Industry Ethics ?'s
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My roommate works with one of the large financial services MLMs, which leads to regular heated arguments on investment strategy. He believes a VUL is an ideal product for almost everyone. Argues that someone would have to be an idiot to hold equity in their house instead of investing it. Believes he has access to annuities with a guaranteed 14% yield and various other no/low risk products with guaranteed above-market returns. Disputes that, as a general rule, people should lower risk as they near retirement. Gets angry at me when I call Kiyosaki a hack.
This is one extreme. While researching companies attending an upcoming career fair, I ended up on the Ameriprise website and initially thought “Damn, they’ve got a good site. They must really have it together.” A quick search took care of that notion. Yes, I’ve been tainted by the amersux site, correct me if they’re wrong.
There are (presumably) millions of Americans with their life savings/retirement funds tied up in potentially-crappy 401k’s. Millions who could benefit from a decent financial advisor. This is the upside of the industry, to me. My roommate can delude himself on one side of the spectrum, but I’m not sure where I fit on the other. How do I sell an actively traded mutual fund with relatively high costs (and commensurate commissions) when I personally believe almost everyone is better off in a passive low-cost index fund?
Everyone here wants to sell the right product to the right client - ruining someone’s finances is just bad business. Do you accept that your product may not be perfect, but it’s better than the client would do on their own and take solace in that?
I have no fear of cold calls, nor any great desire to make a career of them. I didn’t realize how central cold calling is to being an FA until I lurked these forums. I could do it if I had faith in what I was selling. More and more, I’m tempted to work at a bank and deal with limited personal income. What I want, of course, is for someone to explain to me how FA’s truly help their clients despite the allure of pushing higher-commission products.
Personal disclosure: I’m 26, could pass for 20. Live in Orange County (CA). Look good in a suit and can summon confidence and charisma when necessary, but I realize the age factor can limit me. Will gladly take any suggestions of “You aren’t cut out for this industry, but consider .”
Wow, you really know how to get people on this board going… Congrats!Miss J **Personally I don't think this industry is a right fit for you. You already have way too many negative comments. I believe you are smart enough to do this for a living but I would place my bet that you would quit. You should get a job doing commission sales and get some experience and some business contacts. Once you ahve those built up you should do well in a job like this.
First you have to believe in what you’re selling, I REFUSE to sell a VUL until someone can show me a situation where it is the best fit for a client, yes that might limit my bottom line but at the end of the day I can still sleep.
Financial Services MLMs are nothing but SCAMS, the emphasis is on recruiting not doing what’s best for the client. Show me one that doesn’t have a TON of complaints and I’ll retract my statement. If you’re insistent on doing MLM there are much easier products to sell that are MUCH LESS harmful to the client (or customer).
I agree with Miss J on your negative outlook, if you’re struggling with ethics already you will either never make it or ruin many people’s lives. If you aren’t willing to sacrifice $$$ in order to do what’s right, don’t even think of getting in this profession, we have enough bad apples already, and tell your roomate to get educated and find another company.
If you are so short-sighted that you believe the best way to go is low-cost index funds, then you should work the desk at Vanguard or Fidelity. Seriously. You would be helping people that need help. I don’t think being a full-service advisor is for you.
Yes, I've been tainted by the amersux site, correct me if they're wrong.
Yes, they are wrong. I don't mean that as a defense of Ameriprise. Rather the site is a complete hatchet job with no redeeming qualities.How do I sell an actively traded mutual fund with relatively high costs (and commensurate commissions) when I personally believe almost everyone is better off in a passive low-cost index fund?
The better question is why would you want to sell a high cost fund if you don't think that is in the client's best interest? Do you actually have any knowledge that has caused you to come to the conclusion that passive low-cost index funds are the best? If you are going to work with clients and steer them away from high cost funds into low cost passive index funds, don't you want to get compensated for your efforts? After you get compensated, are your low cost funds still low cost?
Everyone here wants to sell the right product to the right client - ruining someone's finances is just bad business. Do you accept that your product may not be perfect, but it's better than the client would do on their own and take solace in that?
Why would we have to take solace in helping a client? Nobody has a perfect product and we'll only know in hindsite. My job is to do the best job that I can in helping my client achieve their financial goals. The specifics of the investment is one of the least important things that we do.
I have no fear of cold calls, nor any great desire to make a career of them. I didn't realize how central cold calling is to being an FA until I lurked these forums. Cold calling does not have to be central. It's just one way to skin the cat. Client acquisition is central. I could do it if I had faith in what I was selling. More and more, I'm tempted to work at a bank and deal with limited personal income. What I want, of course, is for someone to explain to me how FA's truly help their clients despite the allure of pushing higher-commission products. First of all, if you only do things that help your clients, your ethical dilemma would disappear immediately. I sold a couple of life insurance policy todays. About $6000 will end up in my pocket. The commissions are very high. Did I help my client?
Will gladly take any suggestions of "You aren't cut out for this industry, but consider ." It's apparent that you don't currently have the knowledge to competently help people if the commissions that you will make will hurt the clients.
Overlord, you read as conflicted. OK, you admit as much yet there is no need to be. This biz is about matching your expertise with your beliefs and then operating from the platform that creates. Don't believe in high cost mutual funds? OK, that's narrow thinking but still, no problem. You don't have to deal with them in your practice. In fact you don't need to deal with any mutual funds. There are enough non-mutual fund securties to keep you busy for a long long time. Not a stock guy, don't do them. Options fan? Plenty of strategies to fill the appointment book. VA's don't do it for you but munis do, go for it. You get the point.
The opportunity here is to build the practice of your dreams, your way.
The advice I would give you going forward would be to let go of your preconceived ideas and give ALL investments a spot on your ark. Only when you fully understand the pro and con of each can you then decide which to put back on the beach. You owe you future clients at least that much.
iceco1d: Referring to World Financial Group, not Primerica.
ExPropTrader: I thought it was clear that I’m insistent on NOT doing MLM, and would rather leave money on the table and do what’s right.
anonymous: First of all, if you only do things that help your clients, your
ethical dilemma would disappear immediately. I sold a couple of life
insurance policy todays. About $6000 will end up in my pocket. The
commissions are very high. Did I help my client?
I assume you analyzed your clients’ individual needs and sold them the right type of life insurance. But do you have access to every carrier of life insurance? Is there a better policy with lower fees that could have better served your client, or are you hamstrung by your own options? It’s my understanding on very limited/incomplete/could-be-totally-wrong (and don’t mind being called out) information that different firms are limited in what they sell.
If you are so short-sighted that you believe the best way to go is low-cost index funds…
First, I never meant to imply I believe that everyone should have all their money in mutual funds (managed, indexed, or otherwise). So if that’s how I came across, my mistake. I became a huge fan of silver and the energy sector years ago (silver ~$5.50/oz) and would have invested far more in these areas than considered sane were I not a broke ass college student at the time. I would have beat the market! I must be an investment genius! The picks were based on a lot of research and understanding (or thinking I understood) underlying fundamentals.
There’s a point coming, I promise, but a quick side-track. A client comes to you and says “I want to invest in X!” Maybe you
don’t think it’s a perfect match, but you discuss the risk, potential
downsides, other alternatives, and your client says, “Uhhh. I want to
invest in X!” Maybe it’s just a “hot tip” he picked up while
hypnotized by the glare coming off Jim Cramer’s head, maybe it’s an
esoteric move that’s going to net you an eye-popping commission.
If it’s not an outright horrible move that will cripple the
person’s finances, there’s no ethical component.
I assume that, even among existing clients, FA’s more frequently sell their clients on something instead of their client trying to sell them. What if you’re wrong? Not “investments entail risk, and we happened to lose this one” wrong, but fundamentally wrong. Here’s where I’ll be really contentious and probably piss everyone off, but what follows isn’t a personal attack.
Silver and energy may have grown for the reasons I predicted, or perhaps in spite of my reasoning. Living in Orange County, I was around a lot of loan monkeys during the subprime boom. The first time “stated income” and NegAm loans were explained to me, I immediately thought “this will not end well.” I managed to pick a couple undervalued areas and avoid obviously excessive risk. Some knowledge, some intuition, some luck. I’m not a market-beater.
I know I’m focusing too heavily on stocks, and I thank BondGuy for his reply suggesting I broaden my view. But for someone else to call me short-sighted for preferring index funds flies in the face of (I thought) generally accepted economic/portfolio theory and proven results. Any argument like “Yeah, there are good funds and bad funds - just gotta pick the good ones” is essentially a claim of near-magical ability to beat the market. Disclaimer: I realize nobody has made that claim.
Anonymous: My job is to do the best job that I can in helping my client achieve their financial goals. The specifics of the investment is one of the least important things that we do.
I understand the argument, though I could grossly misinterpret that second sentence if I wanted to. There are countless scenarios where you can meet or exceed your client’s goals while still putting a premium on your own commission. By meeting goals, there is no way I could claim you are doing them a disservice. I could, however, claim you may not be serving them to the best of your abilities. This is where my ethical questions come into play.
My WFG roommate isn’t a bad guy. He wants to help people meet their goals and genuinely believes he has the answers. Everyone on this forum has far more knowledge about the industry/products than I do. That’s why I’m asking questions. Saying I can’t “competently help” people is true, by law, because I’m not licensed. I have no idea how I came off as obsessed with selling people bad product to maximize commissions, though.
ExPropTrader: I thought it was clear that I’m insistent on NOT doing MLM, and would rather leave money on the table and do what’s right.
My comments were directed more at your roomate I didn’t make that clear.
Damn Overlord, you make way too many assumptions and all of them happen to be pessimistic. I don’t have time to go through all of them but one thing I will say is that not all firms are limited to their own proprietory products or products in general. Some major wirehouses can shop for any investment on the street. The fact that you question this after assuming otherwise is a decision/opinion you have already set your mind on.The fact is is that there are people out there that can testify to living a good life financially with the help of their broker who's steered them the right way. Why are you questioning relationships between clients and brokers that have lasted over 20 years and become multi generation planning scenarios? Or all these planners crooks? You think they're still around because they made plenty of money to hit their firm's quotas by selling low index funds? Come on man. There's nothing wrong with making money. Anyone who says otherwise doesn't have any nor think they're worth any.
<span id=“userPro89791” =“showDropDown’userPro89791’, ‘proMenu89791’, 160, 0;” =“msgSidePro” title=“View Drop Down”>Antoverlord, you shouldn’t let the fact that Ameriprise is the chop shop of financial planning deter you from the industry. You can pursue reputable firms that train their new hires on financial planning in contrast to Ameriprise who trains you on how to find new suckers and to convert the new suckers into clients with VULs and annuities with the early new clients being your family and friends.
What is posted on amexsux is true on what it’s like working for Ameriprise even though the other posters say otherwise. Fact of the matter, you’ll have to work long hours and you’ll have to sign up your family and friends for financial plans or you’ll be gone. Knowing the majority of people don’t cut it plus they know family and friends will want to help you, Ameriprise will put all your family and friends in prop products so if you leave on either good or bad terms it’ll be hard to take them with you. Once your family and friends see how much those prop products cost over the years, they won’t be happy you.
ameriwho is from the amexsux site (lexus). So is antoverlord (vulforthehomeless).They are here to push their agenda which is: brokers/advisors are inherently bad, DIY is inherently good, all financial professionals who aren't paid salary at a Vanguard call center will screw you over, DIYers always will reap higher returns than clients of full service advisors. That's part of the Talking Points of these two, just to cast aside illusions.
OK…that groups them with willimacca and earns them both the TSFTF label. I’ll happily abuse any misguided DIY promotion on this forum…
ameriwho is from the amexsux site (lexus). So is antoverlord (vulforthehomeless).
I discovered the amersux site the day before I originally posted here while I was researching companies that would be present at a career fair. I read a few threads, didn’t like what I saw, and ended up on this forum with unresolved questions about the industry as a whole.
Obviously I have read posts by the person you’re claiming I am since only 4 people post on that forum, but to claim I sound like him/her or am here to push an agenda is, well, dumb.
Anabuhakbuss: Why are you questioning relationships between clients and brokers that
have lasted over 20 years and become multi generation planning
scenarios? Or all these planners crooks? You think they’re still around
because they made plenty of money to hit their firm’s quotas by selling
low index funds?
There’s an interesting subtext here. First, the continuing implication that client satisfaction overrides ethical concerns. However, there do exist “bad” FA’s (those who sell crappy/non-suitable products to their clients) with satisfied clients. I wonder if a client who has been in costly investments over 20 years would remain satisfied if sat down and told how much extra money they would have without those fees? Note that I’m not saying all FA’s are bad, all investments too costly, and all people capable of managing their finances without help.
Without arguing as to the efficacy of the index fund approach, it is a valid investment strategy backed by loads of research and many experts (it has a right to exist). But the FA’s who would follow this approach would not meet quotas and therefore not have a job. So to help my clients, I have to sell them products with high commissions, so that the firm will allow me to keep working. You’re essentially arguing that the firm disallows a valid strategy that may be the best fit for some clients, and don’t see a problem with this.
In regards to the DIY comments:
I read Ben Graham’s “The Intelligent Investor” not too long ago. I’d summarize his views on FA’s as thus: you can DIY if you work hard at it, but it’s not for everyone. If you’re going to rely on an FA do your research and make sure their investment philosophy matches your own. He suggests the greatest service an FA can provide is to keep an investor from sabotaging himself by panicking every time the market moves.
Let’s say you’re looking at mutual funds. You agree with the philosophy behind the fund, think it a good match with the current market, and like their major holdings. When you sell a client on this fund, you’re selling them the expertise of others. You didn’t do the analysis on each stock in the fund and it would have been a waste of your time to do so.
Isn’t referring to the “DIY approach” as such a little disingenuous? Investing in an index fund isn’t truly DIY. You aren’t putting together your own index fund. You rely on the research and expertise of people who have shown them to be a good investment. Say you need life insurance and decide that a simple term life policy meets your requirements. Assuming near-identical policies from two carriers with similar financial strength, you’re clearly better off with the policy that costs less. You’re relying on the expertise of the insurance company that they will run their business in a way that allows them to pay out if you die.
Index funds and websites that provide dozens of insurance quotes with the click of a button exist. They didn’t always exist… times change. Plenty of people don’t want to deal with their own investments and would prefer a professional be in charge. So far, so good. The problem that I continue to have is that there appear to be fundamental issues within the industry of financial advising that restrict FA’s from achieving the lowest costs and highest returns for their clients.
[quote=Antoverlord] Say you need life insurance and decide that a simple term life policy meets your requirements. Assuming near-identical policies from two carriers with similar financial strength, you’re clearly better off with the policy that costs less. You’re relying on the expertise of the insurance company that they will run their business in a way that allows them to pay out if you die.
Even between two identically rated carriers there is ALOT more than just cost to consider.
What about regulatory actions?
What about convertibility?
What about claims-paying history?
Where is there excess invested in and is it safe?
Your statement is like saying that no one should own a Mercedes cause it costs more than a Toyota. The Toyota is just as reliable (financial strength), and it has 4 wheels (term policy) but the similarities end there.
If you want to make blanket statements at least do enough research to know what you’re talking about.
Ant, if you haven’t read Nick Murray’s “The New Financial Advisor”, I would recommend it. I’m 27 and have been the industry in different capacities since I’ve been out of school in 2002. I struggled with a lot of the same issues you’ve presented and found this book extremely helpful.As I'm sure you've seen from the responses here, our industry is full of different opinions, options, thoughts, and conclusions. The only certainty I've established since I've been in the business is that nobody knows whats going to happen tomorrow. If they did, wouldn't everybody invest with them? We can only take what we do know about each client's individual situation and apply that information the best way we know how. For me, its truly not about the product, it's about the client relationship and making sure I'm doing the best I can for them. That's how I justify my fees, because I know I'm doing the best I can for every client. It's very easy to "what if" yourself to death in this industry, so you have to take time that you have available, do your best research, and apply your principles and philosophy as you see fit. And that's certainly different for everyone. If it wasn't, this industry wouldn't be any fun (or nearly as frustrating!) Good luck.