10 Things You Wish You Knew Before Starting in Financial Advisory/Wealth Management.

Note: I don't have the ten things. I am just scouting for more advice.

The PWM lords on WSO have provided some very educating responses on the website. But, I am trying to find answers to a few other broad stroke questions:

1. What were the mistakes you made on your way to building your own book that you wish you hadn't made, in retrospect?

2. What were things that turned out to be tougher than what you had expected while starting out?

3. What was the biggest assumption you had before starting your career in the business that sooner or later turned out to be inaccurate? 

  1. If you had a chance to do it all over again - would you do anything differently?

Sorry for the broad questions. I am trying to get a full picture of how tough it is to succeed in PWM in the North American market if you don't come from a very well-connected, wealthy, or target school background. I have been reading a ton of success stories but I know these are rigged with survivorship bias. So, I am trying to hear a few stories about the slips and mistakes people make on the way, that they did not fathom while getting started.

Comments (23)

Most Helpful
thebrofessor, what's your opinion? Comment below:

a lot of what I would say is here: https://www.wallstreetoasis.com/forums/then-and-now-thebrofessor

while I survived, I was never first quintile or anything, so the only shoulda coulda woulda I think about is "what if I hit it harder back then?" but then I realize if I'm focused on the past too much, I'm not thinking about what's next, and then I get back to hitting it hard today

what I do think would be helpful is if I shared some observations on what I saw others do that I believe led to their underperformance or possibly, failure

1. What were the mistakes you made on your way to building your own book that you wish you hadn't made, in retrospect?

everybody and their mother tries to avoid cold calling, don't make that mistake. sure, if you've got a big network that will refer to you QUICKLY, go with that, but cold calling is the cheapest, most scalable, simplest way to build a pipeline. people avoid because it's not easy (very mentally taxing) and because it's inefficient (out of hundreds of dials, less than a dozen people you intended on reaching will answer the phone). people think because they have some unique marketing idea or investment approach or a slick seminar, that they can get a high hit rate on prospects, I say bullshit, it's a volume game, more like baseball than golf, you just gotta get at bats, and the best way to get a large number of contacts is cold calling, so stop making excuses and pick up the phone

2. What were things that turned out to be tougher than what you had expected while starting out?

most people don't know how much volume you actually have to do in order to attain critical mass, whatever # of contacts you think you "need" to make daily, double it. people also suffer too much from chasing the hot dot in investments and sell people on their investment prowess, I say bullshit. what you're hired for is what you'll get fired for if you don't meet expectations, so keep that in mind

3. What was the biggest assumption you had before starting your career in the business that sooner or later turned out to be inaccurate? 

that rich people care about beating the market and are only focused on performance

that it's possible to forecast the future and that's what makes someone successful in investing (HAH!)

that you can work a 8 hour day and build a pipeline of potential new business (NOPE), think more like 12 hour days for a couple years, then scale back. still not IB hours, but not the cakewalk everyone dreams of when they hear of PWM

4. If you had a chance to do it all over again - would you do anything differently?

MOAR contacts, that's all, I'm happy so I can't say I did anything "wrong," just always wonder if it could've been more

Skeptic Ape, what's your opinion? Comment below:

Thanks, thebrofessor. Just about everything I wanted to hear. Cheers for the enlightenment! 

  • Analyst 2 in IB-M&A

Brof, given the slog that the first couple of years can be in PWM and all this sentiment around roboadvisors and passive investing out there, would you ever recommend someone with a few years of IB experience switch over to PWM if they're looking for more flexibility but still strong pay in their long term career? Or do you think there's a better way to get there than going from IB to PWM?

Skeptic Ape, what's your opinion? Comment below:


Have been reading left, right, and centre on the industry. Would love to know your take on these:

1. What do you think about fee-only or fee-for-service planners? Do you think this can be a defendable offering against...Let's say Charles Schwab which offers the entire thing for 0.25% AUM + unlimited access to financial planners? 

2. I just got to know that the idea of working with UHNW/HNW clients has zero novelty. Every other wealth platform is virtually focusing on this market. So, as an independent financial planner/advisor starting out, wouldn't it be worthwhile to focus on small and mid-market accounts? (Sorry for the terminology; I guess my homework is still half-baked. But, I am referring to the under $500k market).

3. What do you think about lead generation services? Listened to an episode of a podcast hosted by one Mr Michael Kitces. An independent guy, although quite experienced in the retirement advisory and planning vertical, is spending nearly 15% of his topline every year on marketing with outsourced lead generation and first calling services using platforms like SmartAsset, WiserAdvisor, and IndyFin. Do you think a guy just starting out as an independent with virtually little or no experience can use these services to get some clients in the first year? (I guess this validates your idea that everyone's mother wants to avoid cold-calling!)

Have been seeing some boutique planners/advisors working on a fee-only basis in Canada. That is the target market I am looking at; and honestly, the idea of having 80-100 clients who pay $1500 in recurring revenue with an annual review of the plan - does not sound outlandish. Maybe, this is the newbie enthusiasm speaking, but this appeal of boutique, high-touch, niche-focused, and fee-based planning seems...Doable. Please feel free to burst my bubble. 

If, at any point, while reading this, your blood was boiling - feel free to dismiss the entire thing here. Looking forward to your response!

  • 3
thebrofessor, what's your opinion? Comment below:

1. I am not familiar with this business model in great detail, but I do know it exists. I'm going to punt on this because I'm never in competition with those folks so I only have a cursory knowledge of their strong points (mostly costs) and my perceptions of their weaknesses

2. fuck novelty, get money. this is an economical question as well. let's say you get your 100 clients with $1,500 annual fee, that's $150k gross revenue, then after you pay your expenses you're looking at $60-90k tops in income. if that's where you're comfortable being, so be it, but I think you're thinking far too small. unless you go family office or UHNW ($20mm+), you should be thinking in terms of 2-300 clients each paying you over $10k/yr on average. the other thing is this - if someone's retiring with smaller balances, they could be very nice people and pleasant to deal with, but the likelihood that they refer, add additional assets, etc., is less. plus, may of the digital solutions being offered today are poaching that exact clientele - the $2-500k accounts that your neighborhood edward jones advisor isn't servicing, I'd happily go to betterment or vanguard PAS if that was my scenario, so I think both the economics, growth potential, and competition are all against you. note, this is not an indictment on those with less $$$, just the realities of running a business, who you choose to serve will dictate where you plateau, and the plateau if you're going HNW is way higher than if you're going sub-$500k

3. it's fine if you use those services, but you gotta make contacts, plain and simple. you can buy all the leads you want, but the volume still needs to be on the order of tens of thousands of contacts annually for several years

I think I just bursted your bubble above. here's how I do these mental masturbatory sessions as I'm planning the future of my practice. ask myself who my target client is, what AUM they have, what fee can I comfortably charge, and then multiply that by 200. I say 200 because 300 is dunbar's number (the maximum number of reasonably tight relationships you can have on a regular basis) and when you account for family, friends, colleagues, gotta have some room there. plus if you have 200 families, you can meet with one per business day and still take off a lot of vacation time. so if you have $1500 x 200, your top line revenue is only $300k. I have a friend who runs a RIA, his net margins are basically what a wirehouse payout is (45-55%), so you figure your income tops out at $165k. that's thinking far too small. you can survive and do better than most of your neighbors on that income, but don't intentionally handicap your ceiling just because it seems like it has more "novelty." I have a high touch, niche clientele, planning focused practice and my ceiling is probably in the $1-2mm/yr income range. you can have the aspects of the business you want, but the clientele will determine your ceiling, for better or worse

rickle, what's your opinion? Comment below:

I know several who work the "fee only" model. Some do it as an attempt to avoid regulatory scrutiny (don't sell any products) while others use it as a marketing tool to harp on "greedy FAs who receive fat commissions blah blah blah blah x 100)."

Although they may have successful and interesting practices, I truly feel they are misunderstanding the value of their client relationships. A client relationship should have nothing to do with how much or how you get paid. It should have everything to do with the value you create for the client. By and large, they don't care what or how you get paid. I've been doing this for 30 years and NEVER have I lost a client due to my compensation. Some of my clients are advisory fee only. Some are planning fee only. Some are commissions only. Most are a blend. Not sure how you can be a true advisor and not be on the commission side BECAUSE eliminating commission based products is eliminating tons of planning. There's a difference between managing money, managing assets, and financial planning. Managing doesn't just mean growing, it means protecting (against all sorts of threats - think building a mote around someone's financial future). Often the mote solutions are insurance related products and they all pay commissions in one form or another. Life insurance, DI, LTC, Annuities, P/C, etc. They all play a role in asset protection and are often the most cost effective ways of managing risk.

My revenue is split about 50/50 between advisory fees (managed accounts / AUM and insurance. I can't think of one long term client who doesn't have an array of accounts with me designed to both grow and protect their wealth. And if they're just starting out, we ALWAYS start with insurance because you can't grow what you don't have, so things like life insurance and disability are important. When they're older and are pre-retirees, protecting their wealth is critical for them to enjoy a comfortable retirement so shifting some assets to income generating instruments (including annuities) makes a lot of sense. When they're retired and clearly won't outlive their resources, legacy planning almost always includes insurance products and is by far the most cost effective, tax friendly way of guaranteeing results. Emphasis on guarantees!

So to bring it back to your question, there are folks who work in a non-commission / fee only world. They are missing providing solutions to half of their client's lifetime issues. There's another group that are really disingenuous. They give up all their licenses (so no compliance) and simply charge a large annual quarterback fee to organize and keep organized the clients financial life. I know guys who charge (and clients pay) 25k per yr. Think of it like concierge medicine. They position themselves as planners only and they don't sell any products. However, everyone I know who does this has a side company or relationships with other shops that pay them a "marketing fee" to compensate them for all the actual business written. Happens a lot. The client likely doesn't care, although might be miffed if they knew the truth. They're not stupid. They know someone has to be getting paid. I say just be honest. Trust me, they won't care.

rickle, what's your opinion? Comment below:

Did a lot of cold calling when I started. Mainly in person (just walking in to small businesses and asking for the owner). Although this was successful to a point, I highly recommend networking with other professionals, showing them the value you can create a client - perhaps their client- and getting brought in as a referral. Much greater success. Pure numbers, you'll still have to dial for dollars. Be organized. Have a market in mind. Develop an area of expertise and ability to communicate it succinctly. 

If you're concerned about A/B/C I can help you with 1/2/3 which will save you time/ money or both. Would love to have a meaningful conversation when you feel these items are important....

theyouthahead, what's your opinion? Comment below:

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