Over-Aged Financial Planners?

[traineeinvestor]

I don't suppose FA's are any different than any other profession. If you went to any big NYC law firm, you would find a number of partners/of counsel in their late 60's and 70's who come to the office everyday, and its usually not because they need the money. Generally, it's because they spent all their life's energy in the practice and have nothing else to do.

This is becoming less common.

While there are exceptions, as a generalisation most partners in the large law firms will know when its time to move on, failing which they will be told to move on. For many, that time will arrive well before any retirement age stipulated in the partnership deed. Simple economics will not allow people to remain as partners if they are not contributing. What you do see is some partners staying on as consultants (usually working less than full hours for substantially reduced incomes).

 

[saluki9]

Wouldn't someone buy the book?

Or are they just so philanthropic that they can't abandon their clients?

It's much harder to sell your book than it sounds. Despite what most people here think, this business is very personal, and requires a lot of dedication. When you work with people for years, watch their families grow, mourn with them when family members die, you take a very personal stake in their well being. It is a hard business to leave.

 

[kumquat]

I understand. I have gobs of money, enough to last several generations, but I'm so dedicated to my clients (for whom I've sacrificed my life) that I must toil on until death. Please honour my passing.

 

[haha]

kumquat, my older boss was like that. He sold the business 6 years ago and stayed on, both to keep in touch with the clients but also, based on simple reality, that if he had some sudden illness, he wouldn't be able to help them. Philanthropy, probably not, but the same kind of succession planning as ANY business would do.

I don't say it too much, but you folks sure have a broad ass paint brush for a profession that one of your hard-working moderators spends all damn day doing. I'm just saying...

The smartest investor I ever knew was a 75 year old broker who owned a small firm. The money he made from me was meaningless to him, as he was very wealthy. The most successful people in the world love their work, and generally are in no great hurry to retire.

We have a tendency to narrowly interpret actions of those who appear to make different choices from those chosen by us.

Ha

 

[Sarah in SC]

Nicely said, Ha. I'll have to remember that a great euphemism for "tool" is "narrowly interpret actions".

I think those members who have worked in businesses where they didn't interact with clients may not understand the mentality in adviser-type jobs is to help people. These aren't the same folks as what you'd find in a typical sales job.

Just like I couldn't be a nurse (too much personal interaction), those jobs where I can contribute to the well-being of a family and their goals are where my best skills are utilized.

Saluki, my older boss is working on a book, and if it is ever finished I suspect we'll just be handing them out to the clients rather than him actually selling any!

 

[Gone4Good]

I think those members who have worked in businesses where they didn't interact with clients may not understand the mentality in adviser-type jobs is to help people. These aren't the same folks as what you'd find in a typical sales job.

Everywhere is different, and broad brushes usually paint badly, but my experience has been that when conflicts of interests arise between what's good for the employer and whats good for the client, the client often loses. It's so bad in some places (read industries) that if you want to do right by the client, you sometimes have to do it on the sly and then only with trusted clients who you know won't blow you up. But of course, in those instances, doing right by the client means putting yourself in a hole relative to your peers and the good graces of your employer who sees your peers selling more, or generating more fees, than you are. Most people can't survive long doing that.

There's a reason why the brush is broad. And it's not because the financial services industry employs bad people. It's because the incentive structure often times pits the interests of those selling financial products against those who buy them.

 

[harley]

Everywhere is different, and broad brushes usually paint badly, but my experience has been that when conflicts of interests arise between what's good for the employer and whats good for the client, the client often loses. It's so bad in some places (read industries) that if you want to do right by the client, you sometimes have to do it on the sly and then only with trusted clients who you know won't blow you up. But of course, in those instances, doing right by the client means putting yourself in a hole relative to your peers and the good graces of your employer who sees your peers selling more, or generating more fees, than you are. Most people can't survive long doing that.

There's a reason why the brush is broad. And it's not because the financial services industry employs bad people. It's because the incentive structure often times pits the interests of those selling financial products against those who buy them.

Exactly. My previous FA is a great guy, who works hard and is convinced he can do well for his clients. However, returns don't bear that out. Also, just like nearly every other human being, he has a significant blind spot regarding what I see as conflicts of interest. He could justify putting me in a 5.75% load fund that does the exact same thing as a Vanguard fund because it's one year return was .7% higher. It had nothing to do (in his mind) with that big commission he was going to get. Seriously, he just didn't think that way. Great guy, good intentions, but just wrong. He was adding no value at relatively high costs.

 

[Orchidflower]

Most financial planners that have done it for awhile are FI, but prefer to work. If they have built up a book of business and haven't found someone they trust or a family member to take over their book they don't just want to abandon their book and leave.........



I would not assume everyone wants to "get their work life" over as fast as possible.... Based on the many posts I have read on here, a lot of retired folks on here had crappy jobs and wanted out years before they were able to, but put the hammer down and made it to FIRE. Maybe some of us like our jobs?

I have no attentions of quitting when I turn 50, I have control of my hours and my life and my business, so why should I, when I enjoy what I am doing?

It's the popular thing to believe that all financial advisors are crooks...just like all salespeople are shysters..sigh. (Not that some aren't, of course, just not all.)

 

[harley]

Getting back to the OP, if I was introduced to an older (65+) FA, my first assumption would be that he wasn't frugal and still needed to work. My second assumption would be that he was on autopilot, and didn't need to work very hard since he just handed the appropriate recommendations based on the template for the client's needs. So he didn't need to retire, he was sort of retired in place. The concept that he loved his job and just couldn't bring himself to quit would be a far distant third assumption, since it's so foreign to my way of thinking. These would all be my assumptions, however, and would likely not have any relevance to his thinking. Or hers (sorry, Sarah).

 

[FinanceDude]

But then my parents tell me that they are concerned for him and his wife, as they didn't think he and his wife had much money to live off in retirement. He was about 60 or so, and had been an FA for as long as I could remember.

Your parents "didn't think" the FA had money, that's not a material fact.........

 

[FinanceDude]

I don't say it too much, but you folks sure have a broad ass paint brush for a profession that one of your hard-working moderators spends all damn day doing. I'm just saying...

+1

 

[FinanceDude]

He could justify putting me in a 5.75% load fund that does the exact same thing as a Vanguard fund because it's one year return was .7% higher. It had nothing to do (in his mind) with that big commission he was going to get. Seriously, he just didn't think that way. Great guy, good intentions, but just wrong. He was adding no value at relatively high costs.

How was he wrong? If he put you in Vanguard funds was he giving value? No he was not..........

 

[FinanceDude]

You've identified the heart of my question, and the reason for the post. Why doesn't a competitive market supply enough labor and competitors to bring salaries and fees in financial services down to a level consistent with other services in the economy?

Are you aware that MOST FAs are not paid a salary? How is comparing a TD Ameritrade, Schwab or Vanguard salaried advisor who is given a book of business to manage, comparable to an FA who has to build a book of clients from scratch? I get calls from Schwab and Ameritrade every couple months wanting me to work there. As soon as I want to take a 70% paycut and get micromanaged, I'll be there..........

Most VG "advisors" are lucky to make $35,000 -$40,000 a year........sorry, I didn't get a degree in finance to only make that..........

 

[Gone4Good]

Are you aware that MOST FAs are not paid a salary?

Did you actually read the original post? There was a list of six groups of highly paid people before the product even comes to the FA. And the list wasn't even complete, just for starters it left off the six to seven figure sell side analysts who help sales people market new deals. The comment wasn't only directed at FA's, but whatever the FA takes out of the equation is in addition to what all these other folks take.

The question remains, how can it be that there are so many millionaires between an institution who wants to sell a product and someone who wants to buy it? Can you think of another industry where this is true?

Are you aware that MOST FAs are not paid a salary?

Maybe while we're re-reading posts, you can look at this one about conflicts of interests. Having an FA who has to sell me something, anything, to put food on his table is the worst possible arrangement I can imagine.

And it's telling that the salaried folk make far less than the commissioned folk. What it tells me is that the value of providing non-transaction related advice is less than the value of a motivated sales person. How is that good for the customer?

 

[Sarah in SC]

Having an FA who has to sell me something, anything, to put food on his table isn't a good place to start.

I never thought about this, but now I know that I should have been way more suspicious of that realtor who sold us our land! And all those other people in my life who benefit when I buy something! Yikes! This conflict of interest thing has some far reaching implications...
Even that so-called farmer I buy grass-fed beef has been influencing my purchases...maybe even convincing me to buy pricey steaks instead of ground beef.

lol...and yeah, I get it...we've got the SEC requirements and all that jazz to disclose conflicts of interest...and so did my realtor...but not my farmer.

 

[Gone4Good]

I never thought about this, but now I know that I should have been way more suspicious of that realtor who sold us our land!

Good point! I recall a relator showing me a property when I was in the market for my first house. I go into the back yard and find a set of train tracks. The relator had sold the property as "close to the train station" but never mentioned the train passed within 50 feet of the back yard. When I pointed out the tracks she said "With all of those trees, you won't even hear it."

So yeah, maybe you should be more suspicious of people who are paid to sell you something regardless of whether it is in your best interest.

Edit to add: Incidentally, the property I ended up buying didn't use a realtor or a have a fee. And no, I didn't trust the seller about anything I could verify.

 

[MasterBlaster]

Good point! I recall a realtor showing me a property when I was in the market for my first house. I go into the back yard and find a set of train tracks. The Realtor had sold the property as "close to the train station" but never mentioned the train passed within 50 feet of the back yard. When I pointed out the tracks she said "With all of those trees, you won't even hear it."

So yeah, maybe you should be more suspicious of people who are paid to sell you something regardless of whether it is in your best interest.

In my state, the buyer gets full disclosure in escrow of everything within a mile or more that would affect the value/quality of the property. Things like trains and waste dumps and commercial ventures have to be disclosed.

the buyer has to sign off that they are aware of the area and surroundings.

 

[Gone4Good]

In my state, the buyer gets full disclosure in escrow of everything within a mile or more that would affect the value/quality of the property.

I don't think New Jersey has that law. It sounds like a good one.

But when and how stuff is disclosed is important, too. If the realtor says "I have this property with a train running through the back yard, I can show it to you if you want, but the tracks are really close. Do you want to see it?" The answer is most likely "no". So what they do instead is they walk you through the front door and try and get you invested in the kitchen, and the curb appeal, and whatever else there is that might get you excited. Only when you're on the hook do you hear, "there is just this one small thing you should know."

A relator on salary may take the first approach which is good for the customer but not so good for the company. A relator on 100% commission is going to be hard pressed to survive long doing the same.

Of course it's pretty clear that train tracks running through the yard is a bad thing. It's far more difficult to determine whether a complicated annuity product is. And therefore it is far easier for the seller to play up the kitchen and downplay the train tracks. But I'm sure that rarely happens, I'm just paranoid.

 

[FinanceDude]

I don't think New Jersey has that law. It sounds like a good one.

But when and how stuff is disclosed is important, too. If the realtor says "I have this property with a train running through the back yard, I can show it to you if you want, but the tracks are really close. Do you want to see it?" The answer is most likely "no". So what they do instead is they walk you through the front door and try and get you invested in the kitchen, and the curb appeal, and whatever else there is that might get you excited. Only when you're on the hook do you hear, "there is just this one small thing you should know."

A relator on salary may take the first approach which is good for the customer but not so good for the company. A relator on 100% commission is going to be hard pressed to survive long doing the same.

Of course it's pretty clear that train tracks running through the yard is a bad thing. It's far more difficult to determine whether a complicated annuity product is. And therefore it is far easier for the seller to play up the kitchen and downplay the train tracks. But I'm sure that rarely happens, I'm just paranoid.

In your world, EVERYONE should be on a salary, however, WHO would bring in the revenue to pay those salaries? Let's get rid of ALL salespeople in the USA, outlaw them, and see how long the economy takes to grind to a halt...........

 

[Gone4Good]

In your world, EVERYONE should be on a salary,

No, what I'm saying is that I'm not going to trust someone who gets paid to sell me something. If I can avoid dealing with that person, I will. If I can't, I will try to corroborate whatever I'm being told by an independent source. The amount of effort I dedicate to getting that information is a direct function of the importance of the transactions. If I'm buying sneakers then I'm going to dedicate zero time to avoid falling for a sales job. But if we're talking about my entire financial future, there is almost no amount of time that is too great.

Maybe it's worth knowing, maybe it's not, but I too made a living selling financial advice. Not as a FA but as a sell side analyst. So I understand first hand the conflicts that exist and the effects they have on the kind and quality of advice given to both retail, and in my case, institutional investors. So to the extent you feel like I'm casting aspersions on your career, rest assured, I'm casting them on my own as well.

 

[harley]

How was he wrong? If he put you in Vanguard funds was he giving value? No he was not..........

I'm not sure how to take this? If it's sarcasm, I don't get it. A lower fee with no load is significant value over the other fund, especially with pretty much equal returns over time. If it's not sarcasm, it's about the best proof of what I said about justifying conflicts of interest that could ever be made.

I never thought about this, but now I know that I should have been way more suspicious of that realtor who sold us our land!

You should absolutely be suspicious of realtors. Their main interest is in closing the deal. If it costs you an extra $30K because they influence you to buy quickly, that only costs them $900. Not a big deal for them, but huge for you.

As far as your farmer or any other salesman, sure, be suspicious of their sales pitch too. But they likely can't do as much damage to your wallet as a FA or a realtor. Unless those are REALLY expensive steaks.

 

[FinanceDude]

I'm not sure how to take this? If it's sarcasm, I don't get it. A lower fee with no load is significant value over the other fund, especially with pretty much equal returns over time. If it's not sarcasm, it's about the best proof of what I said about justifying conflicts of interest that could ever be made.

Vanguard exists for the DIY. If you want to DIY, do it an Vanguard or somewhere like that. Not everyone needs or wants an FA, but some do. It never ceases to amaze me how little folks on here know about the FA business, but act as if they do...........

So, say I offer customized fee-based Vanguard ETF portfolios for my clients at 50 basis points a year, are you in?

 

[FinanceDude]

Looks like I killed this thread..........

 

[haha]

Looks like I killed this thread..........

A terrible loss.

 

[FinanceDude]

A terrible loss.

Not really............