rain on your dreams, Joshi, but going from no relevant experience to operating a successful company operating independently is simply not realistic in this business. Better you should know that now rather than later.[/quote]
I would not start up an independent pfp business off the bat except with franchise support (and even there I assume there is significant training and understudy before you can hang a shingle). I would want to get started somewhere, work toward certification, start building a transferable book, and then decide down the road to spin off into my own shop. And I realize this is a process that will take years. And the fact that I know it will take years is why I was asking about percentages… If you told me, hey, if you play in a band in Nashville and pay your dues for 5-10 years in clubs, sleeping in the back of a van, and then you have a .02% chance of hitting the bigtime, I’d say “goodbye.” If I know that after I spend 5 yrs in pfp I have (statistically) a 40% chance of being over 100K, then those are beatable odds. However, if I have a 5% chance based on all the folks who’ve come before, then those are much longer odds and I need to weigh that risk. The salary sites I’ve seen tend to say pfp’s average about $60K-$80K a year, but I don’t know who is being included in those numbers. That’s why I was wondering about the honest likelihood, based on what others have experienced, that I’d be successful (in my book that means $100K/yr minimum) if I get started, pay my dues for a few years, and then strike out on my own.
Joshi, I’m not sure you understand the industry. There is no such thing as a “franchise” with “franchise support”. There are independant B/D’s and indy RIA firms to affiliate with. But they are only going to give a “franchise” to an experiencied advisor (or “planner”) with a book. They will give you “support”, but that support comes in the form of back-office support, not how-to-sell-yourself support, or leads, or whatever you think support means to you.
As some have eluded to in previous posts, I think you are overblowing the whole concept that being a fee-only planner is the only way to be on the “same side” as your client. You can basically be an IAR (a rep for an RIA) at almost any wirehouse or region al firm now. Most of them do fee-based business. And to be honest, without a book, it might be nice to have the B/D license and insurance licenses to get some added income in the form of insurance premiums and commissions to get you started. If you think hanging out a shingle and saying I am “Joshi the Financial Planner” is going to bring in 100K+ accounts right away, you might be surprised. In the early years, it helps to be able to take the small accounts and charge a commission (even if it is a C-share type commission) to get some income and clients on the books. On top of that, msot B/D’s are going to give you some good sales training, which you are going to NEED. Whether you think it or not, just believing that you want to build your book thru “referrals, seminars, and community relations” doesn’t necessarily translate into clients. Unless you are connected to money from a past career in accounting, finance, law, etc. that would give you credibility in this profession right away, you are pretty much going to be hustling the first few years.
My point is, don’t rule out the B/D route the first few years.
All, thanks for your patience. There is much I need to learn and I know that.
B24, great comments, quite helpful. “Franchise” was bad terminology/shorthand. I just meant it in the limited sense of a company where they have systems, back-office support, and a name behind them. Question: In your experience, of the people you’ve seen who intended to go the route you mention (their plan is to start at a b/d, build a book, and then go independent), what is the success/failure rate after 5 years? Again, I consider a “failure” a situation where I wouldn’t be making 100K/yr minimum in 5yrs.
anonymous, what you said is true of any business. Two things… First, my issue w/some forms of sales mentioned earlier is that I don’t want to do them because I don’t like them ethically (not in the sense that they are sinful or illegal, but just imo bad manners no matter how pleasing the results). Second, as for more “mannerly” business methods (e.g. networking at local events), it’s a question of whether I will be able to overcome personal limitations in this area. While “doing what others don’t want to do” is a part of it, I also put stock in personality and aptitudes after 17yrs… I’ve seen
people in IT fall short who worked hard but whose limitations (personality, mental ability, etc) were too much to overcome. Now, IT and PFP are different beasts, and what I’ve seen is patently true in IT may not be true in PFP.
[quote=anonymous]
Joshi, first of all, I think that almost anyone can succeed in this business. I think that there are a few main things that stop people. 1) They don't do what needs to be done on a daily basis. 2) They don't have the ability to be underpaid for awhile. 3) They focus on pleasing methods instead of pleasing results (which is really part of #1 above). You sound very much like you would fit into category three based upon some of the things that you have said. Read the following: http://www.theintellectualviewpoint.com/reading/thecommondenominatorofsuccess-albertengray.pdf [/quote] Anon, THANKS for posting that link! Anyone who feels like they are just spinning their wheels prospecting (me) needs to read that every so often. I will print that out and put it in my "motivational" folder.First, my issue w/some forms of sales mentioned earlier is that I don’t want to do them because I don’t like them ethically (not in the sense that they are sinful or illegal, but just imo bad manners no matter how pleasing the results).
If you don't overcome this attitude, you are destined for failure. Don't take this to mean that I am saying that you have to cold call or cold walk because I am not saying that. (If you aren't willing to do that, you're chances of succeeding are very slim, but that's not my point.) Please explain the ethical difference in the following situation: Joe Smith runs a very successful widget business. He has no desire to talk to a financial advisor. B24 makes a cold call to him. "Hello, Joe. This is B24. Do you have a minute to talk. I work with quite a few business owners and I have some ideas that you may find of use. Can we get together on Thursday?" Morphius walks in the front door of his business. "Hello, Joe. My name is Morphius. I help business owners leave their business with maximum profit. Can we schedule a time to sit down and talk?" Joshi makes a warm call to him. "Hello, Joe. This is Joshi. I met a friend of yours, Tony Perez, at a networking event. Tony spoke very highly of you. Can we get together on Thursday?" In the first two examples, how did B24 or Morphius display bad manners? What made Joshi's manners any better? How is what Joshi did any more ethical? They all bothered someone who didn't want to be bothered. In order to succeed you are going to have to ask people who have no desire to meet with you to meet with you or do business with you. This is true whether you are calling people who met you at a networking event or referrals or if you are just inviting people to a seminar. I have no doubt that with proper training you can do the easy, "polite" part of the job. You see, sitting down with people who trust us and want our help is a piece of cake. The hard part, and where the money is made, is doing everything in our power to get people to sit down and talk to us. If you have enough cash that you can survive the beginning stages, and you are willing to do whatever it takes, success is almost guaranteed. Calling people and/or popping in on people who don't want to be called is part of this "whatever it takes". Failures simply aren't willing to do enough of this to survive. I have to tell you that it sounds like you want a business where people call you and say, "Hi Joshi. I need a fee-only financial planner. Can I come to your office at 2:00. I'll bring my checkbook."[quote=anonymous]
I have to tell you that it sounds like you want a business where people call you and say, "Hi Joshi. I need a fee-only financial planner. Can I come to your office at 2:00. I'll bring my checkbook." [/quote] That's what I was thinking. Maybe he just wants an office where he can leave the door open and have people stop on in and open an account? Not saying this guy is like this, but it's always amusing to see people new to this business that think clients are open and willing to talk with them all the time. They don't realize how difficult it is to bring in substantial accounts, and how many people need to object before one will say yes. Regardless, he's in for a rude awakening.[quote=Joshi]
[quote=Morphius]To be honest with you Joshi, the odds of success based on the information you’ve provided are significantly stacked against you. I’m not aware of specific studies pertaining exclusively to RIAs, but I have seen studies that show upwards of 90-95% washout rate at wirehouses within 5 years. … But if you focus on the odds for those RIAs who survive as a
viable, profitable concern (say at least the $75K you mentioned) having
started from scratch with no prior experience and no existing book, I
would have to guess that would be a very low number, certainly less
than 2%. In other words, the odds are not good.[/quote]
Thanks for this. I was just wondering if that washout rate was skewed because there are college grads at places like Ameriprise. I would be more interested in a business based on referrals, seminars, community relationships, etc., not from cold calling or making unsolicited ventures into local businesses (both are pet peeves- it’s just me). I’ve read of many people who were burned out by the Ameriprises. That, and my desire to align my interests with the customers (which I think is complicated by commission selling), are why I may have seemed “anti-wirehouse.” I’m not though.
Another example may clarify the gist of the original question. My wife is a journalist. If you ask how much a journalist makes in her particular field, she could tell you anywhere from zero to millions. However, 95% of them make between $25K-$60K and, anecdotally, most journalists she knows have have left the biz. I can give you similar stories about PMs in many industries. I know the range where 95% of them are. I know the range that contractors pay. I know generally what s/w developers and QA people make. I can give anecdotal evidence of failure rates. Etc. And so I was just looking for that from pfp’s.
[quote]Consider the question from this perspective Joshi: what would you say if I told you that I have long loved computers and have helped a bunch of my friends and family troubleshoot their computers, and I wanted to start my own computer consulting/servicing firm? Not join an established firm, where I might get hands-on training and mentorship while potentially building a network of people as potential future clients, but start my own independent firm.[/quote]
Well, I was in software development and operations IT, not servicing, but I’d say you could make a go of it if you know how to, or can learn to, run a business, if you have sufficient capital, a decent competitive landscape, a proforma that works, etc. (I’m speaking here of servicing equipment). However, I get your point!
[quote]Would you give me much better odds if I said I would first study and
earn my Microsoft certification, or whatever certification is
considered relevant?[/quote]
Certainly. I’m a PMP so I know a bit about certifications. They are a good thing to have and I’m glad I have mine, but they don’t necessarily correlate with quality.
[quote]Keep this in mind also: unlike working IT in a large corporation, the critical skill in order to survive the start up and short run period is NOT technical skills about investments or financial planning - it is your ability to get clients. In a word, sales skills. [/quote]
Going off topic a bit, you hit on my biggest question mark: can I sell? I’ve never done it professionally. However… I could get a job tomorrow at a computer store or a nursery/hardware store, etc, and I think be a great salesman. I’d know my stuff, I’d be able to communicate it, and people would trust my advice. But in those cases, people are coming to you, you aren’t soliciting them. And that leads to my question: Do you think a good pfp needs to be an extrovert? As an IT project manager I led and directed teams, but my success always came more through working relationships based on trust and problem solving skills. In other words, if I go to a party and don’t know anyone, I’m not naturally the kind of guy who will walk around glad handing and making small talk. However, teaching a class or mentoring people or guiding a team are things I do well. And people trust my advice.
[quote]If you’re serious about this industry, you need to be realistic. You need to consider paths that get you into the business while you receive training and build a book of clients. A start up RIA is not a good way to enter this industry - it is a good place for some to progress to down the road. You have to walk before you can run. I hate to rain on your dreams, Joshi, but going from no relevant experience to operating a successful company operating independently is simply not realistic in this business. Better you should know that now rather than later.[/quote]
I would not start up an independent pfp business off the bat except with franchise support (and even there I assume there is significant training and understudy before you can hang a shingle). I would want to get started somewhere, work toward certification, start building a transferable book, and then decide down the road to spin off into my own shop. And I realize this is a process that will take years. And the fact that I know it will take years is why I was asking about percentages… If you told me, hey, if you play in a band in Nashville and pay your dues for 5-10 years in clubs, sleeping in the back of a van, and then you have a .02% chance of hitting the bigtime, I’d say “goodbye.” If I know that after I spend 5 yrs in pfp I have (statistically) a 40% chance of being over 100K, then those are beatable odds. However, if I have a 5% chance based on all the folks who’ve come before, then those are much longer odds and I need to weigh that risk. The salary sites I’ve seen tend to say pfp’s average about $60K-$80K a year, but I don’t know who is being included in those numbers. That’s why I was wondering about the honest likelihood, based on what others have experienced, that I’d be successful (in my book that means $100K/yr minimum) if I get started, pay my dues for a few years, and then strike out on my own.
[/quote]
How much time did you waste writing that crap?
[quote=snaggletooth][quote=anonymous]
I have to tell you that it sounds like you want a business where people call you and say, "Hi Joshi. I need a fee-only financial planner. Can I come to your office at 2:00. I'll bring my checkbook." [/quote] That's what I was thinking. Maybe he just wants an office where he can leave the door open and have people stop on in and open an account? Not saying this guy is like this, but it's always amusing to see people new to this business that think clients are open and willing to talk with them all the time. They don't realize how difficult it is to bring in substantial accounts, and how many people need to object before one will say yes. Regardless, he's in for a rude awakening. [/quote]It's amusing to hear these kids talk about how their friends and family are going to invest with them, too.
[quote=Joshi]
I would be more interested in a business based on referrals, seminars, community relationships, etc., not from cold calling or making unsolicited ventures into local businesses (both are pet peeves- it’s just me). That, and my desire to align my interests with the customers…[/quote]
Wow, referrals and seminars—who woulda thunk it!!
I’d peg your chances of success at around 10-20% based on all the above information. If you do primarily asset-based fees and avg 1% fee, you can probably net $100k with only $12-15m AUM if you keep your expenses to a minimum. Achieving that level of assets should be easy in 5 years, but from scratch with no experience or training or credibility, it isn’t.
And that is the kind of stuff I'm interested in hearing.
[quote]Please explain the ethical difference in the following situation: Joe Smith runs a very successful widget business. He has no desire to talk to a financial advisor. B24 makes a cold call to him. "Hello, Joe. This is B24. Do you have a minute to talk. I work with quite a few business owners and I have some ideas that you may find of use. Can we get together on Thursday?" Morphius walks in the front door of his business. "Hello, Joe. My name is Morphius. I help business owners leave their business with maximum profit. Can we schedule a time to sit down and talk?" Joshi makes a warm call to him. "Hello, Joe. This is Joshi. I met a friend of yours, Tony Perez, at a networking event. Tony spoke very highly of you. Can we get together on Thursday?" In the first two examples, how did B24 or Morphius display bad manners? What made Joshi's manners any better? How is what Joshi did any more ethical? They all bothered someone who didn't want to be bothered.[/quote]
There's no difference in them. All are unsolicited and I hate dealing with unsolicited sales offers by phone or in person. Does that make unsolicited calling wrong? No, but I don't like it. I wasn't referring to networking with people at an event and getting people's names to call sight unseen. I just meant getting professional relationships going with people that might lead to referrals. If I talk to a friend and ask for a referral on an attorney and my friend provides one... that's all I meant. I've never bought anything from an unsolicited offer; there are many businesses out there getting people almost solely by referrals. I use them all the time. This isn't a criticism of you, though.
[quote]In order to succeed you are going to have to ask people who have no desire to meet with you to meet with you or do business with you. This is true whether you are calling people who met you at a networking event or referrals or if you are just inviting people to a seminar.[/quote]
[quote]I have no doubt that with proper training you can do the easy, "polite" part of the job. You see, sitting down with people who trust us and want our help is a piece of cake. The hard part, and where the money is made, is doing everything in our power to get people to sit down and talk to us. [/quote]
[quote]I have to tell you that it sounds like you want a business where people call you and say, "Hi Joshi. I need a fee-only financial planner. Can I come to your office at 2:00. I'll bring my checkbook."[/quote]
You're overstating things here. I wouldn't be just sitting by the phone waiting for business to come to me, much less expect a checkbook brought along. However, it is fair to say that the sales methods I would employ wouldn't be hard-sell (if that's a fair term). I would rely on good marketing materials, doing quality work in order to land referrals, attend networking events to get to know people who could provide referrals, provide value-add seminars for people to get to know me better and possibly lead to business, etc. And it's pretty clear that you're telling me "hey, that's all fine and dandy, but it isn't gonna work in this business." And that is very valuable to know. I know businesses where it does work. It's interesting that I looked through a few books on becoming a FA/planner and none of them came right out and said what you've just told me in the quotes above. They really should. And I'll commend you for being helpful.
As for some of you others-- seriously-- you are just nasty and you really should take a look in the mirror. Maybe you've heard it all from newbies, but I can't imagine providing advice to interested parties in my longtime profession and responding the way some of you have. The simple hostility from innocent questions is just ridiculous. Are you that insecure or unfriendly? How about putting a lid on the mockery? If you don't want to answer questions, then fine, move along. You really could learn from posters like Morphius.
[quote=Cowboy93] [quote=Joshi]
I would be more interested in a business based on referrals, seminars, community relationships, etc., not from cold calling or making unsolicited ventures into local businesses (both are pet peeves- it’s just me). That, and my desire to align my interests with the customers…[/quote]
Wow, referrals and seminars—who woulda thunk it!!
I’d peg your chances of success at around 10-20% based on all the above information. If you do primarily asset-based fees and avg 1% fee, you can probably net $100k with only $12-15m AUM if you keep your expenses to a minimum. Achieving that level of assets should be easy in 5 years, but from scratch with no experience or training or credibility, it isn’t.[/quote]
Thanks for the input!
[quote=iceco1d]
As someone else mentioned, the only new FAs that can start their practice on referrals and/or “walk ins” are people that are already respected financial professionals (accountants, lawyers, etc.). Although you seem quite successful in your field - it isn’t going to make people want to throw their money at you because there is no correlation. That leaves you absolutely needing to prospect. Whether it's wandering around neighborhoods introducing yourself all day 6 days a week, or calling people - you hafta do it. [/quote]Absolutely, there's no correlation whatsoever between my old career and this one.
The info about prospecting is very valuable to know. I feared that this might be the case, but I wasn't sure that it was until... well, tonight. As I said, I'm an outsider, I've read through a few books and that's as far as my exploration has gone. I'm moving into a different venture at the moment. All I'm trying to do is compile some basic info to determine whether to pursue it more seriously down the road.
[quote] I think you are also going to find that you don't know as much about financial planning & investments as you *think* you do - so I'm sure you are going to have plenty to learn before you really can do the "best" for your clients. [/quote]
Oh I know. I have a basis, but certainly a ton a learn.
[quote]Just my .02[/quote]
Thanks, it's a good .02 and I appreciate it. Some of you guys should band together and write a book.
" I just meant getting professional relationships going with people that might lead to referrals. If I talk to a friend and ask for a referral on an attorney and my friend provides one… that’s all I meant. I’ve never bought anything from an unsolicited offer; there are many businesses out there getting people almost solely by referrals."
Joshi, I think I can sum it up for you. All of your methods work well in this business - once you have a book of business. You won't get a single referral until you have a single client. How are you going to get your first client...and your 10th? (family doesn't count) Seriously. Based on what history or experience will someone send a referral to you? WHO will send you a referral? I'll tell you who...clients and professionals (CPA's, attorneys, etc.) that have SEEN your work or talked to YOUR CLIENTS (mutual clients). So again, my question is, how do you get that first stable of 40-50 clients before you start getting referrals??“Question: In your experience, of the people you’ve seen who intended to go the route you mention (their plan is to start at a b/d, build a book, and then go independent), what is the success/failure rate after 5 years? Again, I consider a “failure” a situation where I wouldn’t be making 100K/yr minimum in 5yrs.”
Honestly, I have never met someone who intended (openly) to leave after X years before they even started in thie biz. Most people don't start out in this business knowing much about how the business works. I am talking about scratch starters, not the guy that goes to work for his father/brother/friend/etc. It's just not a traditional "business" like opening a restaurant or law firm or contracting business. Most people stumble upon this career, and then decide to change their situation once they have been in the business for a bit of time. So I guess my answer is, I can't answer your question.Joshi,
Why don't you see if you can get a job as an associate in an already successful RIA or Indy B/D office before you jump off of the cliff. That way you can see how the business works and get a feel for if it is right for you. You may find that the emotional stress of dealing with other people's money in reality instead of in theory is too much for you to take. What sounds interesting in theory is sometimes just not as attractive as the reality. I'm sure the rest of the crew here can tell you that our jobs right now are VERY stressful because of market conditions and we have to not only deal with our client's portfolios, but act as emotional and psychiatric counselors half of the time. Some indy B/D offices need to have a certain level of production to stay open and may be interested in taking on a new but low producing rep in order to boost their total production.[quote=B24]Honestly, I have never met someone who intended (openly) to leave after X years before they even started in thie biz. Most people don’t start out in this business knowing much about how the business works. I am talking about scratch starters, not the guy that goes to work for his father/brother/friend/etc. It’s just not a traditional “business” like opening a restaurant or law firm or contracting business. Most people stumble upon this career, and then decide to change their situation once they have been in the business for a bit of time. So I guess my answer is, I can’t answer your question.[/quote]
I think I got the answer I needed reading a bunch of other threads… This seems like a very binary business from what I’m reading. The vast majority of people (90%+) wash out in 5 years, in fact most of those probably in 2-3yrs, and the ones who succeed really succeed (unless they throttle back). And those are the people who can go independent.
I think my initial impression from these books (and really, isn’t this probably what most people think coming in?) was that the methods I mentioned were used at the beginning, with your network being the focus of your startup accounts. I saw on other thread that a lot of people who thought they had very strong natural networks coming in – and what they described certainly seemed stronger than anything I have – found out that converting those people into clients just didn’t come anywhere near their hopes/expectations. And so the things I don’t want to do are exactly the things I will have to do. And dat is dat.
[quote]Why don’t you see if you can get a job as an associate in an already
successful RIA or Indy B/D office before you jump off of the cliff.
That way you can see how the business works and get a feel for if it is
right for you. You may find that the emotional stress of dealing with
other people’s money in reality instead of in theory is too much for
you to take. [/quote]
I think that is what I’ll do if I ever decide to move forward with this career. I’m focused on my franchise and plan to stay that way for the next two years. This was just one of several other careers I have been evaluating. As much as a few of the people in the forum seem to be half human, half animal, these boards have been a most helpful education on the realities of the business. I guess it’s made all the Rickles routines sufferable.
Joshi,
Thanks posting this question and thanks everybody for your answers. I was having very similiar thoughts to Joshi. I'm in a situation, experience level, etc. that sounds very similiar to Joshi. My problem is I can't afford to quit what I'm doing to take the chance to work fulltime at a traditional brokerage to get the training and make sure this career is right for me and my family. You get to mid-life and wonder why your interest in learning about things wasn't this keen in college. Babbling Looney- that was a great idea. I have an aquaintance in a small 3 person independant firm that is looking for someone extra. How would you go about approaching this subject with them? I need a mentor to show me the basics, give me a script that I can massage with time and basically put it all together in a cohesive package. I have an above avg knowledge of most products (except insurance) and know I could pass the 65. I'd even work for real cheap early on just to learn and bring in what biz I could through the Beiderman approach. Heck I'd love to practice all approaches given the opportunity. How did the rest of you folks get your start in the biz? Mainly wirehouse training? Did everybody here start out cold calling? And what's the avg net payout for a 10M book for an independant rep vs traditional? How much of your planning is your own knowledge vs computer generated from client info? Would having a 65 and 6 increase my chances of getting hired at a bank or wirehouse if thats the route I decided needed to be taken? Thanks so much for the info. Info on here is way more helpful than any book on the subject. Sometimes it's more motivating knowing there is a challenge ahead of you.Anon …thanks for the article , printed and saved.
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