Q&A: A Bored Financial Advisor

Hello everyone. I've lurked here on and off over the years and realize there isn't much activity regarding wealth management, but thought I'd register anyway. I'm in my 30s, at an independent broker/dealer, been doing this over a decade (after getting my B.S. in finance and an MBA at a state school) and sort of on cruise control at this point. I've always been disappointed in the lack of actual "finance" involved in the wealth management industry, but I think having the knowledge and being a "people person" has been really helpful. Mostly just looking around for entertainment, but happy to share anything I can about the WM industry if anyone is curious.

Comments (107)

Oct 5, 2016 - 11:24pm

What are your hours like?

Who are your typical clients?

Are all shops generally the same?

Since I'm independent, my hours are whatever I want them to be. While I was building my book, they were long-ish, but more "late" than "early." I built my book on retirement plans, so I'd prospect at employers (getting plans, and then building relationships with employees) during the day (9 - 3/4/5), and then meet with prospective clients in the evenings. Done anywhere from 7 - 11 at night. These days, I probably average 40 hours a week, but some weeks it's 30 and others it's 50. You could run a decent book with a good process working 30 hours a week with good support staff.

One unique thing about WM is once you've "made it" you can run your practice any way you like and keep whatever hours suit your model and your own growth goals. If you want to make 7 figures, you can keep grinding. If you want to make $300K and golf a lot, you can do that too (heck, you can work from home and make $150K if that's your thing).

As for clients, my book is built on "mass affluent" and small employer retirement plans (less than $5MM in plan assets). Many of my clients are state or federal employees that have nice pensions plus $250 - $750K in DC assets.

All of the shops are definitely not the same (but they are full of $hit in their own way). I'll put some details of the major channels in a subsequent post, so if it should be moved or made it's own topic, it's easier...

Oct 6, 2016 - 9:52pm

Curious on how you are handling the new Fiduciary rule since so much of your business is retirement focused. Are you facing any challenges that require significant changes (i.e. taking the EJ approach and no longer putting clients in MFs)?

Also would love to hear how you cut your teeth growing your book as a young guy. I work at a fee only RIA (lean shop, 1 PM, 1 client facing VP, and me--got about $300M under management)--currently focused almost exclusively on financial analysis (which is what I wanted), but in order to get some equity need to grow the book. I respect the sales-type person: it's not always easy convincing someone 20/40/50 years your senior to hand over their nest egg to some freshly minted MBA with limited experience... so how did you do it early on? Cold calls / direct mailings? Hosting info sessions?

Best Response
Oct 5, 2016 - 11:50pm

So the major channels in the WM industry...

Wirehouse (Morgan Stanley, Merrill, Wells, UBS)

Will pay a salary to trainees (though the training is a joke). Have broad investment platforms, but usually limited on insurance and annuities. Fee-based business is the focus. Very high hurdles when you start out and most people don't "graduate" training programs (as in, less than 20% easily). Payout ranges from 35 - 45% depending on your production, plus 401K match, deferred comp, etc. If you aren't doing at least $400K you'll be struggling (and pushed to grow). Also, you'll need to focus on $250K accounts and up as most wires aren't accepting accounts below that (and if they do, they are reducing your payout, sometimes to zero, for taking small accounts).

Edward Jones

Putting them next because they aren't a wirehouse, but they are a major firm that doesn't fit anywhere else. They also pay a training salary, but it's less than the wires (and the goals are easier). One man offices, and you may start working from home. Much more limited investment choices and flexibility than the wires. Generally seen as a bit of a "cult" within the industry. They want you to focus on "door knocking" to build a book. Payout is typically 40%, plus 401K match and various profitability bonuses. You can become either a GP or LP if you become a decent producer.

Major Bank (Wells, JPM, BofA)

Usually lower payouts (20 - 35%) and more "cookie cutter" investment options than other shops. You aren't going to "own" the book because most of your clients do business with you because they have a relationship with the bank. They don't typically have training programs and like to hire licensed FAs that maybe failed out at a wirehouse. Good fit for people that might be decent at selling to "warm leads" but not so good at cold prospecting. This is the most like a "job" of any of the channels. You're getting leads from the bankers, pitching them, and moving on. Rarely will you be acting as an advisor except to close business.

Community Bank / Credit Union

Payouts are all over the board with the major difference between the big bank programs being more autonomy and clearing through an outside custodian (CUNA, LPL, and Raymond James are popular b/ds for smaller banks).

Insurance (Mass Mutual, NY Life, Guardian, Northwestern Mutual)

Never pay a salary at startup, but sometimes you can get a "draw" for a few months. They all claim to be "independent" and want you to focus on "comprehensive wealth management." What they really mean is "do a financial plan and show the client why they need more life insurance...specifically our brand of permanent life insurance." They will tell you that you're free to do investment business, which is true...as long as you're meeting your insurance sales goals (and even then, the investment options are much more limited than at a wirehouse or indy b/d). Payouts are usually fairly high (ranging from 50 - 80%, sometimes higher for selling proprietary insurance annuities). Sometimes you'll be both a W-2 employee and a 1099 independent contractor, depending on the type of business you're doing. Many times you'll have a choice to "rent" space from the agency you're affiliated with, or open your own office as if you're independent. Main point...don't join an insurance broker/dealer unless you want to focus on insurance (likewise, don't work at a wirehouse if you do want to focus on insurance).

Independent B/D (LPL, Raymond James, Commonwealth, Cambridge)

No salary or training. They typically expect you to be coming over with an established book from an employee model firm. Many times you're doing business under your own brand, not theirs. Investment and insurance options are generally wide open and you're free to do whatever you want (as long as you're legal and compliant). Payouts are usually 80-95%, but you're paying all of your own expenses, and they find ways to nickel and dime you for b.s. that should be free (but the whole industry does that).

RIA (custody with Fidelity, Schwab, TDA, etc.)

No salary or training. This is the purest form of owning your own business in the WM industry. You can custody with multiple firms, and invest however you want. Payout is 100% (custodians make their money the same way they do on retail clients, $9.95 a trade, or 12b-1 fees or revenue sharing on mutual funds and ETFs on their NTF platform). Everything you use you'll buy on your own a la carte (performance reporting, research, E&O insurance, etc.). You can only do fee business as an RIA, so if you want to do any commission work you'll have to also affiliate with an independent b/d (above). Many times RIA FAs will form their own insurance agency as well, and run investment advice, brokerage, and insurance as separate entities.

RIA is definitely the way of the future. Every other business model on this list is going to undergo massive changes over the next 10 years. They are behind in many areas (technology, pricing, value proposition) and (in my opinion) are struggling to change.

One more area I forgot...

Discounter (TDA, Etrade, Scottrade, Schwab, Fidelity)

These are call center jobs. If you are decent, you can earn $150 - $200K. You'll always be running on the treadmill and you'll absolutely never "own" any of your book or your relationships. You're an order taker with sales goals.

Hope that's useful to someone.

Oct 6, 2016 - 7:48pm

thanks for posting! Can you provide a bit of clarity on this paragraph you mentioned above?

"RIA is definitely the way of the future. Every other business model on this list is going to undergo massive changes over the next 10 years. They are behind in many areas (technology, pricing, value proposition) and (in my opinion) are struggling to change."

you mention that RIA is a way of the future... but they are behind in areas such as tech, pricing, value prop and are struggling to change. Do you mean RIA is behind in those areas or every other business model is behind in those areas?

Can you expand on a bit?

Thanks again!

Oct 6, 2016 - 11:39pm

thanks for posting! Can you provide a bit of clarity on this paragraph you mentioned above?

"RIA is definitely the way of the future. Every other business model on this list is going to undergo massive changes over the next 10 years. They are behind in many areas (technology, pricing, value proposition) and (in my opinion) are struggling to change."

you mention that RIA is a way of the future... but they are behind in areas such as tech, pricing, value prop and are struggling to change. Do you mean RIA is behind in those areas or every other business model is behind in those areas?

Can you expand on a bit?

Thanks again!

Thanks for the kind words. Yes, poor wording on my part. I meant the other channels (wirehouse, indy b/d, bank, etc.) are behind in areas like tech, pricing, etc. RIA is the place to be.

The retail wealth management industry is built on smoke and mirrors. So many firms are hell bent on selling actively managed mutual funds, permanent life insurance as an investment, etc.

They nickel and dime the clients. $5 to mail a confirm? $75 or $125 for an IRA fee? C'mon man.

They nickel and dime the FAs. Indy broker/dealers are notorious for advertising payouts of 90% plus, only to add "program fees" to their platform which basically means they scalp 15 - 40 bps off your fee before paying 90% on the remainder. So with a 20 bps program fee, charging 1%, you get 90% of 80 bps. I didn't go to Harvard, but that doesn't look like 90% payouts to me.

Household minimums. They think shunning a new doctor because he doesn't have $250K to invest now is a good idea. Let them get established at TDA or Schwab, and they will come back to Morgan Stanley when they have more money...yeah right. By the time someone accumulates $250K on their own at Etrade, they sure as hell aren't going to come crawling back to a wirehouse to pay 1.25% for crappy asset allocation.

The list goes on. They all built their businesses on fancy offices, expensive suits, and underperforming products. They still think if you just "focus on deepening relationships" that the clients won't care about fees or performance. I guarantee, they clients care about both fees and performance. And with the availability of information online these days, traditional FA antics to earn business aren't going to work.

Take a look at where asset flows are going (via Morningstar's asset flows report). Vanguard and BlackRock. No one else is bringing in new money and haven't been for years. Flows are going through RIAs and DIYers.

Sorry, rambling again.

Dec 15, 2017 - 6:00pm

Exactly what Brofessor said. They are an insurance company. If you want to sell insurance for a living (I mean, annuities), go there. AXA has two channels: "Indepdent" (which is b.s.) and captive. In the captive market, you will sell proprietary AXA annuities to teachers. You can make bank if you want to be sleazier than a car salesman, but it otherwise is terrible. On the independent side, I'm not super familiar with them, except to say that EVERY insurer claims they have an "independent" side, which still means you have an insurance/annuity quota. Which is stupid, because you can still sell AXA, Mass Mutual, Guardian, NY Life, etc. insurance and annuities, for the same commission, if you go to LPL, Raymond James, etc.

The only one you can't sell is Northwestern Mutual because they don't broker their products. But insurance is insurance. They don't have some "secret sauce" that isn't available elsewhere.

I'd just avoid AXA unless they are "giving" you a book of business to start. But remember, any company that can give you a book of business, can do so because they own it. You will never own anything at AXA, VALIC, etc.

Jul 9, 2019 - 10:46am

Does the offered training program at my firm carry any "weight" if I were to explore other career paths? More specifically, is the training analytical in nature, or more procedural?

Does the firm you work for have any influence on expanding your book? If I was a naive household, I would go to a institutional powerhouse over a community bank/credit union.

TIA for any insight.

Jul 19, 2019 - 1:34am

I suppose that depends partially on what firm you're talking about. I think the warehouses probably have decent training programs these days because they are trying to push teams. I think most of them will get you on a team, have you work on your CFP, and maybe do some other semi-meaningful stuff. But in the end, the "training programs" are still basically just a test phase to see if you can prospect and sell.

Since I've only ever been in the WM industry, I can't tell you how that experience might be viewed at an investment bank, commercial lender, etc. I'm guessing it's worth SOMETHING (but worth more to any other area of finance that is more sales and analytical).

Most firms are going to have some say over you expanding your book. At the independent b/ds, they mostly have a production minimum (could be $25K a year, could be $250K a year). Hit it, and you keep your contract. The insurance b/ds typically have some carrot (or stick) in your contract about writing insurance (specifically THEIR insurance), regardless of your other production. I think the wires used to be all about production (10 years ago), but it seems they are creeping in with carrots (or sticks) to get FAs to...team up, do financial plans, cross sell banking products (hello, BofA), bring in new households (not just coast), and bring in higher net worth households. The RIA custodians mostly just care about AUM (and they couldn't care less what you charge because they don't take a cut of that).

There are good FAs and bad FAs in every channel. But you'd do well to avoid most FAs at banks (of any size) or insurance companies. Too much "churn and burn" / quota focus at those shops.

Oct 6, 2016 - 4:17am

So, how would someone get started in RIA? I have friends who went into WM for Merill Lynch, JP Morgan Stanley, Mass Mutual and Major Banks.

I've always liked the idea of being independent, and generally speaking, the people I tend to meet, often are concerned with their retirement accounts because of the market, and also because they were unsure if they were getting a "fair" insight about their accounts either.

I think the idea of working client-based is great, and building a book of business helping others is always a huge plus.

Oct 6, 2016 - 7:11am

Getting started in the RIA channel is fairly easy, the only question is whether it's advisable. If you don't have any experience in the industry, it might be best to find a local RIA in your area and do an internship there with the up front idea that you want to become a licensed IAR and build a book there after graduation (or even during college). You'll trade sweat equity for getting your feet wet. Find the right shop, and you may even be able to inherit some smaller households from one of the senior advisors at the firm. It's easy to find RIAs in your area, just Google "SEC Adviser Search" and plug in your zip code. Then make calls and introduce yourself (remember, these people all built their businesses being salespeople, so they will appreciate a direct approach).

If you have a bankroll (for startup costs and to live on while you're building your book) and want to go it alone, that's also pretty simple. You can find a compliance consultant to get you started up (legal entity, file your ADV, advisory contracts, etc.). Using a firm like RIA In a Box will probably cost you $10,000 bucks to be up and running. Aside from that, you just need a custodian, some E&O insurance, and a Series 65 license (which you don't need a sponsor for, just buy the book from Kaplan and go take the test).

You actually don't need a custodian, some RIAs (especially those focused on Millenials) don't even custody assets. They do hourly or retainer fee financial planning. But more common is an assets under management fee where you'll hold your clients money at Fidelity or Schwab, etc. Look at TradePMR too, they cater to startup and smaller RIAs and have a lot of whitepapers and turnkey tools (they actually overlay their services on First Clearing, which is a Wells Fargo company, so you get many of the same tools that a WFA wirehouse advisor would have).

It's really not that difficult or expensive to get started in the RIA channel, but there are so many things you just don't now starting out. Not in terms of financial knowledge, but the "in the trenches" stuff. A few examples...

You're going to run into prospects that have annuity contracts with different riders (GLWB, GMAB, GMIB, etc.) and different surrender schedules. Some of which require their own paperwork to transfer or rollover.

Some rollovers can be done over the phone, other times you'll need to request paperwork and get TPA approval. Sometimes those forms have to be notarized, other times you'll need a signature guarantee. You'll almost always need a letter of acceptance.

If you're going to do financial planning (you should, because straight investment management is becoming commoditized), you'll need software. You'll also need to figure out what you're going to do about insurance, especially life, long term care, and disability. You'll probably be a proponent of term insurance for most people. But what will you do when you find someone with an old VUL or WL policy with significant cash value? If you're going to do a 1035 exchange to a paid up policy, or a low cost VA or a MYGA, you'll need an insurance license too. If you're going to refer that business out to an insurance agent, you'll need a relationship with someone that won't try and steal the investment business from you, and won't try and sell your client more insurance than they need (after all, they would be an insurance agent).

Aside from that, no matter how well versed you are in finance, a big part of this job is hand holding and it's emotional. Not for you (well, maybe for you), but for the clients. How do you tactfully tell a client their idea to retire at 50 isn't feasible? Or talk them out of their new penny stock strategy? What is your value proposition and how do you communicate it to prospects and earn business? Better yet, how will you get in front of prospects in the first place?

Certainly not trying to dissuade you by any means, this can be a lucrative career where you can earn 7 figures if you're driven, or earn well into the 6 figures and have a wonderful lifestyle. And I'm happy to help in any way that I can, but there is so much more to it than managing money for people. In fact, the act of managing money is less than 20% of this job. I'd be willing to bet less than 25% of the USA's financial advisor population can succinctly explain (let alone do) an NPV calculation or use a financial calculator beyond basic add/subtract/multiply/divide. Disappointing, but true...but they all know what an RMD is or how to start a 72(t) or 72(q) for an early retiree (do you? I didn't when I started).

Oct 6, 2016 - 1:14pm

There is nothing to dissuade me from, actually. The people I generally know who are concerned with planning are the teachers, sheriffs, officers and normal mom/dad's who work 40+ hours a week to support their kids. I turned down a position with two firms that "constantly" are expanding into new territories (didn't like them) despite that they offered to sponsor the license (though I would fork the fees).

It's not that I am driven, I do not need a lot of income to live on, and if I can manage a few clients while attending school FT, that would be great. Most people I run into though are not too inclined about financial advisors, and sees them as sharks after their cash without benefiting them. I think roughly 90% of the people I run into view bankers (or anyone in finance) as generally crooks. I am from a pretty large city (San Diego) so the market is filled with Primerica, World Financial Group and other shark-chains who call themselves "financial advisors".

Oct 6, 2016 - 6:14pm

Got a kick out of seeing TradePMR mentioned here - worked for them in between my UG and MSF. Everything you're saying here is pretty accurate though!!

Life's is a tale told by an idiot, full of sound and fury, signifying nothing.
Oct 7, 2016 - 2:54pm

This is a really good post. Thanks for sharing your thoughts. I am starting my RIA after spending 10+ years in banking. I have a CFA and an MBA so I am comfortable with creating financial plans and helping my clients make the right decisions. What I don't know about is all these regulated instruments/accounts (and I am not talking about Roth vs. Traditional IRAs, those are easy).

So my question is: can you break down, by client type, the kind of accounts/investment vehicles you use?

Most importantly, is there an online resource where I can learn all about RMDs, 72(t)s, 72(q)s, etc?

I don't know what my clients will have when they decide to join my RIA, but I want to be prepared to handle whatever comes my way..

many thanks

Oct 7, 2016 - 7:37pm

I'll give this a stab A-type, but I may be misunderstanding your question, so please feel free to re-word if my answer doesn't hit the mark.

First, breaking down my client type by, kinds of account registrations and investment vehicles. Most of my clients are just regular Joe's. So you've got a good grasp on IRAs and Roth IRAs, that's the bulk of it. If you're working with retail clients, you're going to want to have a fee-friendly 529 plan available, and brush up on the various was a non-qualified account can be registered (specifically joint accounts, Tenants in Common vs. Right of Survivorship, etc.). You may run into the occasional UGMA/UTMA or Coverdell account (these aren't used much these days, but many of them were started 10 - 20 years ago and are still floating around). Don't forget to look where Transfer on Death registrations would be helpful with any non-qualified accounts you bring on...it's just as important (almost) as having correct beneficiary designations on retirement accounts.

I'm not sure if you'll be doing any retirement plan business (401k, etc.), but if you are, as an RIA you're going to want to find a reputable TPA (third party administrator) you can partner with when doing unbundled plans. Your custodian can probably help you with this, especially if you're using Schwab or Fidelity.

As for investment vehicles, I'm mostly using open ended index funds. I do run a model of about 20 stocks for a handful of clients (again, nothing fancy, big household names).

I'm fairly certain I'm not looking at this question the right way, but feel free to re-word and/or shoot me a PM. If you get stuck along the way, just get in touch with me and I'm happy to walk you through the stuff you learn only by doing.

As for your question regarding learning about 72(t), etc., you can learn a good bit of information on Bogleheads dot org (I'm a new member, so I have to post it that way). I wouldn't call it an advisor friendly site, but it's well organized and probably fits the bill. Otherwise, if you're willing to spend a couple of bucks, just buy the CFP or ChFC modules on the topics you're looking to brush up on (or just buy the study materials on eBay, since you aren't looking for the credits, just the knowledge).

Dec 8, 2017 - 9:02pm

Tell me about it! How can people from Primerica label themselves as Wealth Managers. I was watching a show on a house hunting channel and they said they were both regional Vice Presidents in Wealth Management. Two cheesy looking Miami couple come on the screen and I said no way do they manage people's money! I did more research and saw that they worked for primerica. What a joke. It destroys the prestiage a successful FA or WM have because everyone in the cinsurence sales industry call themselves that.

"Fugazi, Fugazy. It’s a wazi. It’s a woozy.”
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Oct 6, 2016 - 11:59pm

There is some very basic finance involved, but nothing compared what most of you are doing. Basic asset allocation. Some minor tax rules. Household budgeting. The job is sales and hand holding. I spend far more time talking to clients about their grandkids and their last vacation than I do talking about how the assets in their portfolio are correlated. In fact, I've never been once been asking about correlation, standard deviation, alpha, beta, or any number of other basic things. But I've spent hundreds of hours listening to stories about kids, grandkids, pets, and vacations.

That was a tough obstacle starting out. People don't do business with advisors because of their intelligence or where they went to school (or even IF they went to school at all). They do business with advisors they like.

No joke.

Oct 7, 2016 - 12:31am

Interesting take. I once heard it was the same for athletic trainers; how well they get along with them is far more important than their knowledge of exercises.

For asset allocation, do you make specific percentages up or is it a general guideline (e.g., "You're nearing retirement, so let's put x% in high-income securities, y% in some capital preserving securities, and z% in cash." Obviously those are made up allocations and investments, just trying to understand your perspective...)? Then when choosing investments, how do you determine what to invest them in? Are you going into all the statistical data of volatility and returns for x number of years or is it something as simple as "Morningstar gives this fund 5 stars?" Does your employer push products that give you a kickback?

Oct 8, 2016 - 4:23pm

I just started an internship as a financial advisor, mainly advising for retirement and savings plans investing in mutual funds. We are required to go through a number of questions to test if they are actually able to invest (in terms of income, debt, assets etc.) and FATCA. How can I make it sound less monotone and process-y, and more like a conversation between two people, one that wants to invest, and another that wants to help with investments?

Oct 6, 2016 - 6:03pm

Thanks for posting, it's great to see something this detailed on PWM.

You mentioned DC; do you find that the overwhelming amount of government employees around here helps your business? (They usually want stability, they have great retirement accounts like you mentioned, and they have decent salaries that they'll never lose...I assume this works in your favor)

Can you describe your approach with clients like that?

Oct 7, 2016 - 12:03am

Thanks for the kind words and warm welcome.

I think it both helps and hurts. On one hand it's nice that they generally don't spend down the assets they have with me because their pensions generally take care of their lifestyle. The flip side is that instead of having $1 million in a 401K, they have a pension for $50K a year and $250K in a 457. So generally, much lower AUM per household for me compared to your average wirehouse advisor. In fact, probably half of my households would result in reduced (or zero) payout if I worked at Merrill due to not meeting the minimum household size.

Oct 7, 2016 - 12:24am

Do you mean exchange traded funds? If so, I think they are fine investment vehicles, but I don't use them simply because I prefer open ended index mutual funds. Costs are essentially the same.

ETFs have advantages in that they are traded intraday, can buy/write options on them, and you can "slice and dice" better with them. But none of those things are useful for my mass affluent, unsophisticated clientele or the way I manage money.

On the other hand, with open ended index funds, I can easily reinvest dividends and capital gains, buy/sell fractional shares, and don't have to worry about trading volume, spreads, or NAV premiums/discounts.

I have never done business with Envestnet. Most of my AUM is in models of (mostly) index funds that I manage in both discretionary and non-discretionary accounts. I make a few beta plays (not with smart beta products) from standard asset allocation (mostly heavier weighting towards small caps, both domestic and international). A few small asset classes I'll use an actively managed product if data from the SPIVA Scorecards indicate I might have a chance at generating a few bps of alpha. If I use an actively managed product I'll screen for expense ratio, turnover, active share, and whether or not there is manager money in the fund. Nothing too elaborate. And that data I get for free from FI 360 as an AIF designee.

Oct 7, 2016 - 12:20pm

Excellent posts thank you very much.

A few questions, you can run with them however you'd like.

What is your opinion of a young FA (mid twenties) starting a book out on family and friends money? Do you manage close friends/family money and is it likely to cause tension to those relationships?

I'm testing for my CFP designation in November, what is your opinion of the designation and what is the perception you find of the designation in the marketplace?

I have many friends that are doing well for themselves early on and I can see them accumulating wealth in the next 5-10 years. Do you have any advice on whether or not to take on $15-20K AUM households when the fees won't cover the administrative costs?

Oct 7, 2016 - 8:44pm

You're welcome! Regarding your questions...

Young FA starting with friends & family: A few concerns here, the biggest of which is that starting with F&F doesn't teach you how to build a book. You may gather a few million in assets and feel like you're really moving forward. Except when the F&F money runs out, you're now stuck deciding how you'll grow from there. Even if you get $5 million in AUM from F&F, at 1% you're grossing $50K and still have expenses to pay.

As far as managing F&F money myself, I do it for most of my close family an a good chunk of my social group. It's not a big part of my book, but I have mixed feelings about it. I NEVER prospect F&F. If they come to me, I have a conversation with them before agreeing to take on the work. I let them know what to expect, etc., but I make it clear that if they want me to take on the work, they have to agree that business is at the office. I don't want to talk about the market or AAPL on Labor Day at a family picnic.

The CFP is a great designation to have and has the highest perceived value by the public. That being said, don't expect that having it is going to get you much business. Every few months someone may call/email you because they found you on the CFP website, but don't expect flocks of people coming your way (the overwhelming majority of people still have no idea what it is). You may win a competitive case here and there if you have it and the other FA doesn't. The most important part of the CFP is the knowledge, not the letters.

Regarding asset minimums, I would absolutely take small accounts with future potential. I personally have taken clients starting with $100/month Roth IRAs and $0 AUM. Some of them have grown to decent accounts (changed jobs and rolled over 401Ks, inherited money from parents). Others are still small accounts, but have referred decent accounts to me (their parents, for example). And many others are still just small accounts that generate enough revenue each year to buy me a SBUX latte.

Note: Many other FAs would disagree with me and would tell you to only work with people with money. Here is my reasoning:

Say you want to work 45 hours a week. Take a look at your week and be honest with yourself. Are you putting in 45 hours of work (defined as prospecting, closing business, or servicing existing clients..."market research" and meeting with wholesalers for lunch doesn't count as work). If you are not "working" 45 hours a week, and you have someone in front of you with $25,000 that wants to invest, why would you turn them away? So you can come on here (like I'm doing this week, lol) and talk at the virtual water cooler? So you have time to take a 90 minute lunch with the Fidelity wholesaler? So you can play around on Yahoo! Finance? Take the business. When you feel you're at capacity, or just don't want to work as hard anymore, you can always...

a) Hire a junior advisor, and give him/her your small households (where you take 50% of the revenue for doing 0% of the work).

b) Fire the clients (politely and professionally). Send them to your custodians retail side, or refer them to another FA.

c) Sell those clients to another advisor.

But why would you pass up business when you have time to do other things that you really don't need to be doing.

By the way, when I say "you," I don't mean you personally. I mean anyone contemplating this.

Oct 9, 2016 - 11:07am

Greatly appreciate the detail you put into your answers to my questions. These are questions I don't feel very comfortable asking my senior, every time I approach him he doesn't give me the time of day and clearly doesn't have much desire to mentor. He balks at the idea of anything less than $250k. My firm uses salesforce (Orion) and each account is $80 a year.

Oct 7, 2016 - 12:31pm

Very simple question. Do you have to have good credit to sell financial securities? For example, I've always considered launching a commercial insurance brokerage (P&C + Employee Benefits) but wouldn't mind having the personal side of things including insurance AND securities.

"It is better to have a friendship based on business, than a business based on friendship." - Rockefeller. "Live fast, die hard. Leave a good looking body." - Navy SEAL
Oct 7, 2016 - 1:17pm

What do you use as a performance benchmark and how often have you beaten it? Also do you discuss your performance net of fees or gross with your clients? Like are you saying your account returned 5% this year and with my 1% mgt fee your total return was 4%, or are you saying your account returned 5% and the fee is charged as like a separate fee for service?

Oct 7, 2016 - 8:58pm

I only use benchmarks for myself to see how my beta plays have helped/hurt over time (remember, 80% of my portfolios are index funds anyway, there isn't much to benchmark). I don't think I've ever been asked about a benchmark by a client, and I rarely have a client even ask how the S&P 500 or the Dow has done. They just ask "how's the market doing?"

For my own use, I like to compare my portfolios to a similarly allocated Vanguard Target Date Fund (which uses Total Stock Market Index, Total International Stock Index, Total Bond Index, International Bond Index).

Note: Morningstar creates blended benchmarks for your portfolios automatically as well.

I discuss performance net of fees.

Oct 7, 2016 - 9:18pm

Thank you.

Regarding comp (remember, I started independent, this will be a lot different starting at a wirehouse)...

1st year was just breaking even (spent a lot of time learning the ropes, not building book. Start indy = learn as you go, no training, no mentor, no assistant).
2nd year made about $40K.
5th year made about $125K.
7th year made about $200K.
10th year made about $350K.

The progression is mostly linear because almost everything is AUM fee based and I pretty much always bring in $6 - $9 million net AUM per year (except the first year or so).

Oct 10, 2016 - 9:35pm

Yes, definitely. It varies by day but never anything insane. I would say 8-10 calls per week, but if you have an assistant it's fairly easy for them to be screened out if you don't want to talk to them. What's far more annoying is the emails. I swear to god every broker/dealer on Earth sells their entire advisor force's email address to every mutual fund, ETF, annuity, insurance, REIT, SMA, etc. firm out there. And then you unsubscribe, and a month later, they're back.

As far as adding value, the overwhelming majority do not, especially on the mutual fund side. They usually want to talk about their latest and greatest growth & income fund, or their view on what's going to happen this quarter with China or the Fed. If they had a clue what was going on, their funds wouldn't be trailing their benchmarks like clockwork. I suppose if you came into WM with no finance background, they could give you some talking points or at least give you practice talking to people about the market, economy, etc. But most of them don't provide any value on this front.

On the insurance and annuity side they can be helpful by keeping you up to date on all of their product changes. The only wholesalers I really talk to are the fixed annuity guys (for one, that's the only type of annuity I use). Many of the rates change monthly, so it's nice to know who's offering what rate. But variable annuity rides change all the time, as do life insurance rates, long term care products, etc., so if you do that type of business you'd want to talk to those guys as well.

Some wholesalers, the ones who "get it," will help you with marketing ideas (if you're struggling in that area). Help you figure out a seminar topic, how to present it, offer to bring in a speaker, etc. Some of them also will get you access to databases that have contact info for businesses, 401K plans, 5500 data, etc. So this could be handy.

Many of them will also contribute (financially) to your marketing efforts as well, but you have to ask.

Oct 11, 2016 - 9:15pm

It's a daily occurrence, and the reason is they're paid on new money, not on keeping money happy. I'm cordial to them but since I rarely make changes, my team and I aren't great prospects for them.

Where wholesalers are good is in seminars for clients and prospects, their firms often enlist experts in a given field and will pay for an event, so that's nice, but we never move assets to or from someone as a result of this support, some brokers do, but that's the definition of pay to play, and it's a big ethical no no. Additionally many firms will create materials on such topics (elder care for example) that are already well researched and compliance approved so it makes our job of advising clients easier.

Their biggest value add in my opinion is bringing PMs around. I've met with CIOs of hedge funds, had lunches with PMs of large fund families, and so on. Reading monthly commentary is nice, but there's multiple times I've gotten different insights from a face to face meeting.

In the spirit of full disclosure, we base our manager choices on merits of their investments, all of those benefits are secondary, and many of our choices don't have any perks at all, but we use them because they're best in breed.

Oct 11, 2016 - 12:48am

Former paraplanner here. This is the most transparent look inside PWM I've seen on WSO. Thanks so much for posting!You mentioned the Series 63. Being an independent FA, are you required to have the Series 7 as well? If so, how were you able to sit for your Series 7 exam without sponsorship from a member firm? If not, are you limited to intrastate sales i.e. can only solicit prospects within the state which holds your Series 63?

Oct 11, 2016 - 1:24am

Thanks for the kind words John. In regards to your question on the Series 7/63 (I actually hold the Series 7 & 66, and the 66 is the combination of the 65 and 63).

The lines are somewhat blurry in regards to what an "independent financial advisor" actually means. It really could mean any firm where you are a 1099 contractor as opposed to a W-2 employee. The three "real" ways you could be consider indy are...

Indy broker/dealer: A good example here might be Raymond James Financial Services. You're not an employee, but you are contracted with RJFS's broker/dealer (as a registered rep) AND their corporate RIA (as an IAR). The advisor may use the RJFS brand (i.e. their office says "Raymond James" on the door), or they may setup their own brand (i.e. their office says "John Smith Financial" on the door). This is the most common setup for an independent FA, and it's the way I'm setup. Any broker/dealer can sponsor you for the Series 7, even the independents (and mine did sponsor me when I started). At a bare minimum, you need the 6/63 (mutual funds and annuities, commissions only) or 7/63 (general securities, commissions only) to work in this channel, but most hold the 7/66 (general securities, fee or commission).

Indy RIA: An example here is you forming your own RIA as an LLC and contracting with a custodian like Fidelity. Since you're independent, you can actually custody at more than one firm if you wish. In this business model, you're going to do business as your own brand, you can't use the Fidelity name on the door. You'll need the Series 65 to work in this channel, which you don't need a sponsor for. Some newer RIAs (that used to be RRs) will still hold their 66 instead of a 65. But once you drop your Series 7 (or escrow it), two years later your Series 66 automatically converts to just a Series 65 (because the Series 7 is a pre-requisite to the Series 66, so once the 7 expires, you're no longer eligible to hold a 66).

Hybrid RIA: This is where you affiliate with both an independent broker/dealer and form your own RIA. The difference is you don't do your RIA business through the corporate RIA of the broker/dealer you're affiliated with. Many independent broker/dealers don't allow this setup (because many times it's a stepping stone to full RIA, it's only a matter of time before the broker/dealer gets cut loose permanently). Many hybrid advisors affiliate with PKS as their broker/dealer (they specialize in this channel), and then do the RIA at a popular custodian like any other RIA. In this channel, you're going to work under your own brand. You do need to hold Series 7/66 for this channel, as you're doing both fee and commission business.

TL:DR - Even independent broker/dealers can sponsor a new FA for the Series 6 or Series 7. And if you're going to be fee-only, you don't need either of those, and can just take the Series 65 at your leisure.

Note: To my knowledge, the Series 63 is useless on its on. It may carry some weight on its own technically/legally, but no broker/dealer would put you into production in any way with just a 63.

Oct 11, 2016 - 1:28am

By the way, the reason I say those are the "real" ways of going independent are because there is no product quota for any particular type of business. There may be a minimum total production requirement to keep your contract, but you're free to do business however you'd like.

Some of the firms (mostly insurance b/ds) claim to be independent because they pay you (at least partially) on a 1099. But most of them have quotas to sell their proprietary insurance/annuity/fund products (this would be true of NY Life, Mass Mutual, Guardian, Northwestern Mutual, Primerica, etc.).

Firms like that are generally not considered part of the broad "independent" channel.

Oct 11, 2016 - 6:56pm

When I started, fee-only wasn't such a big deal and the RIA movement at the retail level was still in its infancy. I started "independent" versus going to a wire because I had a business in an unrelated industry at the time that I was working on selling, so starting at an employee model firm wasn't even an option.

Looking back, or if I were doing this over, I would without question start as a hybrid RIA. I'd affiliate with PKS for brokerage, start my own insurance agency, and probably custody my RIA business with TDA (Fidelity and Schwab have pretty high minimums these days because they are the two heavyweights in the channel).

There really aren't any pros to starting with LPL or Raymond James, etc. unless you want to use their brand (which doesn't matter), or really value having all 3 lines of business integrated in one place (which you can mostly do with the help of some 3rd party software as a hybrid).

Unless you really know how it works in the trenches (say you came from a wholesaler or paraplanner role) and have a nice bankroll to start, I'd start at a wirehouse (specifically UBS or Wells...though in the short term, Wells obviously has some PR headwinds to deal with, but is otherwise a solid wirehouse).

Oct 14, 2016 - 11:38am

Stacks of SB's for ya..

What tools do you use? Like Morningstar Advisor Work Station/Office, Direct, Zacks, YCharts, Factset etc...

WSO Vice President, Data@JustinDDuBois
  • 1
Oct 16, 2016 - 12:42am


I don't use a lot of 3rd party tools. My b/d provides CRM, Sungard, Smarsh, and performance reporting. I do occasionally use Money Tree Silver planning software, but mostly I use the SPIVA scorecards to make active versus passive decisions when doing asset allocation, and a few Morningstar tools provided (for free) by BlackRock and Vanguard for advisors.

I do know a lot of advisors that use Redtail, Act! For Advisors, Morningstar Workstation, YCharts, Kwanti, Blueleaf, and various Dorsey Wright & Associates tools.

Oct 22, 2016 - 9:17pm

Thanks man! 3 more things...

  1. Can you describe your experience with B/Ds...is having tools provided by them (either discounted or free) a need or just a sweetener? From my experience on the buyside, using soft dollars/BD for research, tools, etc.. is on the decline given the regulatory scrutiny. Does this apply to FAs? Would you say B/Ds are still a smart way to get a get tool in Advisors hands?

  2. Can you explain more on the Morningstar tools provided by BlackRock and Vanguard? Im interested in the process- Why do they do this, How do advisors go about obtaining them? And what Morningstar tools specifically?

  3. Is there anything you think technology wise that would be a big help to you. Client related, investment decision making, reporting, anything really.

I'm in the business, happy to treat you and thebrofessor if you end up in NYC (or maybe Chicago) at some point.

Thanks again.

WSO Vice President, Data@JustinDDuBois
  • 4
Oct 16, 2016 - 12:45am

Good question! I'm a bit late to the party in launching a website and using any social media for marketing. I was early to the party 10 years ago, but shortly after I launched my company site, my broker/dealer disallowed advisor websites. Two years later they got on the ball and allowed advisors to have their own sites again, but my business was already rolling faster than I could handle without one, so I never put it back up. A lot has changed over the past 10 years and my internet marketing skills are outdated, so I'm kind of stumbling along learning as I go (web design, SEO, and social networking for business).

Like anything, I know it will take time. That being said, I'm open to suggestions!

Oct 17, 2016 - 8:20am

definitely have a website. it's not going to get you much attention, but people need to be able to type in [name, city] or [name, firm] and have your website pop up so they can peek at your background. while we've gotten a couple of clients who were seeking an advisor and picked our team because of our background, it's definitely the exception to the rule. in the past 3 years, only 2 clients have come to us directly from the website.

websites are what I like to call "clean sheets." when you go to a hotel, you expect clean sheets, but if they aren't clean, you're disappointed. if someone's looking for a FA, they expect you to have a website. the only exception is some brokers I know that handle UHNW only, their clients desire anonymity, so when you google their names, all you get is barrons list links and maybe a linkedin profile.

Oct 19, 2016 - 12:37pm

Do you use any risk tolerance questionnaires to help with your asset allocation decisions? Clients have unique capacity and willingness to take risks... If you do use a questionnaire, can you recommend the one that has worked well for you?

Dec 19, 2017 - 4:12pm

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