Question for veterans about dynamics of industry

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Jun 22, 2008 8:48 pm

I have spent the last two months really trying to find out as much as I can about this industry.  I have received a lot of help from members of this board and I am very appreciative.  I have heard the bad parts and the good parts of the career.

But I am still having difficulty wrapping my arms around the entire dynamic of this career they call "financial advising."  Please veterans, help me see the light.    Wirehouses and other firms look for sales people because you are an asset gatherer.  That is what they firms care about and that is what they want.  My understanding is that they don't care about you picking stocks or managing the portfolio, they just want you brining the money in the door.  So it takes someone that has great sales ability more than any other one factor.    Ok, so now ten to fifteen years down the road, the GREAT sales person has brought in assets out the wazoo and has even been able to limit his practice to clients with a substantial AUM.  Mr. Magnicifent Salesman has them set up in fee based accounts and is really bringing in the production because he is the "gatherer of gatherers."  In fact, he is now getting almost all of his new clients simply from referrals.   So what happened along the way? Did Mr. Great Salesman have to also become Mr. Great Financial Guru?  Does Mr. Great Salesman now just spend all day at the golf course because he is just the salesperson and someone else in the wirehouse is really managing the assets?   And finally, I have heard on this board many times that the most successful advisors are the ones that always do what is best for the client.  But wait, isn't the advisor really just a salesperson that is gathering assets for the firm?  So how do they know what is best for the client (This question is not meant sarcastically.  I really am wondering how this works)?   Sorry for the long question, but I have really been trying to get a clear understanding of this very interesting profession.
Jun 22, 2008 9:24 pm

Please define what YOU think a financial advisor should do for their clients.

Jun 22, 2008 9:43 pm

Please define what YOU think a financial advisor should do for their clients.

  skippy, I think you are taking my post the wrong way.  If I wasn't clear in my thoughts then I apologize.    But there is no denying that the wirehouses are looking for salespeople to bring in assets.  Hey, I have no problem with that as I am in sales.  In fact, lets use me as an example.  My background is in sales.  My degrees are in humanities.  I have absolutely no financial background whatsoever.  Yet, any wirehouse I have spoken with has been very quick to tell me that they would love to have me on their team.    I was simply stating that I think it is an interesting dynamic since most veterans seem to move past the sales person role after a certain number of years in the business. I talk to fifteen year veterans all the time that say that they get new clients only by referrals at this point in their career.   So what do these advisors do at that point?  Remember, I am going on the assumption that advisors at wirehouses are simply asset gatherers.  In fact, I have even had a BOM tell me very specifically that an advisor's role is simply to bring in assets and let someone else manage them.     
Jun 22, 2008 10:14 pm



I'm not a "vet," but think of it this way...when you go to the doctor for a checkup, or when you are sick, how long does it take the doctor to diagnose you, order tests, or take some sort of action/implement a plan?  When you get your taxes done, does your accountant need to spend 25 hours researching your taxes?  You get the point.   During your training, you will (hopefully) learn the basics about investments/planning and the other services you will provide (depending on your firm).  Once you know it, you know it.  Once you "know your shit" (or get set in your ways and at least THINK you know your shit), you will find that MOST of your clients take very little time to come up with a plan.  Go back to the doctor again...of all the sick patients they see in a year, how many of them end up with some type of rare illness and how many of them can be handled with a relatively simple, effective treatment plan?    Now, when you get a HNW/sophisticated client, or special situation, you will have to spend some extra time.    When we say your job is an "asset gatherer," is that's because it's your main job.  You do need to learn planning concepts, investment strategies, etc.  But you do that in training.  You "learn" new strategies and "keep up with the market" on "your own time."  Think about the doctor again.  Do they read research publications while at the hospital?  Nah.  They do it before they leave for work/at night/over the weekend, etc.  When do CPAs update themselves on new tax laws?  Do you think they do it at 2 PM on a Wednesday when they could/should be seeing clients?    You get my point?  We aren't numbskulls (well, I'm sure plenty of advisors are) that just peddle crap we don't know about.  It just becomes second nature to you.  You eat/sleep/breathe/drink it.  You don't need to be on morninstar all day.    The point you need to absorb is that if you don't have any clients, or the necessary AUM, all the investment knowledge in the world doesn't do you diddly.   Hope that helps.[/quote] Helped Me.
Jun 22, 2008 10:30 pm

Runner -

Ice made some good points, as usual. Pay attention to his posts, he is keenly in tune to what this business is about and he gets it. I'll add - Yes, your primary role is to bring it in. If you cant bring it in, you are done. But how do you bring it in? You have to show the prospects you meet, some value. To do that, you need to have a good grasp of investment strategy. That doesnt mean you need to know how to pick stocks. You need to understand strategic asset allocation, cut up the pie, and be able to put a manager, mutual fund, or ETF,  into each slice. You'll understand this much better after you;ve gone thru training. You also MIGHT need to understand tactical asset allocation. How and when to make changes in what % of the pie each slice should be, based on market conditions currently. Some FA's dont believe in that. They believe the only change in strategy should be based on a change in the clients situation, because you cant predict markets. You need to decide on YOUR investment philosophy. You also need some understanding of tax concepts, estate planning, etc. But you also need to be skilled at discovery (profiling the client), reading people, and psychology. If you get some understanding of all the above, you will be well equipped to bring in the assets, and thats how you make money AND a great life for you and your family.   I gave you way more than you need to know at this point, pre training. But I think its a good representation of the real dynamics of the business and the career
Jun 22, 2008 11:52 pm


  So what happened along the way? Did Mr. Great Salesman have to also become Mr. Great Financial Guru?  [/quote]   The good ones do.   If you want to be someone WORTH working with, you will want to develop your skills and knowledge to be referrable.   This means CFP/ChFC, CIMA &/or CFA coursework.   The more in-depth knowledge means you can "swim at the deep end of the pool."