I could never do as good a job as Michael Kitces, so I’ll just link his article on this very same subject here. I won’t bother to repeat the points he already made. I’ll just share something I wish someone had told me when I got into the field of financial planning.
The Job Description vs. the Actual Job: The Truth
As I shared with podcast sensation Hannah Moore, your job may not be what you think it is. Realistically, a job in any industry may not be what you think it is. But this may hold particularly true for the financial planning profession. This is because the industry is often made of small, independent offerings. In other words, there really isn’t a standard way of doing things.
But back to the original point: what the job posting says and what your interviewer tells you often have no relation to what you ACTUALLY may do all day long.
I found this to be the case in the first three financial planning firms I worked for.
Of course, you can make the case that this job sucks and isn’t what you thought you would be doing. And, it very well likely does suck and has no relation to your hired skillset. So, what’s the solution? Talk to your employer? Good luck with that. Ultimately, if you really want to have to complete control over what you do, you’re going to have to start your own firm.
Veteran Advisors Likely Don’t Get Evidenced-Based Investing
Take the above heading with a grain of salt. I’m making a gross generalization here, based on my life experiences. Disclaimer aside, many veteran (i.e. older) advisors started out in the industry as salesmen, peddling absolutely awful financial products that ultimately hurt people’s finances. In short, they were doing bad stuff. Consumers were probably worse off for engaging with them. Maybe these advisors knew better. But they likely didn’t.
Why is the financial services industry like this? Here’s one idea: when it comes to selling financial products that are flat out bad, talking about the numbers doesn’t necessarily work. That’s because the numbers on these bad financial products are ACTUALLY bad too. Said another way, a variable annuity can never offer better numbers than a low-cost index fund. So, what’s a variable life insurance salesmen to do when he doesn’t have the numbers on his side? Tell stories! Besides, stories are more engaging than numbers anyway – both for the peddling advisor and for the hopefully-engaged customers.
As such, veteran (insurance-salesman turned portfolio manager) advisors are likely more focused on stories than numbers. As a consequence, so is that veteran advisor’s investing philosophy. That is, a veteran advisor is likely more focused on the story an investment tells than the actual expected performance of the investment. And lay consumers are likely too. After, what’s the better story?
IBM’s machine-learning Watson is going to change the world! Computers will now be able to diagnose patients faster and more acurrately than doctors ever could. This is the future!!!
or . . .
Maintaining low-costs in your investment portfolio is important.
In short, evidence-based (i.e. low-cost) investing is a pretty boring story. There are much more interesting stories to tell about active management, alternatives, and quant strategies (that have no regard for fees). Unfortunately, the clients get hurt because the insurance-salesman-turned-portfolio-manager simply hasn’t done the due diligence to set up their clients for success (because due diligence can be super boring, and telling stories is just way more fun). Moreover, that veteran advisor is still in the industry because they are such a good storyteller. Anyone who tried the industry years ago by focusing on explaining numbers to potential clients likely fell flat on their face, and never stuck with the financial services industry.
But, that was then. Enter modernity – and science, which dictates that if you’re not obsessed with fees, you’re doing investing wrong. This is so important I need to say it again:
If you’re not obsessed with fees, you’re doing investing wrong.
If you don’t agree with the above, you need to start reading some science. Seriously. The above is so undeniable thanks to an infinite amount of research and historical performance. Fees matter. Fees matter more than anything. If you refuse to believe this, please quit the financial services industry and go into timeshare sales.
But, if you have done some (any!) reading, you already know this. So, forgive me for preaching to the choir. But, just because you value science doesn’t mean the lifelong insurance-salesmen-turned-financial-advisor (that you’re likely working for) values science as well. As such, you may find yourself in the position of pushing clients into investments on the basis of stories and not numbers. And that sucks.
When I was new to the field, this storytelling mentality sucked because I am genetically pre-disposed to doing the right thing, to help people. (Or at least I like to think so.) And placating a veteran advisor for his delusions on the future investment return of Amazon or other random unfounded investment thesis is not doing the right thing. It’s quite the opposite. Basing investment decisions on a compelling story (and not data) it is literally going to impair people’s financial welfare.
In short, having to work for a veteran advisor who was more-or-less clueless about investing sucked for me. And it may very well suck for you two. So, I figure a warning is in order.
Fee-Only Fiduciary or GTFO
I’ve heard Michael Kitces mention at least on a couple occasions to take any job as your first job. Despite Kitces being a genius and the industry thought-leader, I couldn’t possibly disagree more. I want you to run screaming from any job that isn’t offered by a fee-only fiduciary firm. Ideally, that firm would even be a firm that gets evidenced-based investing. That’s not to say that a firm that checks the boxes for
- and low-cost investing
is going to be an amazing job experience. It’s just that you’ll likely be in a better place to help people than the alternative.
You’ll Do a Better Job If You Like Doing It
One final thing that is so true – and said often – but is so true that it just needs to be said again: go do what you love. Why? Well, in addition to being happy, you’ll actually do a better job doing something you love than something you don’t like doing. I hope that’s obvious. But, I simply wanted to make that point because I don’t hear it enough.
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If you haven’t already done so, go do yourself a favor and read Michael Kitces post on advice for new planners.