Well, welcome everyone. Welcome to Office Hours with Michael Kitsis. For this week's Office Hours, I want to talk about what is still one of the most common inquiries I get from readers from the blog, and that's finding that first financial advisor job opportunity. And the email I get is almost always the same.
It says, Dear Michael, I'm writing to get a second opinion about a financial advisor job opportunity I have. I'm new to the industry and I've been offered an opportunity from some major firm to become a financial advisor with them. And I'm really excited to be an advisor, but I'm nervous about the fact that I have to get all my own clients.
And I'm not certain that I can get enough clients quickly enough. Do you think this is a reputable firm and a good job opportunity? What should I do? And the answer I have to give them almost every time, this is not going to be a good job opportunity for you. And it's not a good path to becoming a financial advisor, and it's probably not going to work out.
And it basically doesn't even matter which major firm it happens to be that's given them the opportunity, because this isn't just about one big firm versus another. It's with the entire path to becoming a financial advisor in the first place. Because the truth of that job is that it's not actually a job to become a financial advisor, it's a job to become a financial salesperson. And according to industry data from Cerulli, only about 20 to 30 percent of financial salespeople who join a firm even survive the first three years, and the rest fail and leave.
Now, the key distinction to understand here is the difference between financial advisor and financial salesperson. I'm not talking about what the companies call themselves or what they put on their business cards, because virtually no one calls themselves financial salesperson anymore these days. They say financial advisor, because the word sales is taboo and advisor sounds professional.
But the reality is that when you look at the actual duties of the job, is that you're a financial salesperson. The first and primary hint is that you're taking a job as a salesperson that the firm says you have to get your own clients from day one. Because let's be honest, no one's going to pay you for your financial advice when you have no formal education as an advisor, no CFP certification, and not a day of actual experience as a financial advisor in your first place, regardless of what's on your business card.
Now what they will do, or at least what they might do, is buy a product that your company offers that can help them with their financial situation. Maybe they're underinsured and need more life insurance. You can help them with that.
Maybe they have an old 401k that needs to be rolled over and reinvested. You can help them with that. Maybe they are trying to figure out how to generate some additional income in retirement.
You can help them with that. But the reason you can help them with these problems is not because you're getting paid for financial advice yet. It's because you're representing a company that sells life insurance or investments or annuity products.
And the situations I just described are scenarios where these clients might be buyers of one of those products from your company. And if everything goes well, they'll implement one of those products with you. And you'll get paid for selling the company's product because that's how it works when you're a financial salesperson.
And that's why the company wants you to get your own clients, because your job is to find people who will buy the company's products, because that's the job of a financial salesperson. In fact, most of the time, if you even just try asking them, can I charge a separate fee just for giving advice? Even if they don't want or need one of our insurance or investment products, see what the company says.
Usually you'll hear, oh well, around here we get compensated for our advice with the products we implement. Because again, the job is to sell the products. Or they may say, well, if you reach a certain level of production, or you're here for three years or five years first, then you're allowed to become dual registered and charge separate planning fee because it actually takes time to become a financial advisor. They let you sell products out of the gate because it doesn't take as much time to learn to be a financial salesperson.
But you just need sales training on how to sell, product training on your company's products and how they work. But. The point here is that not to debate between fees versus commissions, which is really a whole other discussion.
There are advisors out there who really are in the business of advice and happen to get paid through the solutions they implement at the end of their advice process. But those advisors have training and education and years of experience actually working as an advisor to add value with their advice and then happen to implement a needed solution at the end. When you're starting from day one with no training and education experience to do anything but sell the products.
And they say, we want you to be an advisor and you're compensated for selling the products. Your job is to sell products. And again, the reason why all this matters is that 70 or 80% of the industry's new recruits into sales don't even last for three years because sales is such a brutally difficult thing to do, especially when you're new to the industry and don't have any experience. It's tough even when you have sales experience because most consumers don't trust financial advisors because so many of us are financial salespeople and consumers have figured it out. If you don't believe me, tell a stranger you meet at a social event.
I'm a financial advisor and see what they do and watch them take like a step back away from you. And unfortunately, the reality is the industry has a long history of doing this because from their perspective, one of three things happens. Either you're really good at sales, in which case you have a fine career as a salesperson.
You're really bad at sales. sales in which case you're going to be gone in three to six months and it won't cost them anything. Or three, you may try and struggle to get some clients, then decide this isn't for you and leave, and the company keeps your clients. So from the company's perspective, those three scenarios are win, win, and win. If you're good at sales, you succeed with them.
If you're not, it doesn't cost them much because you leave quickly. And if you join and get some clients and then leave, they make a profit and keep all your family and friends as clients after you go and leave the business. But for me, your perspective, either you're good at sales and stay or you're not or you'll be gone long before you ever get enough experience to actually get paid for your financial advice. So what's the alternative for someone that's looking to build a career as a financial advisor but doesn't want to risk getting burned out on a sales job or just knows deep down they're not going to be good at sales in the first place? Simply put, the answer is to find a non-sales job in the industry first.
Ideally, this I think would be finding a job as a peer planner, an associate advisor, an existing advisory firm where your job is to to support other existing advisors with their other existing clients. Because firms that are actually in the business of giving advice, and not just doing product sales, need advisors to help give advice to the existing clients. Because firms that are focused on product sales don't.
They just need to find the next new client to do the next transaction because that's how the model works. But advice-centric firms generally have ongoing clients that need ongoing advice and service, and therefore need ongoing support advisors to facilitate it. In fact, one of the fundamental reasons we launched our new plan of recruiting business...
years ago was to help new advisors coming in industry find those, we'll call them like real financial planning job opportunities. The caveat though, is that firms hiring peer planners, associate planners these days often want their candidates to have CFP certification, or at least to pass the CFP exam. And if you're just coming to the industry for the first time, you may not have that yet.
You may not have even started yet, which means peer planner, associate planner jobs may not be feasible for you out of the gate. And it means the next alternative is find any other job you can and get your foot in the door. see a lot of advisors that focus so much on finding like the one true perfect job for their career path out of the gate.
You don't have to find the perfect job out of the gate. You have to find a job out of the gate. You can morph your way to the perfect job later at some point down the road.
You know, just work towards what gets you to the initial job you need to get started with your career and morph from there. Now, what those jobs look like varies by the firm. It could be working in an operations or administrative capacity in the firm.
maybe it's a job as a client service administrator that'll handle paperwork and work alongside another advisor. I spent almost two years of my early career working in support roles for other established financial advisors, helping to complete annuity insurance applications, open investment accounts, and track the status of ACAT transfers, and make sure client portfolios are traded, invested, and all the things that have to get done in a firm doing ongoing work for clients. Now, eventually I moved on from that role and advanced my career, but it was an incredibly valuable experience because it's actually quite helpful when you're working with clients to understand. how all that stuff works.
And it got my foot in the door with a couple of years experience to then move to a better job with more opportunity, especially because while I was doing those initial operational administrative jobs, I got my CFP certification, which let me take on more and more financial planning tasks over the years and built my career and helped me to move forward. But the key is to understand the real entry-level job as a financial advisor is not to go get clients to start selling products from day one. It's to get experience working in an advisory firm from day one, or if you have to, just any financial...
services industry job. And you can move laterally from there over time because the truth is virtually any experience in the industry is helpful to learn your way, understand the companies, understand the dynamics of the industry and what the opportunities are. Ideally, it's working with a firm where you can pay your dues, as they say, and get some real relevant experience and then move up the ladder as a financial advisor.
And the good news at least is these jobs are generally salary jobs. You don't have to go get clients. You don't have to sell products.
You just have to be good at helping the firm services clients and start getting experience. learning and developing the skills to move forward. Now, I know it's difficult for some people getting started, especially if you're a career changer and accustomed to a certain potentially higher standard of living, that the reality for career changers or starting a new career is you may have to take an entry-level job for a period of time, get the experience you need, and then move up.
The good news is experience advisors often make $100,000 or $200,000 a year. The most successful make far more than that. But you have to start somewhere, which may mean taking one step back to take two steps forward in your career, or taking one small entry. entry-level step to try to climb bigger steps later. But the key point here is to understand that unfortunately, the financial advisor job offer from a lot of big firms is usually not a good way to start a career as a financial advisor because it's not a financial advisor job.
It's a financial salesperson job. Regardless of what it says on your business card, that's why they want to expect you to get your own clients early on and bring people in that can buy the company's products. And that's why a lot of major firms have increasingly been soliciting career changers lately because career changers often come with what's known as their own natural market. Existing friends and family with whom they could do business from day one, often from their former career or industry.
But again, it means to hate to break the news to you, you're not getting hired for your potential as a financial advisor, you're getting hired because you're coming to the table with good prospects for the company's products. Which again, either you'll sell your friends and family and succeed and make money and the company makes money, or you sell a few of your friends and family and not succeed and then you'll move on and the company keeps your friends and family as clients. That's their marketing strategy. And the challenge for some advisors, even if you succeed, if you decide in the future that you 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 into a company where it's hard to leave because they make the conscious decision the company has good resources, will be a good partner, and it's a good tradeoff for them. But it's another one where you simply get recruited there to start your career and then discover you're pretty good at sales and then realize you can't make a change later without starting over again anyways. But the bottom line is simply this.
Not with saying what companies put on their business cards. There's a difference between financial advisor jobs and jobs as a financial salesperson. And unfortunately, the realities of the companies that are in the business of manufacturing and distributing products they create are generally in the business of selling those products and hiring salespeople to do it. So make sure you understand what kind of job you're getting yourself into.
And if you really want to get started in the financial advisor career track, as I would view it, your preferred list of job pathways in, number one is an associate or paraplanner. Number two is operations, client service, some kind of administrative job in a firm. Number three is any other salary job in the financial services industry. And the distant number four is taking a job as a financial salesperson. The truth is, even if you don't succeed, it's actually still a good and valuable experience for the next step.
I started my career as a financial salesperson. I was terrible at it. I was still able to move forward with that experience, though, and find other job opportunities that worked out better because any experience helps.
But not all of us have the financial flexibility or situation to be able to start out of the gate and fail horribly as I did and then try to navigate your career from there. And I will say, don't even think about trying to go out on your own and starting your own firm from scratch with no experience. Any of the options I listed above, including financial salesperson elsewhere, is better than going out as an independent solo from the start with no experience.
In the long run, great opportunities to be a solo independent advisor. but not the way to start a career and get the training experience you need. Fortunately, though, there are more and more of these jobs available.
You can find them on association websites like FPA and NAPFA, CFP Board, Jobs Board, our new plan of recruiting job opportunities, and a growing number of large firms that are realizing this challenge and even hiring new advisors into teams in support roles rather than trying to send them out to sell from the start. But again, the bottom line is just, as we wrap up, to understand that financial advisor jobs that require you to get your own clients from day to one, are not advisor jobs. They're sales jobs. And there are and will always be a lot of opportunities for salespeople because it's a difficult thing for you to do.
So if that's you, that's great. If that's not you, don't let yourself be misled. Ask good interview questions. We've covered this in prior office hours before.
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 this is hopefully food for thought. Office hours with Michael Kitts is normally 1 p.m. East Coast time on Tuesdays.
But as you can see, I'm recording from conference hallways at AICPA's Personal Financial Planning Conference this week. But thanks for joining us, everyone, and have a great day.