My post last week encouraging you not to hesitate to ask questions resulted (not at all surprisingly) in a great many questions from readers.
What did surprise me was that the most frequently asked-about topic wasn’t investing at all — at least not directly. People had lots of questions about working as a financial advisor. Specifically, they wanted to know:
- Why I left the field despite still being very interested in investing,
- How much of an advisor’s time is spent on sales work as opposed to actually working with clients, and
- What I thought about working at Edward Jones as opposed to other firms.
Why I’m No Longer an Advisor
In short, the reason I quit working as an advisor is that I was not very successful at it. It didn’t take long for me to realize that I had a lot more fun when I was researching and learning about investing and tax planning than when I was networking, knocking on doors, or making phone calls.
But, as it turns out, reading books doesn’t bring in very many clients. And not-many clients means not-much income.
Are Advisors Salespeople?
As far as Edward Jones goes, yes, it’s definitely a sales position. Back when I went to work for them (2006), their website stated this fact very clearly, and the people involved in the recruiting process made sure to point it out as well. I’m not entirely sure why they’ve changed that.
To be clear though, the same thing applies to new financial advisors at other firms. When you’re new in the business, you have no existing clients. So, naturally, most of your time is spent trying to bring in clients. And that means sales-work.
[Exception: If you're able to find a position at a firm that currently has more clients than it can handle, your time would obviously be spent differently. My understanding, however, is that these positions are not exactly abundant.]
The difference between brokerage firms (like Jones) and fee-only firms is that at a brokerage firm your job is to sell investments (specifically, ones that pay a commission), whereas at a fee-only firm your job would be to sell the service — the planning itself.
Which Firm to Work For
Personally, I think the fee-only model does a better job of preventing conflicts of interest between the advisor and the client. Unfortunately, the biggest recruiters in the industry (i.e., large brokerage firms, banks, and insurance companies) use the commission-paid model for most of their business.
That leaves you with three options, each of which presents its own challenges:
- Look for a position at a fee-only firm. (The challenge here being that such positions are more difficult to find.)
- Start your own independent practice. (The challenge being that you have to pay the start-up expenses and you’ll be earning very little while you find clients.)
- Go to work at a bank, brokerage firm, or insurance company, building your business in the most ethical way possible within that firm’s constraints, possibly with the intention of going independent later once you’ve built your client base.
Of course, all of the above comes with the caveat that this is the viewpoint of somebody who was only in the industry for approximately one year, worked for only one firm, and wasn’t particularly successful there. So if being a financial advisor is a career path you’re seriously considering, I’d definitely suggest getting other opinions as well.