Most people who provide financial advice self-identify on their websites and business cards as professionals: as advisers, planners or (popular with the brokerage firms) vice presidents of investments. And I think because most of these people provide at least some level of financial analysis for their customers, they’ve convinced themselves that their primary activity is advice rather than sales.
Yet when I look at the annual broker-dealer surveys, I find, with very few exceptions, that their dually registered reps generate much more of their revenues from commissions than from fees. The BDs of insurance companies, meanwhile, are almost exclusively commission-driven. That tells me a different story from what I read on the business cards.
Years ago, when I lived in the Atlanta suburbs, the local comedian Jeff Foxworthy came out with a hilarious series of books, which had a lot of comments that started off with the phrase “You might be a redneck if …” followed by something that would make some of my neighbors laugh uncomfortably, like “you and your dog use the same tree.”
Or: “You think the last words to the Star Spangled Banner are: ‘Gentlemen, start your engines.’ ”
In the spirit of Jeff Foxworthy, I’d like to help readers self-assess whether they truly act as professionals or whether they’re really sales agents in disguise.
You might be a salesperson if …
–You spend a lot of time trying to find the assets that your clients are hiding from you.
–Your conversations with clients raise, rather than lower, their fears about market risk, and your solutions are products, rather than behavior change.
–You have sales award plaques on your wall instead of a CFP certificate.
–You earn more in trail commissions than assets under management.
–You believe everybody in America is underinsured.
QuoteYou might be a salesperson if... your production levels qualify you for all-expenses-paid trips to exotic locations.
–You’ve accepted at least one upfront recruitment bonus in the last three years.
–You talk to other advisers about your book — and it’s not something you authored.
–You have never recommended a passively managed fund or ETF for a client portfolio.
–You still believe that fee-only planners “don’t implement.”
–You aren’t totally sure how equity-indexed annuities work, but you wholeheartedly recommend them anyway.
–Someday you hope to move up to a Series 7 from a Series 6.
–You’ve changed broker-dealers at least once because the new one offered a higher payout percentage.
–You strongly oppose any rule that would require full disclosure of adviser compensation.
–You worry that you’re not getting your fair share because “the grid” is more complicated than you think it should be.
–You’ve recommended nontraded REITs as a way to help your clients capture “the illiquidity premium.”
–Your income goes up sharply every time you hear a motivational speaker.
–You honestly believe that every “no” brings you one step closer to a “yes.”
–Your team meetings end in a rousing group cheer.
–Most of the session presenters at the national conferences you attend are wholesalers.
–Your compliance department would never allow you to sign a fiduciary oath.
–Your financial planning software’s primary output is how much life insurance a person needs.
–The investments you recommend for IRAs are managed by an insurance company.
–The investments you recommend for taxable portfolios require a discussion of the benefits and costs of the riders.
–You’re a proud member of one or more of the organizations that are suing to overturn the Department of Labor fiduciary rule.
–Your production levels qualify you for all-expenses-paid trips to exotic locations.
–Your recommendations change whenever this or that company offers periodic bonus commissions.
–You often wonder whether your client relationships belong to you or your company.
–The main reason you meet with clients on an ongoing basis is to collect referrals.
–You got into this business primarily because of the income potential.
–There are people in your book that you haven’t seen in years, and you honestly don’t know whether they’re still clients or not.
–You believe that affluent is a target market.
–At the end of the year, you’ll make certain investment recommendations because they will push you up a rung on the payout grid.
–You have a lot of designations on your business card that you earned over various weekends.
–You compare notes with your peers over whether this is a successful year, and client outcomes are never mentioned.
–You meet with allied professionals, and the conversation inevitably turns to an offer to trade clients or pay for them.
–The balls you take on the golf course were provided by your favorite wholesaler.
–Your primary goal in client meetings is identifying hidden objections and overcoming them.
–The most persuasive reason to become a wealth manager is you’ve read surveys that say wealth managers make, on average, more money than you do.
–You believe that every effort to regulate sales activities is just another restriction on consumer choice.
–You want to be regarded as a professional in the marketplace, but you oppose any and all efforts to create professional standards.
In the spirit of Foxworthy, this is not intended to cast aspersions on sales agents, but only to help you self-assess where you are on the path to professionalism — and, I hope, provide a moment of amusement as well.
My neighbors in suburban Atlanta were always entertained by the “redneck” comments, even though at least a few of them probably recognized their behavior (or, more likely, a former boyfriend’s) in one or another of the payoff lines.
What is serious is the fact that the financial planning world is at the very edge of creating a true profession. Before long, collectively, we’re going to have to decide what subsets of those who call themselves financial planners or advisers belong in the club, and who should more accurately be identified as a salesperson.
I know that many of you don’t plan to change how you function, and that’s perfectly fine. But if you’re among those who might be a salesperson and you want to be included among those who break from the pack and create a profession alongside doctors, CPAs and attorneys, then you might want to make sure that nothing about this column applies to you.