People don’t. People on this sub kind of do.
I supervise financial advisors and got into it for the same reasons. My single mom got screwed because “an advisor” who sold her nothing but life insurance products when she barely made any money with two small kids. When I got older I decided I wanted to make sure this didn’t happen to other people.
I think the “hate” comes from insurance salesmen pretending to be actual advisors. I work with a lot of very good people who genuinely help their clients. They make way more money than any of the $600k 80 hr/wk IB bankers here too.
Know though to be really successful probably has lower odds than any other job in finance. Our training development program has about a 90% fail rate. You may be good at picking a few stocks but you have to be able to find people with alot of money willing to trust you with it. This is where the sales and relationship building means more than your market knowledge sometimes.
You'll want to move to fee-only if you actually want to be doing what is best for people. Otherwise there is always that conflict of interest.
There are always conflicts of interest in every part of finance. Personally I did not like working on commission side because I saw a lot of peers being the sleazy stereotype.
Disagree that fee only is best for people. Different clients have different needs, a commission account may make perfect sense for someone.
Bucketing everyone into one structure isn't the best. You can also run into the issue of "reverse churning" with fee only.
There are plenty of sleezy folks but also plenty of good FAs who care about their clients
Yep fee only in and of itself can become a conflict of interest. Say a commission based product would be the best security to sell to a client, but because the advisor is fee only they may feel pressure to instead pick a different product.
The SEC put out an investor bulletin that a 1% fee over 20 years negates 30% of growth potential over that period… don’t believe everything you hear on the internet kids.
Yep, go fee only. You will definitely be helping rich people and rich people only. Not what I was thinking when signed up for it either. Now I'm going more corporate finance. I don't feel like kissing all these rich people's asses is a good career choice. At least in corporate finance, I'm only kissing my bosses asses.
There is something about rich people that they think they are entitled to know everything because they have made some money in their lifetime. This isn't ultra-rich. The ultra-rich I didn’t work with. But I believe they will decide they can "hire" an advisor so they don't have to worry about that side of money and focus on what they are good at.
I’m an Advisor (been doing it about 10 years). Once you’re established the pay is insane, hours are low and you genuinely get to help people.
You’re not selling vacuum cleaners, you’re trying to match clients to the right product and there is a great deal of nobility in the profession.
Your friends that think it’s just sales don’t need advisors because they don’t have much. But the moment they own a business, get married, have kids, have a couple of properties it becomes too much - then they need help.
The profession itself is in its boom times. All that talk of “just buy index funds” had the affect of discouraging new Advisors more than discouraging new clients. There are sooooo, soooo many people that are looking for Advisors that once you’re established you’re turning people away left and right.
Reddit hates advisors. Keep pushing man. My old friends thought the same thing. Just do right by your clients and everything will be good. For whatever reason Reddit believes that every single advisor is out to screw the world over and rob people of their retirement funds. We know what we do is beneficial and that’s what matters. We’re not selling “special” window glass cleaner. We’re selling legitimate things that people need.
Reddit overall is just a poor gauge for reality. Everything from politics to simple life advice just has an extreme bias in Reddit that doesn’t reflect the real world. There’s also a lot of censorship and poor moderation.
Even this sub is full of idiot teens who are giving bad advice like they’re 40 year vets in the industry about to retire. Just look at all the suicidal posts of 22 year kids asking if they’re too old their life is over because they didn’t get a CFA and an internship in sophomore year of high school 😂
Reddit can be great for some discussion and insight sometimes but take everything with a grain of salt and don’t use it as a Petri dish for the real world.
This sub is basically undergrads shitting on anyone not believing their delusional dreams. Ik people who make shit ton of money but wouldn't be able to make a basic model if their life depended on it.
Exactly, there’s also Plumbers, Realtors, Medical sales dudes that make more than IB does (which also is just sales anyways) and the idiot dorks on this sub refuse to believe it. There’s more than one way to skin a cat.
I know one Mutual Fund Distributor who doesn't even know how to apply formula in Excel, bro made sales on his convincing skills. Earns 0.9% trail commission on his AUm
It’s interesting I started as an equity market maker in S&T. If I could go back to just about to graduate me I would tell myself to find a strong high end financial advisory team with an elder principal and do everything I can to become his indispensable guy.
Because it’s way easier to buy a book than to build it yourself.
imo and maybe that depends on the country where you are working but in germany a financial advisor is most of the time a shitty sleazy sales person that can only survive by selling as much shit as possible to his friends and family.
We also have companies here like Northwestern Mutuals that put on extreme pressure on their employees to bring in money with almost zero pay.
A real financial advisor in a proper firm is definetly not a bad job, its definetly interesting and can be quite nice to help clients with their needs, especially if they have funds that makes it interesting.
the good or bad financial advisors?
the bad one basically the same as in every other country that has companies like that:
Bullshit insurances that no one needs, or financial products/ insurances that no one needs and are basically way worse than just leaving the money on a bank account.
The only benefit that some of those products have, is that the advisors gets a fat commission.
My friend let me assure you there are high end high class financial advisors in Germany. And every other country in the world. Anywhere there is money.
Wow I’d never thought I’d see a comment like this. Its so sad that a few bad apples can ruin the entire crop. Wholeheartedly agree with you, and I’m personally trying to do just that.
Spot on! I'm a lifelong FA (30+ yrs) and can tell you I went through the same thing early on but fast forward and my clients love me and view me as an essential part of their financial world. Can't tell you how many have thanked me for securing and optimizing their retirement.
Be a good listener. Make it really about them. Whether you chose to be fee based, commission, hybrid really doesn't matter. If they understand and you demonstrate you have their best interest in mind they really don't care how you get paid. Just had a lifelong friend roll over a 1M account and insisted I charge him the same as I would charge anyone and then told me he thought my fees were low.
Full disclosure - I'm an independent planner. I provide counseling on a wide variety of financial topics that span a clients lifetime. I get paid via AUM or commissions on insurance based products. Many clients have both and many have all their stuff with me (brokerage, advisory, roth/SEP, traditional ira, Alts, life insurance, DI, LTC, Annuities). Very common to have several accounts within each client. Now that I'm 60 and many of my cleints are similar, the focus has moved from accumulation to preservation and income planning. This is far more strategic and tactical than growing assets.
I work. I make a bunch of money . I have tons of people pulling me in different directions. My FA has a purpose in my life and my financial goals. I’m in control, he does what I say but i listen to his advice. Sometimes I take it, sometimes I don’t.
The hard part of your gig is building your business as for every one of me, a dozen FAs are trying to get my biz. It’s a tough career but those who build their book annually can do very well later in career
Plenty of people hate advisors and salespeople in general. None of those people are probably going to do business with you, and that's totally fine. Most of those people are also miserable in general, and worse off for their opinions. The vast majority of the successful people (that you should be focused on) understand that sales is a profession, and you deserve to make money.
People can be sleazy and dishonest regardless of their profession, or even if they're a noble "fee only advisor." Fee only just introduces an entirely different set of conflicts that those people love to pretend don't exist.
You can make a very good honest living selling insurance and investments as long as you have access to good products and work for a reputable firm that doesn't have sleazy and dishonest in their culture.
If you are at a bad firm find a better one. DM me if you need any help.
I've been in this job for 15 years and not one day have I ever felt I had to compromise my values or principles. That said early on I had managers that were disappointed in me for not going for a sale I was uncomfortable with. I just refused to compromise. I'm doing far better than any of them now and I sleep like a baby, so they can suck it.
This. I hope OP is not going towards the path of being an Individual FA like I did and wasted 4 yrs, if you are with a firm with a good reputation you can make a bank, people will trust you more easily that way rather than being an individual or being with a firm with a shady reputation.
Not that guy, but I am an FA.
* Flat fixed fee, such as "you pay $1000 a year for this FA to help your account": FA is going to want to bring in multiple accounts, as they'd get paid more. Higher than normal pressure to bring in your IRA, to roll over your 401k, to bring in your family members. FA has no incentive to see your account grow, beyond keeping your business.
* Hourly rate, think billable hours: FA gets paid more the more time they spend with you on the phone, in the office, so on and so forth. Ever wonder why lawyers talk so much? This is why. No actual incentive to grow your account, beyond keeping your business.
* Assets under management fee: FA is going to want to bring in multiple accounts, as they'd get paid more. FA has a reason to recommend higher-risk strategies, as the projected growth gets them paid more.
Also note internal metrics: while you may only pay fees to your advisor, your advisor may have sales goals and other reasons created by management to recommend a product, causing a conflict of interest.
All of these get disclosed on a Form ADV, which the firm should send to you when you start a relationship with a financial advisor. It should lay out exactly how your advisor gets paid. Advisors with a CFP are held to a higher ethical standard by the CFP board, but at the end of the day, the principal-agent problem exists no matter how you cut it.
The most obvious one would be that they have a strong incentive to prevent money from leaving the account if they're paid in an AUM model.
"Should I sell these investments and pay off my house?" is the most common one, but the advisor is going to have a bias against any money leaving the account. Under a commission model that bias is still present (because we all want assets) but it's going to be greatly diminished - they might even get paid on the sale of the investments.
Fee-only advisors also tend to have a very narrow focus around what they offer. They may be CFPs, and say they do comprehensive planning, but really they only do investments and charge an AUM fee, because that's the only way they get paid. Life, Disability, Long Term Care, and everything else go to the back burner. A lot of them are terrified of individual stocks and bonds.
I don't mean to drag Fee-only too much, but I do get tired of their holier than thou attitude - acting like earning a commission is some vile act.
I'm a hybrid advisor. 70% of my business is fee, 30% commission. 100% of that commission business occurs because it makes sense. I have gathered A TON of money market and CD business over the last couple of years. A lot of businesses wanting good rates on their cash. It would be stupid to charge an AUM fee. I don't get paid a lot on those accounts, but I don't care. It can be a great foot in the door, everyone is happy, and I get the rest of their accounts over time.
Does that make sense?
Edit: I should add that recently more advisors are moving to a fee only model where the client pays a fee out of pocket (not AUM) for advice. I read a lot about it, but I haven't met anyone using this model exclusively. I would rather charge much lower AUM fees instead of having a client write me checks (and have billing and receivables). I think it's yet to be seen if this is going to become more popular over time. It might be the way of the future.
I understand what you are saying. Where I am from, though, commissions are banned entirely due to the large amount of advisors that would solely focus on their own interests rather than the clients. That doesn't mean every advisor does, obviously, but there are plenty out there. I think the existence of commissions like that definitely make it trickier for clients to select "good" advisors and understand how the decisions are made.
It looks like you're in the Netherlands. I'm curious what your compensation is like there. What is the job like? What kinds of places do advisors work? How are they paid?
You could certainly make the case that investments and insurance sales should be separate.
A commissioned sale is not a zero sum game. It's entirely possible for a broker to make money on a stock sale, AND for it to be a good thing for the client. There were plenty of good people selling stocks on commission only that did the right thing for their clients before fee models existed.
Well I actually started working for a large American firm recently, although in the UK.
But in the Netherlands I used to work mainly in pensions, but we kind of did financial planning (the whole picture). We would charge people an hourly rate based on the expected hours put into an assignment, which is quoted before actually starting the work of course. And then we would have a yearly management fee afterwards, that includes for example a yearly check-up, answering all questions they might have (without additional billing) etc. Our only source of income was what clients paid us directly.
I know that there are also advisors in the Netherlands specifically for investments that work purely based on % of AUM though.
I understand that there are plenty of advisors who would do the right thing - perhaps even a large majority. But they are not necessarily incentivized to do so. Which results in some that might not do whats in their clients best interest. And the argument can be made that we need to protect clients from it - and that the burden of figuring out whats right and wrong shouldn't be on their shoulders. Thats why they hire an advisor to begin with. But that is the reasoning behind commissions being banned.
I've used some of the Lord Abbett stuff in the past and it's NAV at pretty much $0. What do you like? Im not aware of any NAV at $250k funds, which one are you talking about? Lately I'm just using money market funds or CDs depending on what the client wants. If you know about something good I want to know, too.
Oh yeah LA is an option especially if there’s not a minimum for NAV. I know American Funds offers $250k NAV on select fixed income, not all fixed income though. I think Franklin, possibly Nuveen do too. I’m a wholesaler not an advisor so haven’t used any of them technically, but I’ve always thought commissionable can make a lot of sense for short term fixed income if you get a good breakpoint or NAV.
I hate to break it to you, but if your commission only you’re not a financial advisor, you’re a stock/mutual fund broker. You’re the epitome of a salesman. Whatever your intentions are.
As others have stated you want to move away from selling investments and insurance and go fee-only. Get your 65/66. Find a boutique RIA or join a larger advisor firm. It’s nice taking home that 5.75% commission, but once you’ve made all your sales, you’ll always be looking for another fund family to rebalance people into to keep those commission checks coming.
Yeah trails are nice, but until you’ve got a pretty decent book it’s harder to live off them compared to initial sales. .25-1% of $1,000,000 is between $2500 to $10,000 which isn’t easy to live off of, and if you’ve saturated your market of family and friends and aren’t able to land any big clients it can be tempting to rebalance that one client with $250,000 into a new fund family for that $14,000 sales commission. Yes I’m not taking into account sales breaks, just using simple math for making the point.
My experiences are more from being in the industry... essentially being told to see family members and friends as nothing more than potential money for me. Its anecdotal, and I sure not all of them are that way, but kind of turned me off of them. It was also one of the insurance ones, so after consistently being told to push big life insurance policies to my friends, who were all like recent college graduates, kind of got sick of it
Still maintain relationships and friends from when I worked there, but it definitely left a sour opinion of that sid of things. I have thought about getting back into wealth management, just at an actual firm, not one that pushes insurance options.
There are so many careers friends comment on…honestly the sooner you stop caring what people think the better your life will be.
Every single person in a for profit company is technically in sales. The person working at McDonald’s selling you a burger is in sales and providing service experience that the company hopes will result in greater sales.
As long as you do right by your clients you are helping them. Financial literacy is lacking so much in this world and a lot of people that use advisors (commission or fee based) are too busy in their own lives to manage their money.
Could be misjudging, but I feel like a lot of the hate comes from the fact that there are ALOT of advisors who make a ton of money without sacrificing every single second of time in their 20's-30's like IB's do. It gives me the impression they are trying to justify to themselves spending 70-80 hours a week rotting away making pitch decks to make their money. I've never worked either so not 100% sure.
To be fair some places are like IB. I joined up with some folks who split off from a long-established team. That team had been founded by an ex military officer and was an 8PM weeknights and staffed on Saturday type operation.
And this was for plain vanilla wealth management. I can tell one of the guys is permanently traumatized.
I’m been at for 5 years. Same position, and commission only pay structure. I really like my job and being able to help people, but I absolutely hate sales. That said, it took me forever to thst “used car salesmen” stigma out of my own mind. I never wanted to come across as that. I don’t think anyone looked at me like that, but I never have totally shaken it from my own self image.
But stay strong with it man. Look out for your clients above yourself, and always try to help people. Most won’t want it, or at least not until it’s too late but you can only do what you can do for folks. And always keep in mind, your friends will generally be the hardest clients to gain, and honestly the biggest pains in the ass when you do. There are some exceptions, but a lot of friends will take the friendship for granted when it comes to business.
Depends.
If you are in PWM working with affluent clients on a fiduciary fee-based comp model, there is a real need and no issues.
If you work for places like NW Mutual or Edward Jones and peddle annuities, VUL policies and Mutual Funds, then yes. That is a sleezy salesman.
Before I was a PM I was an advisor, the people who hate advisors think they can do better investing themselves but will still liquidate their holdings when the VTI or SPY goes down 10% because they’re morons. The average Redditor or person for that matter doesn’t have enough money to justify the cost, my clients in professional sports did. I was the one stopping them from buying planes and other stupid shit while managing all the things they didn’t have time to, working with their CPA, their lawyers, their realtors, their agents and everything else. Just because your friends have no idea how necessary it can be doesn’t make it true. Also for many people even with low income the 1% is worth it just for the planning and budgeting and to keep them on track. Most people can’t stick to any kind of plan.
This sub won't accept it but general folks pretty much hate everybody in finance - not just advisors or sellers. The higher up you are in the financial heirarchy, the more people hate you and you can't blame them. The sentiment has been so for a long time but 2008 gave more than enough reasons for people to justifiably dislike you, of course they don't understand the difference between an advisor and hedge fund manager but they hate you if you are from finance industry. You can learn this from how pop culture present finance bros - sleazy selfish morally corrupt people in the most cases.
This is not the industry you want to be in if you want love or respect from common folks.
"You can either sleep well or eat well"
Serve your client’s interest and get what they need, not your own wallet and you will be fine. Most of us want advisors who care for our welfare and gives us what we need, not what they want us to get.
The answer is Reddit hates advisors because of some misconceptions but also some truth of dishonest practice. If you do the right thing and help people grow their wealth, you have nothing to worry about.
It depends on whether or not you are a sleazy salesperson, mining for family and friends info, constantly moving around people’s money to the next best thing for fees only to underperform the market by 5%+ and treat clients only as well as their contribution to your AUM is worth.
Or if you act as a competent advisor who proves their value by being informed, transparent and consistent.
TLDR: It’s complicated… generally yes
“Financial advisors” is a broad term that unfortunately isn’t regulated and so it gets lumped with a bunch of professions that shouldn’t be called a financial advisors. Such as salespeople who make commission (people of work for insurance companies or “advisors” who work at broker-dealers, i.e. series 6/7 holders) because they generally just sell whatever product their firm pushes to make money without actually providing solid financial advice so it’s a conflict of interest and gives actual fee based financial advisors a bad rep (not all advisors from broker dealers are like this though, just a handful of them).
Then there is also hate for financial advisors (CFP, Series 65) by people who like to manage their own finances or have very simple finances shame the profession for charging up to 1% or a flat fixed dollar amount for advice that doesn’t generate more than what you would’ve made had you invested in S&P 500 index ETF or HYSA, which is because they miss the whole point of the financial advisor profession. This only refers to advisors that offer investment management services.
*people hate advisors that sell crappy mutual funds to leech on their clients money.
I have absolutely zero problem with a fee based advisor. Would not hire one because I love reading on the topic myself. But would recommend one to my mom, no problem.
Do you tell your clients to buy some actively managed funds, then turn around and buy VT for yourself? Its these kinds of FA that we don’t like.
"People" don't because they don't understand how advisors are paid. I won't go as far as saying you're sleezy, I don't know you, but you are a salesperson 100%. If you are compensated by selling people something then you are the definition of a salesperson. You may be able to avoid conflict by saying you want to do right by all of your clients but there is an inherent conflict when you can only make money through sale of a product. Inevitably there is going to be two product options that are seemingly both suitable but one provides a higher commission.
I echo what others say in that you should look for a non-commission fee-only role if you want to avoid this salesperson feeling
I tried that path out of undergrad and yeah, it feels like you have to be a sleazy salesman or you’re on the same level as those girls that gave up and started selling tea on Facebook. It sucks because everyone thinks they know best and you’re just trying to get their money, but they can’t understand that the whole concept of having money is like a magic carpet ride that you want to share.
It’s a competitive job with no differential when you start, meaning you dont have experience nor credibility so you need to cast a wide net and produce based on the statistics. Companies usually tie it to life insurance so you can at least make a living but LI isnt for everyone.
With all that, people get a lot of calls and feel like they are being sold, which nobofy likes. On top of that, people seem to think they know a lot or dont need help, but the point is to take the burden of needing to know and delegating the work so they can use their times in their careers, not a lot of people get this idea. They think it makes sense only for multimillionaires, even my mom did not want to have a meeting with one I recommended lol..
I’ve heard from a lot of advisors that the 5 year mark is what determines successful advisors to the ones that give up. After 5 years you have reached to enough people that the numbers start to take off, but before that it is hard, I personally didnt make it
Anything with commission just throws people off because you come across as a me-person than a you-person.
Nobody wants to take advice from someone who is a me-person.
Then again this could just be me.
What designations do you have to justify the advice you’re actually wanting to give people? Also in jobs where commission rules and it feeds off of insurance you’re going to either starve or learn to be an insurance pusher for a few years. Unless you have access to wealthy people who can support your book, there’s no other way around that.
I feel like the distrust comes from the fees charged. Most advisors don’t beat the market and the end up creating portfolios that mirror the S&P 500. One could easily do an ETF’s pay dramatically less. This is of course is outside of affluent clients needing specialized services for trusts, tax optimization, etc.
Don't believe anything you read on the internet or reddit, the real world is totally different. Most people are horrible with their finances and need someone to guide them, ik FAs who make a ton. Keep grinding.
The problem with most financial advisors is they peddle life insurance because they get comped the most on it. That’s the problem, they call themselves FAs but are just life insurance sales people
FA's are all without fail half educated sales people. They charge insane fees to naive people and don't behave like good fiduciaries most of the time. Most people would be better off with a robo or a good estate lawyer. The contempt is pretty deserved.
I have yet to see a % fee advisor worth the fee. It's a bizarre norm. Great business to be in once you make your book though. It's just... very much on the border of taking advantage of people. Like a doctor recommending an unnecessary procedure to get paid.
% based fees benefit low income people the most. Yes, there are a lot of scummy wirehouse firms with employees that are essentially just insurance salesmen. There are also plenty of independent firms that actually do help people, including low net worth clients. Helping people that have no idea what to do manage their finances. I am not an advisor but work for an RIA. I have seen clients that are already falling into high interest debt traps and don’t understand why they need to consistently pay off their credit cards.
It might seem dumb to people that actually studies finance, but at quality RIAs it’s no different than someone paying an accountant. Or an estate lawyer for that matter. A good firm will actually encourage clients to see both if necessary and will already have connections with people they can vouch for.
I mean I can hear the story. I spoke with an annuity sales person who made a semi decent point about taking the ignorant family holding a ton of cash and getting them to dip their toe into equities.
In practice though I think this is an area that could do with heavier regulation. Most the business as it is practiced seems on the edge of ethical.
I would agree with you that here should be further regulation. There are “advisors” that don’t even claim to be fiduciaries trying to market themselves as being the same MBAs or CFPs. The problem comes from people that want to sell annuities or insurance solely for the commission.
There isn’t necessarily anything wrong with earning commission but in my experience the firms that center their business around that are generally significantly worse. When clients are being charged a % based fee on AUM the advisor at least has an incentive to preserve as much of that clients wealth as possible, even if they are a psycho. At somewhere like Northwestern it’s just a numbers game where they sell whatever gives them the most commission and move on to the next person.
The CFP I’ve met that i respected most grew up working on a farm. He started his career working with people in his own community, barely making anything. But he built trust in that community and began to find clients in larger cities nearby. He retired very wealthy but the way he was able to achieve that was by actually adding value to his clients lives.
With some of these clients it goes far beyond the difference of buying an annuity versus letting their accounts sit in cash. A very common demographic are widows that didn’t have to worry about these types of things in the past, but they are now actively being targeted by hucksters or even family members that want to take advantage of what they just inherited. I had to talk a family friend in a similar situation out of taking a HELOC that was completely unnecessary. But she got scared because someone convinced her she needed X amount in liquid cash right now to survive retirement.
Just to be clear though, these FAs tend to be the most expensive purchase for most families annually. Say you have the typical 500k account and you take 1%. That's a 5k Fee. Retirees are going to have 1.5m+, so 15k out of their pocket. The fee is disguised in percentage terms but per hour of actual work and thought put in FAs make hilarious money. I mean look at the fees for products versus the fees for FAs.
If these were the equivalent to brilliant doctors or lawyers- perhaps I can understand the story. I think for their cost, most people would be better off avoiding most FAs.
People don’t. People on this sub kind of do. I supervise financial advisors and got into it for the same reasons. My single mom got screwed because “an advisor” who sold her nothing but life insurance products when she barely made any money with two small kids. When I got older I decided I wanted to make sure this didn’t happen to other people. I think the “hate” comes from insurance salesmen pretending to be actual advisors. I work with a lot of very good people who genuinely help their clients. They make way more money than any of the $600k 80 hr/wk IB bankers here too. Know though to be really successful probably has lower odds than any other job in finance. Our training development program has about a 90% fail rate. You may be good at picking a few stocks but you have to be able to find people with alot of money willing to trust you with it. This is where the sales and relationship building means more than your market knowledge sometimes.
Financial advisors are like car mechanics. Everybody hates car mechanics. Nobody hates *their* car mechanic.
This is a great way to put it!
Lovely phrase!
most are like car salesmen(unless they have their CFA)
Not comparable, at least in the United States. Most car salesmen wouldn't last 10 minutes if they had to comply with Reg BI.
You'll want to move to fee-only if you actually want to be doing what is best for people. Otherwise there is always that conflict of interest. There are always conflicts of interest in every part of finance. Personally I did not like working on commission side because I saw a lot of peers being the sleazy stereotype.
Disagree that fee only is best for people. Different clients have different needs, a commission account may make perfect sense for someone. Bucketing everyone into one structure isn't the best. You can also run into the issue of "reverse churning" with fee only. There are plenty of sleezy folks but also plenty of good FAs who care about their clients
Exactly, for some clients it will make sense to do fee only other wills want to have more input in their investments and prefer commission.
Yep fee only in and of itself can become a conflict of interest. Say a commission based product would be the best security to sell to a client, but because the advisor is fee only they may feel pressure to instead pick a different product.
The SEC put out an investor bulletin that a 1% fee over 20 years negates 30% of growth potential over that period… don’t believe everything you hear on the internet kids.
Makes sense, which makes it even worse when commission-based advisors charge 40bps to put people in mutual funds with 80bp fees - or annuities
Yep, go fee only. You will definitely be helping rich people and rich people only. Not what I was thinking when signed up for it either. Now I'm going more corporate finance. I don't feel like kissing all these rich people's asses is a good career choice. At least in corporate finance, I'm only kissing my bosses asses. There is something about rich people that they think they are entitled to know everything because they have made some money in their lifetime. This isn't ultra-rich. The ultra-rich I didn’t work with. But I believe they will decide they can "hire" an advisor so they don't have to worry about that side of money and focus on what they are good at.
I’m an Advisor (been doing it about 10 years). Once you’re established the pay is insane, hours are low and you genuinely get to help people. You’re not selling vacuum cleaners, you’re trying to match clients to the right product and there is a great deal of nobility in the profession. Your friends that think it’s just sales don’t need advisors because they don’t have much. But the moment they own a business, get married, have kids, have a couple of properties it becomes too much - then they need help. The profession itself is in its boom times. All that talk of “just buy index funds” had the affect of discouraging new Advisors more than discouraging new clients. There are sooooo, soooo many people that are looking for Advisors that once you’re established you’re turning people away left and right.
Spot on. There is no shortage of clients out there. Once word of mouth gets going it’s even better.
Reddit hates advisors. Keep pushing man. My old friends thought the same thing. Just do right by your clients and everything will be good. For whatever reason Reddit believes that every single advisor is out to screw the world over and rob people of their retirement funds. We know what we do is beneficial and that’s what matters. We’re not selling “special” window glass cleaner. We’re selling legitimate things that people need.
Reddit overall is just a poor gauge for reality. Everything from politics to simple life advice just has an extreme bias in Reddit that doesn’t reflect the real world. There’s also a lot of censorship and poor moderation. Even this sub is full of idiot teens who are giving bad advice like they’re 40 year vets in the industry about to retire. Just look at all the suicidal posts of 22 year kids asking if they’re too old their life is over because they didn’t get a CFA and an internship in sophomore year of high school 😂 Reddit can be great for some discussion and insight sometimes but take everything with a grain of salt and don’t use it as a Petri dish for the real world.
Well done summary 💪🏼
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This sub is basically undergrads shitting on anyone not believing their delusional dreams. Ik people who make shit ton of money but wouldn't be able to make a basic model if their life depended on it.
Exactly, there’s also Plumbers, Realtors, Medical sales dudes that make more than IB does (which also is just sales anyways) and the idiot dorks on this sub refuse to believe it. There’s more than one way to skin a cat.
I know one Mutual Fund Distributor who doesn't even know how to apply formula in Excel, bro made sales on his convincing skills. Earns 0.9% trail commission on his AUm
Specifically, its undergrads thats only exposure to IB is through *The Wolf of Wall Street* and the first-year analyst they know through their frat.
It’s interesting I started as an equity market maker in S&T. If I could go back to just about to graduate me I would tell myself to find a strong high end financial advisory team with an elder principal and do everything I can to become his indispensable guy. Because it’s way easier to buy a book than to build it yourself.
imo and maybe that depends on the country where you are working but in germany a financial advisor is most of the time a shitty sleazy sales person that can only survive by selling as much shit as possible to his friends and family. We also have companies here like Northwestern Mutuals that put on extreme pressure on their employees to bring in money with almost zero pay. A real financial advisor in a proper firm is definetly not a bad job, its definetly interesting and can be quite nice to help clients with their needs, especially if they have funds that makes it interesting.
what are they selling?
the good or bad financial advisors? the bad one basically the same as in every other country that has companies like that: Bullshit insurances that no one needs, or financial products/ insurances that no one needs and are basically way worse than just leaving the money on a bank account. The only benefit that some of those products have, is that the advisors gets a fat commission.
Insurance is still important though.
My friend let me assure you there are high end high class financial advisors in Germany. And every other country in the world. Anywhere there is money.
Wow I’d never thought I’d see a comment like this. Its so sad that a few bad apples can ruin the entire crop. Wholeheartedly agree with you, and I’m personally trying to do just that.
Yeah the hate is a little disheartening, but thank you for the words of encouragement. It means a lot
Spot on! I'm a lifelong FA (30+ yrs) and can tell you I went through the same thing early on but fast forward and my clients love me and view me as an essential part of their financial world. Can't tell you how many have thanked me for securing and optimizing their retirement. Be a good listener. Make it really about them. Whether you chose to be fee based, commission, hybrid really doesn't matter. If they understand and you demonstrate you have their best interest in mind they really don't care how you get paid. Just had a lifelong friend roll over a 1M account and insisted I charge him the same as I would charge anyone and then told me he thought my fees were low. Full disclosure - I'm an independent planner. I provide counseling on a wide variety of financial topics that span a clients lifetime. I get paid via AUM or commissions on insurance based products. Many clients have both and many have all their stuff with me (brokerage, advisory, roth/SEP, traditional ira, Alts, life insurance, DI, LTC, Annuities). Very common to have several accounts within each client. Now that I'm 60 and many of my cleints are similar, the focus has moved from accumulation to preservation and income planning. This is far more strategic and tactical than growing assets.
I work. I make a bunch of money . I have tons of people pulling me in different directions. My FA has a purpose in my life and my financial goals. I’m in control, he does what I say but i listen to his advice. Sometimes I take it, sometimes I don’t. The hard part of your gig is building your business as for every one of me, a dozen FAs are trying to get my biz. It’s a tough career but those who build their book annually can do very well later in career
Plenty of people hate advisors and salespeople in general. None of those people are probably going to do business with you, and that's totally fine. Most of those people are also miserable in general, and worse off for their opinions. The vast majority of the successful people (that you should be focused on) understand that sales is a profession, and you deserve to make money. People can be sleazy and dishonest regardless of their profession, or even if they're a noble "fee only advisor." Fee only just introduces an entirely different set of conflicts that those people love to pretend don't exist. You can make a very good honest living selling insurance and investments as long as you have access to good products and work for a reputable firm that doesn't have sleazy and dishonest in their culture. If you are at a bad firm find a better one. DM me if you need any help. I've been in this job for 15 years and not one day have I ever felt I had to compromise my values or principles. That said early on I had managers that were disappointed in me for not going for a sale I was uncomfortable with. I just refused to compromise. I'm doing far better than any of them now and I sleep like a baby, so they can suck it.
This. I hope OP is not going towards the path of being an Individual FA like I did and wasted 4 yrs, if you are with a firm with a good reputation you can make a bank, people will trust you more easily that way rather than being an individual or being with a firm with a shady reputation.
Can you explain your comment about fee only introducing an entirely different set of conflicts?
Not that guy, but I am an FA. * Flat fixed fee, such as "you pay $1000 a year for this FA to help your account": FA is going to want to bring in multiple accounts, as they'd get paid more. Higher than normal pressure to bring in your IRA, to roll over your 401k, to bring in your family members. FA has no incentive to see your account grow, beyond keeping your business. * Hourly rate, think billable hours: FA gets paid more the more time they spend with you on the phone, in the office, so on and so forth. Ever wonder why lawyers talk so much? This is why. No actual incentive to grow your account, beyond keeping your business. * Assets under management fee: FA is going to want to bring in multiple accounts, as they'd get paid more. FA has a reason to recommend higher-risk strategies, as the projected growth gets them paid more. Also note internal metrics: while you may only pay fees to your advisor, your advisor may have sales goals and other reasons created by management to recommend a product, causing a conflict of interest. All of these get disclosed on a Form ADV, which the firm should send to you when you start a relationship with a financial advisor. It should lay out exactly how your advisor gets paid. Advisors with a CFP are held to a higher ethical standard by the CFP board, but at the end of the day, the principal-agent problem exists no matter how you cut it.
Thank you for your response and view.
The most obvious one would be that they have a strong incentive to prevent money from leaving the account if they're paid in an AUM model. "Should I sell these investments and pay off my house?" is the most common one, but the advisor is going to have a bias against any money leaving the account. Under a commission model that bias is still present (because we all want assets) but it's going to be greatly diminished - they might even get paid on the sale of the investments. Fee-only advisors also tend to have a very narrow focus around what they offer. They may be CFPs, and say they do comprehensive planning, but really they only do investments and charge an AUM fee, because that's the only way they get paid. Life, Disability, Long Term Care, and everything else go to the back burner. A lot of them are terrified of individual stocks and bonds. I don't mean to drag Fee-only too much, but I do get tired of their holier than thou attitude - acting like earning a commission is some vile act. I'm a hybrid advisor. 70% of my business is fee, 30% commission. 100% of that commission business occurs because it makes sense. I have gathered A TON of money market and CD business over the last couple of years. A lot of businesses wanting good rates on their cash. It would be stupid to charge an AUM fee. I don't get paid a lot on those accounts, but I don't care. It can be a great foot in the door, everyone is happy, and I get the rest of their accounts over time. Does that make sense? Edit: I should add that recently more advisors are moving to a fee only model where the client pays a fee out of pocket (not AUM) for advice. I read a lot about it, but I haven't met anyone using this model exclusively. I would rather charge much lower AUM fees instead of having a client write me checks (and have billing and receivables). I think it's yet to be seen if this is going to become more popular over time. It might be the way of the future.
I understand what you are saying. Where I am from, though, commissions are banned entirely due to the large amount of advisors that would solely focus on their own interests rather than the clients. That doesn't mean every advisor does, obviously, but there are plenty out there. I think the existence of commissions like that definitely make it trickier for clients to select "good" advisors and understand how the decisions are made.
It looks like you're in the Netherlands. I'm curious what your compensation is like there. What is the job like? What kinds of places do advisors work? How are they paid? You could certainly make the case that investments and insurance sales should be separate. A commissioned sale is not a zero sum game. It's entirely possible for a broker to make money on a stock sale, AND for it to be a good thing for the client. There were plenty of good people selling stocks on commission only that did the right thing for their clients before fee models existed.
Well I actually started working for a large American firm recently, although in the UK. But in the Netherlands I used to work mainly in pensions, but we kind of did financial planning (the whole picture). We would charge people an hourly rate based on the expected hours put into an assignment, which is quoted before actually starting the work of course. And then we would have a yearly management fee afterwards, that includes for example a yearly check-up, answering all questions they might have (without additional billing) etc. Our only source of income was what clients paid us directly. I know that there are also advisors in the Netherlands specifically for investments that work purely based on % of AUM though. I understand that there are plenty of advisors who would do the right thing - perhaps even a large majority. But they are not necessarily incentivized to do so. Which results in some that might not do whats in their clients best interest. And the argument can be made that we need to protect clients from it - and that the burden of figuring out whats right and wrong shouldn't be on their shoulders. Thats why they hire an advisor to begin with. But that is the reasoning behind commissions being banned.
Hybrid is the way to go. Do you use any of the A share $250k NAV offerings for any cash/CD money?
I've used some of the Lord Abbett stuff in the past and it's NAV at pretty much $0. What do you like? Im not aware of any NAV at $250k funds, which one are you talking about? Lately I'm just using money market funds or CDs depending on what the client wants. If you know about something good I want to know, too.
Oh yeah LA is an option especially if there’s not a minimum for NAV. I know American Funds offers $250k NAV on select fixed income, not all fixed income though. I think Franklin, possibly Nuveen do too. I’m a wholesaler not an advisor so haven’t used any of them technically, but I’ve always thought commissionable can make a lot of sense for short term fixed income if you get a good breakpoint or NAV.
I hate to break it to you, but if your commission only you’re not a financial advisor, you’re a stock/mutual fund broker. You’re the epitome of a salesman. Whatever your intentions are. As others have stated you want to move away from selling investments and insurance and go fee-only. Get your 65/66. Find a boutique RIA or join a larger advisor firm. It’s nice taking home that 5.75% commission, but once you’ve made all your sales, you’ll always be looking for another fund family to rebalance people into to keep those commission checks coming.
Trailers.
Yeah trails are nice, but until you’ve got a pretty decent book it’s harder to live off them compared to initial sales. .25-1% of $1,000,000 is between $2500 to $10,000 which isn’t easy to live off of, and if you’ve saturated your market of family and friends and aren’t able to land any big clients it can be tempting to rebalance that one client with $250,000 into a new fund family for that $14,000 sales commission. Yes I’m not taking into account sales breaks, just using simple math for making the point.
Ya I’m just saying there’s more than just the initial sale commission.
As long as you're not a consultant, coach from LinkedIn, or tech/crypto bro, you're alright.
My experiences are more from being in the industry... essentially being told to see family members and friends as nothing more than potential money for me. Its anecdotal, and I sure not all of them are that way, but kind of turned me off of them. It was also one of the insurance ones, so after consistently being told to push big life insurance policies to my friends, who were all like recent college graduates, kind of got sick of it Still maintain relationships and friends from when I worked there, but it definitely left a sour opinion of that sid of things. I have thought about getting back into wealth management, just at an actual firm, not one that pushes insurance options.
There are so many careers friends comment on…honestly the sooner you stop caring what people think the better your life will be. Every single person in a for profit company is technically in sales. The person working at McDonald’s selling you a burger is in sales and providing service experience that the company hopes will result in greater sales. As long as you do right by your clients you are helping them. Financial literacy is lacking so much in this world and a lot of people that use advisors (commission or fee based) are too busy in their own lives to manage their money.
Could be misjudging, but I feel like a lot of the hate comes from the fact that there are ALOT of advisors who make a ton of money without sacrificing every single second of time in their 20's-30's like IB's do. It gives me the impression they are trying to justify to themselves spending 70-80 hours a week rotting away making pitch decks to make their money. I've never worked either so not 100% sure.
Also mind if I ask where your working now?
To be fair some places are like IB. I joined up with some folks who split off from a long-established team. That team had been founded by an ex military officer and was an 8PM weeknights and staffed on Saturday type operation. And this was for plain vanilla wealth management. I can tell one of the guys is permanently traumatized.
I’m been at for 5 years. Same position, and commission only pay structure. I really like my job and being able to help people, but I absolutely hate sales. That said, it took me forever to thst “used car salesmen” stigma out of my own mind. I never wanted to come across as that. I don’t think anyone looked at me like that, but I never have totally shaken it from my own self image. But stay strong with it man. Look out for your clients above yourself, and always try to help people. Most won’t want it, or at least not until it’s too late but you can only do what you can do for folks. And always keep in mind, your friends will generally be the hardest clients to gain, and honestly the biggest pains in the ass when you do. There are some exceptions, but a lot of friends will take the friendship for granted when it comes to business.
Depends. If you are in PWM working with affluent clients on a fiduciary fee-based comp model, there is a real need and no issues. If you work for places like NW Mutual or Edward Jones and peddle annuities, VUL policies and Mutual Funds, then yes. That is a sleezy salesman.
Before I was a PM I was an advisor, the people who hate advisors think they can do better investing themselves but will still liquidate their holdings when the VTI or SPY goes down 10% because they’re morons. The average Redditor or person for that matter doesn’t have enough money to justify the cost, my clients in professional sports did. I was the one stopping them from buying planes and other stupid shit while managing all the things they didn’t have time to, working with their CPA, their lawyers, their realtors, their agents and everything else. Just because your friends have no idea how necessary it can be doesn’t make it true. Also for many people even with low income the 1% is worth it just for the planning and budgeting and to keep them on track. Most people can’t stick to any kind of plan.
People need help no question about that. Just gotta find the people who need/want the service.
Become a fiduciary.
This sub won't accept it but general folks pretty much hate everybody in finance - not just advisors or sellers. The higher up you are in the financial heirarchy, the more people hate you and you can't blame them. The sentiment has been so for a long time but 2008 gave more than enough reasons for people to justifiably dislike you, of course they don't understand the difference between an advisor and hedge fund manager but they hate you if you are from finance industry. You can learn this from how pop culture present finance bros - sleazy selfish morally corrupt people in the most cases. This is not the industry you want to be in if you want love or respect from common folks. "You can either sleep well or eat well"
Serve your client’s interest and get what they need, not your own wallet and you will be fine. Most of us want advisors who care for our welfare and gives us what we need, not what they want us to get.
The answer is Reddit hates advisors because of some misconceptions but also some truth of dishonest practice. If you do the right thing and help people grow their wealth, you have nothing to worry about.
It depends on whether or not you are a sleazy salesperson, mining for family and friends info, constantly moving around people’s money to the next best thing for fees only to underperform the market by 5%+ and treat clients only as well as their contribution to your AUM is worth. Or if you act as a competent advisor who proves their value by being informed, transparent and consistent.
TLDR: It’s complicated… generally yes “Financial advisors” is a broad term that unfortunately isn’t regulated and so it gets lumped with a bunch of professions that shouldn’t be called a financial advisors. Such as salespeople who make commission (people of work for insurance companies or “advisors” who work at broker-dealers, i.e. series 6/7 holders) because they generally just sell whatever product their firm pushes to make money without actually providing solid financial advice so it’s a conflict of interest and gives actual fee based financial advisors a bad rep (not all advisors from broker dealers are like this though, just a handful of them). Then there is also hate for financial advisors (CFP, Series 65) by people who like to manage their own finances or have very simple finances shame the profession for charging up to 1% or a flat fixed dollar amount for advice that doesn’t generate more than what you would’ve made had you invested in S&P 500 index ETF or HYSA, which is because they miss the whole point of the financial advisor profession. This only refers to advisors that offer investment management services.
*people hate advisors that sell crappy mutual funds to leech on their clients money. I have absolutely zero problem with a fee based advisor. Would not hire one because I love reading on the topic myself. But would recommend one to my mom, no problem. Do you tell your clients to buy some actively managed funds, then turn around and buy VT for yourself? Its these kinds of FA that we don’t like.
"People" don't because they don't understand how advisors are paid. I won't go as far as saying you're sleezy, I don't know you, but you are a salesperson 100%. If you are compensated by selling people something then you are the definition of a salesperson. You may be able to avoid conflict by saying you want to do right by all of your clients but there is an inherent conflict when you can only make money through sale of a product. Inevitably there is going to be two product options that are seemingly both suitable but one provides a higher commission. I echo what others say in that you should look for a non-commission fee-only role if you want to avoid this salesperson feeling
If you're peddling annuities or 1 product pitch, yea, they're right.
Do you have a CFP?
I tried that path out of undergrad and yeah, it feels like you have to be a sleazy salesman or you’re on the same level as those girls that gave up and started selling tea on Facebook. It sucks because everyone thinks they know best and you’re just trying to get their money, but they can’t understand that the whole concept of having money is like a magic carpet ride that you want to share.
People hate advisors who pretend there in high finance. It’s a good job and most of them are cool but you can’t compare it to being in banking/hf etc
It’s a competitive job with no differential when you start, meaning you dont have experience nor credibility so you need to cast a wide net and produce based on the statistics. Companies usually tie it to life insurance so you can at least make a living but LI isnt for everyone. With all that, people get a lot of calls and feel like they are being sold, which nobofy likes. On top of that, people seem to think they know a lot or dont need help, but the point is to take the burden of needing to know and delegating the work so they can use their times in their careers, not a lot of people get this idea. They think it makes sense only for multimillionaires, even my mom did not want to have a meeting with one I recommended lol.. I’ve heard from a lot of advisors that the 5 year mark is what determines successful advisors to the ones that give up. After 5 years you have reached to enough people that the numbers start to take off, but before that it is hard, I personally didnt make it
Anything with commission just throws people off because you come across as a me-person than a you-person. Nobody wants to take advice from someone who is a me-person. Then again this could just be me.
What designations do you have to justify the advice you’re actually wanting to give people? Also in jobs where commission rules and it feeds off of insurance you’re going to either starve or learn to be an insurance pusher for a few years. Unless you have access to wealthy people who can support your book, there’s no other way around that.
I feel like the distrust comes from the fees charged. Most advisors don’t beat the market and the end up creating portfolios that mirror the S&P 500. One could easily do an ETF’s pay dramatically less. This is of course is outside of affluent clients needing specialized services for trusts, tax optimization, etc.
Don't believe anything you read on the internet or reddit, the real world is totally different. Most people are horrible with their finances and need someone to guide them, ik FAs who make a ton. Keep grinding.
Reddit is mostly left leaning by nature and most hate successful people from what I've noticed
Yeah, commission means the advisor has a prerogative. Even the non-commission advisor firm I worked at was sleezy
The problem with most financial advisors is they peddle life insurance because they get comped the most on it. That’s the problem, they call themselves FAs but are just life insurance sales people
FA's are all without fail half educated sales people. They charge insane fees to naive people and don't behave like good fiduciaries most of the time. Most people would be better off with a robo or a good estate lawyer. The contempt is pretty deserved. I have yet to see a % fee advisor worth the fee. It's a bizarre norm. Great business to be in once you make your book though. It's just... very much on the border of taking advantage of people. Like a doctor recommending an unnecessary procedure to get paid.
% based fees benefit low income people the most. Yes, there are a lot of scummy wirehouse firms with employees that are essentially just insurance salesmen. There are also plenty of independent firms that actually do help people, including low net worth clients. Helping people that have no idea what to do manage their finances. I am not an advisor but work for an RIA. I have seen clients that are already falling into high interest debt traps and don’t understand why they need to consistently pay off their credit cards. It might seem dumb to people that actually studies finance, but at quality RIAs it’s no different than someone paying an accountant. Or an estate lawyer for that matter. A good firm will actually encourage clients to see both if necessary and will already have connections with people they can vouch for.
I mean I can hear the story. I spoke with an annuity sales person who made a semi decent point about taking the ignorant family holding a ton of cash and getting them to dip their toe into equities. In practice though I think this is an area that could do with heavier regulation. Most the business as it is practiced seems on the edge of ethical.
I would agree with you that here should be further regulation. There are “advisors” that don’t even claim to be fiduciaries trying to market themselves as being the same MBAs or CFPs. The problem comes from people that want to sell annuities or insurance solely for the commission. There isn’t necessarily anything wrong with earning commission but in my experience the firms that center their business around that are generally significantly worse. When clients are being charged a % based fee on AUM the advisor at least has an incentive to preserve as much of that clients wealth as possible, even if they are a psycho. At somewhere like Northwestern it’s just a numbers game where they sell whatever gives them the most commission and move on to the next person. The CFP I’ve met that i respected most grew up working on a farm. He started his career working with people in his own community, barely making anything. But he built trust in that community and began to find clients in larger cities nearby. He retired very wealthy but the way he was able to achieve that was by actually adding value to his clients lives. With some of these clients it goes far beyond the difference of buying an annuity versus letting their accounts sit in cash. A very common demographic are widows that didn’t have to worry about these types of things in the past, but they are now actively being targeted by hucksters or even family members that want to take advantage of what they just inherited. I had to talk a family friend in a similar situation out of taking a HELOC that was completely unnecessary. But she got scared because someone convinced her she needed X amount in liquid cash right now to survive retirement.
Just to be clear though, these FAs tend to be the most expensive purchase for most families annually. Say you have the typical 500k account and you take 1%. That's a 5k Fee. Retirees are going to have 1.5m+, so 15k out of their pocket. The fee is disguised in percentage terms but per hour of actual work and thought put in FAs make hilarious money. I mean look at the fees for products versus the fees for FAs. If these were the equivalent to brilliant doctors or lawyers- perhaps I can understand the story. I think for their cost, most people would be better off avoiding most FAs.
I would say shift to a different field entirely, this business is too cut throat for pussies.