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Kitces: A warning for aspiring advisors

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Many jobs that are offered to aspiring advisors require them to generate clients from zero. And most entry-level jobs involve selling something very different than a person’s time or expertise: namely, a company’s products and solutions.

Yet this is typically what’s on the table for advisors just starting their careers. Here we look at why this reality persists, and how promising talent can get on their desired paths — rather than taking one that they may not have the temperament or desire for.

Here is a typical email I receive at my blog:

“Dear Michael, I’m writing to get a second opinion. I’m new to the industry and have been offered a chance by some major firm to become an advisor, and I’m really excited, but I’m also nervous because they stipulate I have to get all my own clients and I’m not certain that I can get enough quickly. Do you think this is a reputable firm and a good job opportunity? What should I do?”

Invariably, I reply that this is likely not a good job fit, and certainly not a good path toward becoming an advisor. Rather, it’s likely a job to become a salesperson of financial products. And according to industry data from Cerulli, only about 20% to 30% of financial salespeople who join a firm even survive the first three years, while the remainder fail and leave. Those aren’t numbers to be proud of.

The key distinction here is the difference between advisors and salespeople. I’m not talking about what the companies call themselves or what they put on their business cards; virtually no one calls themselves a financial salesperson these days, as “advisor” sounds a lot more professional.

The first hint that an advisor job is actually a product sales job comes when the firm insists you generate your own clients. Let’s be honest — no one is going to pay you for advice when you have no formal education as an advisor, and no CFP certification or a single day of actual experience, regardless of what’s on your business card.

Maybe a prospective client needs more life insurance. That’s the brand of help you’d be offering. Maybe they have an old 401(k) that needs to be rolled over and reinvested. That’s something you’d help with. Maybe they are trying to figure out how to generate some additional income in retirement. You get the idea.

You’re in a position to help precisely because you’re representing a company that sells products designed to address these issues — nothing more or less than that.

If you ever wanted to charge a separate fee for giving advice, you can expect to hear, “Well, around here we get compensated for our advice with the products we implement.” Or they may say, “Well, if you reach a certain level of production or you’re here for three or five years, you’re allowed to become dual-registered and charge a separate planning fee because it actually takes time to become an advisor.”

The point here isn’t to debate between fees versus commissions, which is really a whole other discussion. There are advisors who really are in the business of dispensing advice and who get compensated through the solutions they implement at the end of their advice process, but those advisors have training, education and years of experience working in their favor. With no training or education to do anything but sell products, then odds are against you doing anything else.

Those high attrition rates published by Cerulli boil down to one hard truth: Sales is a brutally difficult thing to do well, even when you have relevant experience.

The industry has long since made peace with this reality. From a large sales firm’s perspective, one of three things happens with a new recruit. One, the person is really good at sales, in which case they have a fine career as a salesperson. Two, the person is really bad at sales, in which case they’ll be gone in three to six months and it won’t have cost the firm anything. Or three, the person may try and struggle to get some clients, then decide the work isn’t for them and leave — and the company keeps their clients.

From the company’s perspective, any of those three scenarios end in a win.

So what’s the alternative? Simply put, find a non-sales job in the industry. Ideally this would be as a paraplanner or associate advisor position at an existing advisory firm, where your job is to support other advisors with their existing clients.

Indeed, advice-centric firms generally have clients that need ongoing advice and service, and therefore need advisors ongoing to support and facilitate it all. One of the fundamental reasons we launched our New Planner Recruiting business years ago was to help new advisors coming into the industry find those real planning opportunities.

The caveat is that firms hiring paraplanners and associate planners these days often want their candidates to have CFP certification, or at least have passed the CFP exam. And if you’re just coming to the industry, you may not meet those criteria. The alternative in that case is simply to find any other job that gets your foot in the door.

I see a lot of prospective advisors focusing too much on finding that one true fit. You don’t have to find the perfect job right out of the gate, but you do have to find a job. Right now is about working toward what gets you started.

What those jobs look like varies from firm to firm. It could be working in an operations or administrative capacity. Maybe it’s working as a client service administrator. Early in my career I spent almost two years working in support roles for other established advisors, helping complete annuity and insurance applications, open investment accounts and track the status of ACAT transfers — all while ensuring client portfolios are traded and invested, and that client work that needs to get done in the firm got done.

I eventually moved on, but it gave me incredibly valuable experience. Doing those initial operations or administrative jobs allowed me to pursue my CFP certification, which ultimately let me take on more and more planning tasks in the following years and to push my career forward.

Virtually any job in the industry can help someone find their way. Understanding the dynamics of the industry and what opportunities exist can only really be learned from the inside. Working with a firm where you can pay your dues and get some real, relevant experience is — as it is in so many industries — the tried-and-true way to move toward becoming a full-fledged advisor.

Another benefit of going this route is that the aforementioned jobs are generally salaried positions — i.e., your pay is not contingent on making a sales quota.

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An additional piece of good news is that experienced advisors often make $100,000 or $200,000 a year, with the most successful making far more than that. But you have to start somewhere, which may mean taking one step back to take two steps forward, or taking one small entry-level step to try to climb bigger steps later.

A lot of major firms that sell financial products have increasingly been soliciting career changers, and for a simple reason. These individuals often come with their own natural market, i.e., existing acquaintances, friends and family with whom they could do business right out of the gate, often from their former career or industry. But again, they’re not getting hired for their potential, but rather for their good prospects who may buy into the company’s products.

Another reason to be wary of sales positions, even if you are switching careers: If you take the job but decide down the line that they don’t want to stay at that company, you often can’t take your clients with you without a fight. The firm may not be in the Broker Protocol. They may have strict rules against leaving. They may require you to repay prior commission draws that you received if you haven’t sold enough products before you leave. It’s one thing for an experienced advisor to jump in eyes wide open, but it’s another when you’re just starting your career and discover you’re pretty good at sales — only to later realize you can’t make a change down the road without starting from scratch again.

The bottom line is simply to make sure you understand what kind of job you’re looking at. And to get started in the advisor career track, stick to the following job pathways:

  1. Associate or paraplanner
  2. Operations, client services, e.g., firm administration
  3. Any other salary job in the services industry, and as a final resort,
  4. Financial salesperson

I started my career as a financial salesperson, and was terrible at it. I was still able to move forward with that experience though, and seek other opportunities.

Whatever you do, don’t even think about going out on your own and starting a firm from scratch with no experience. Any of the options I listed above, including salesperson, is better than going solo from the start. In the long run there are great opportunities for solo independents, but it’s no way to start a career.

Fortunately, there are more and more of the aforementioned jobs available. FPA and NAPFA, the CFP Board’s jobs board, our New Planner Recruiting job opportunities and a growing number of large firms are realizing this challenge, and are even hiring new advisors into teams in support roles rather than trying to send them out to sell from the start.

But if all of this still doesn’t convince you or a loved one who’s interested in an advisory career to forego the sales track, at minimum you need to ask good interview questions. Understand the nature of the job. Know yourself and what you’re really good at, and figure out if one of these other entry-level pathways may be a better fit for you in the long run.

So what do you think? How would you advise new planners to pursue a career in a non-sales role? What are the best first jobs for financial advisors? Please share your thoughts in the comments below.

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