Newbie Financial Advisor: How To Be Successful.
After a successful job in college as a donations solicitor, I thought I could make a long-term career out of convincing people to part with their money. After speaking to a Financial advisor at Merrill Lynch, I was convinced this was the perfect career for me. Three interviews and three rejections later, following my graduation, I wasn’t so sure anymore.
The general feedback, usually subtly relayed, was that I didn’t know any rich people. Being a recent graduate with no job experience, a child of immigrants and raised in a middle income household, I had no network of ultra high net worth folks. If I did, I wouldn’t have taken out student loans!
So my question is, how does a person like me compensate for this “deficit”? And is the effort even worth it, or are you really doomed without an initial pool?
You are not doomed without a deep network of wealthy people. However, you are going to have a very difficult time "making it" through a wirehouse training program in your early twenties. The wirehouse business model wants you to work with households $250K+ (and preferably much higher). Getting strangers to give you that kind of money is going to be difficult...very difficult.
In the "old" days, you could start at a wire and build your book cold calling 12 hours a day pitching bonds. Make a point or two on an initial trade to get yourself a seat at the clients table, and then work your way into the rest of the household AUM from there. The "do not call" list, upcoming DOL regulations, and move to fee-based business is making this achievable.
If you are hell bent on starting at a wirehouse, your best bet is to show them you will not quit. Remember, this is sales, not really finance. Don't apply online. Don't email your resume. Call the branch and ask for a meeting with the branch manager. I don't know how you handled your interviews, but they do NOT care about your GPA, the way you'll manage money, or anything else related to academics or finance. You need to focus on how you love sales, and how you will bring in business. Come to them with a business plan. Tell them how you plan to graduate training. Here are a few things they will love to hear:
You're going to cold call. A lot. 300 dials a day if this is your main prospecting strategy. You're going to get in early so you can call business owners, lawyers, and accountants from 7 AM - 9 AM before their gatekeepers (secretaries) arrive to screen you out. Then you're going to buy corporate directories and call those people at work from 9 - 5 (no DNC list because you're calling them at work).
You're going to "cold walk." This is basically cold calling in person. Door to door sales (really, introducing yourself, getting phone numbers, making a good impression, and following up in a week asking for a real meeting). This will work well in rural areas, especially in the Midwest and southeast. It may get you killed in the northeast, especially in Boston or NYC (only partly kidding).
You're also going to do seminars. Three per quarter. Held in the evenings at a decent restaurant. Tell them you're going to ask wholesalers to help supplement your marketing budget. You're going to use a mail marketing firm (like SeminarsDirect) to fill the seats. You're going to talk about Social Security Planning, Creating a Private Pension / Not Outliving your Money, Earning Tax-Free Interest, Earning more than 1% on your savings, etc. Topics that will attract people with money. Be clear that seminars can be done in the evening and will be supplemental to your daily grind of cold calling / cold walking.
You will network. BNI, chamber of commerce. But be CLEAR to them that you know this is long term marketing of your brand to keep you top of mind with other professionals and you do NOT expect business to come from these activities until years down the road.
The whole interview is about sales. Remember that. Not finance. They don't care. They don't care now. They won't care later. At no point in your career in PWM will you EVER be evaluated or rewarded based on your finance acumen or your investment returns. Re-read that. Take it to heart. And relentless pursue your spot in a wirehouse training program by being that guy (or girl).
In a subsequent post, I'm going to post some alternatives to you starting at a wirehouse...
For a younger guy right out of college, I think there are other channels you should consider. If for no other reason, as a backup plan since a) you are having trouble getting in at a wirehouse and b) you have a 90% chance of getting fired anyway for failing to meet production hurdles (I'm not kidding or judging you, it's just the way the wires are).
Alternative 1: Go to Edward Jones. If you can't get in at a wirehouse, they will probably take you. If you get fired for production at a wirehouse, they will definitely take you. Go to a local Edward Jones office and tell the advisor there you want to work at EDJ as an FA. Try to pick the most successful EDJ guy/girl in your area because they will put your name in and they get credit for referring you (so it's in their best interest that you get hired). The bigger producer they are, the more say they will have if you get hired. It helps if they are a "Regional Leader" (EDJ speak), GP (doubtful), or at least an LP (likely if they are a $500K+ producer).
You will also want to ask EDJ about their "Goodknight Program." This is where veteran FAs give you some of their smaller accounts to work with in the beginning. It gives you people to cultivate (you will still have to heavily focus on cold prospecting), and gets smaller accounts off a veteran FAs books, allowing them to be more productive (plus, they get paid a portion of the revenue you generate from those accounts).
You could get extremely lucky and they may have an open office you could take over from an FA that left for another firm or failed out (or got fired). Don't count on it, but it's like winning the lottery.
I mention Edward Jones first because they will still pay you a salary and benefits while you get licensed and train, and their hurdles are MUCH easier than a wirehouse. Plus, they don't have account minimums. You can make money (and your hurdles) doing $50,000 rollovers for 35 year olds. At EDJ, everyone you meet (just about) is a qualified prospect. At a wirehouse, that isn't the case. And being in your early 20's, I'm guessing your network is much more heavily weighted towards people that have small 401Ks from old jobs, need 529 plans for their kids, could benefit from putting a few bucks a month into a Roth IRA, and buying life insurance because they still have a mortgage and college debt.
Alternative 2: Get a job with a local independent advisory firm (one that clears through LPL, Raymond James, Commonwealth, or Cambridge...or that is straight RIA). There likely won't be a formal training program, so you aren't going to have big hurdles to overcome. If you get lucky, they may even split some of their smaller accounts with you to help you get started (and you help them turn some of their "C" clients into "A" clients). On the downside, pay is probably going to suck (but then again, you get into PWM for the book you build 5 - 10 years out, not for the salary and vacation time they give you when you start).
I mention this route because it's really all over the board. You're just talking to people and you never know what kind of setup you may find. Your first step is getting licensed and learning what the heck you're doing. If you build your book correctly, you own the relationships. If you become unhappy down the road, you can always change firms or start your own. Step #1 is getting your 7, 66, life/health licenses, and learn what an ACAT is. Starting at a local firm is one way to do that.
Alternative 3: Get a job with a life insurance broker/dealer (Mass Mutual, Guardian, NY Life, Northwestern Mutual). They will almost certainly hire you and sponsor you for licenses. You'll probably be commission only from the start, so if you need income NOW, this might now work for you. A lot of young guys do really well in this channel because it's MUCH easier to sell someone life insurance when you're 22 years old than it is to convince them to give you their life's savings. You have to avoid digesting the insurance industry kool aid (i.e. life insurance solves all financial problems), but you can get your start, build some relationships, and learn how to sell/prospect.
One benefit of a life insurance b/d is that if you decide to move down the road, you can always move to Raymond James to do your securities business (or other b/ds / RIA custodians), and keep your contract with Mass Mutual or NY Life for life, long term care, and disability insurance. Northwestern Mutual is the exception to this rule...they don't broker their insurance. You can only sell it as a career agent at Northwestern.
Alternative 4: Get sponsored by a bottom feeder firm (Primerica, Waddell & Reed, etc.) and then try and move to one of the above firms (or a bank program) on the premise that you realized immediately that these firms are garbage and you don't want to build a career there. You'll be more marketable, even to a wire, because they don't have to pay you for 3 months while you get licensed, you can hit production almost immediately.
Alternative 5: Get a job in the call center of Schwab, Fidelity, TDA, or Etrade. You will get licensed. Get a salary. Learn the ropes. And learn how to sell. You'll never have your own clients, and it's just a job. But it would get you started (and you can make some decent money if you decide to just stay there and climb the ranks). Once again, getting licensed and having some experience will make you much more hirable at other firms.
In my opinion, I'd at least TRY to use my approach and get in at a wirehouse first, but realize you will likely get fired in the next 24 months. But you will get paid the most whle you train and get licensed. Why not make $50K to study and learn how to do a rollover?
Plus, and I'm dead serious about this, any other firm out there will take you without question after you get fired from a wirehouse for missing production hurdles. Edward Jones. Independent. Insurance. Probably even another wirehouse (ironically). The whole industry knows how hard it is to get started and how unreasonable the hurdles are at a wire. There is no shame in not making it out of training your first time.