Becoming a Financial Advisor
Becoming a Financial Advisor
I'm at a crossroads in my life and thinking of what comes next. My own money is completely in Vanguard index funds that I rebalance every year. I've counseled many friends and family to do the same, but with mixed results. Sometimes it's just a matter of follow through. Sometimes they meet an advisor and its like who are you going to believe, a professional or your friend that manages his own money? So it occurs to me that there is probably a need for people who really could manage their own money, but need some hand holding and assurance that a "professional" is giving them that advice.
I'm reasonably financially secure so I wouldn't need to do it for the money and could charge accordingly. My thought was to offer my services for free to anyone under a certain asset threshold or income level and then offer my services at a reasonable cost on a fee-only basis to anyone with assets or income beyond that threshold.
Any feedback on the above? Is what I'm planning feasible? I know that there are compliance costs and such and I assume that I might have to work for an advisory firm that may or may not be thrilled by my plan. I live in California if that has any bearing on anything.
I'm reasonably financially secure so I wouldn't need to do it for the money and could charge accordingly. My thought was to offer my services for free to anyone under a certain asset threshold or income level and then offer my services at a reasonable cost on a fee-only basis to anyone with assets or income beyond that threshold.
Any feedback on the above? Is what I'm planning feasible? I know that there are compliance costs and such and I assume that I might have to work for an advisory firm that may or may not be thrilled by my plan. I live in California if that has any bearing on anything.
Re: Becoming a Financial Advisor
subbed ... you're situation is my situation.
Re: Becoming a Financial Advisor
I think the barrier to entry which includes a years-long apprenticeship is too high for this. And then it takes a lot of work to build a client base. Do you want to put in that work in order to give people vanilla advice for little to no money?
Re: Becoming a Financial Advisor
And when your "clients" lose money?
-
- Posts: 18461
- Joined: Tue Dec 31, 2013 6:05 am
- Location: 26 miles, 385 yards west of Copley Square
Re: Becoming a Financial Advisor
What do people want to know?
How much will I need to retire?
you: Figure out how much you spend now. Multiply by 25. That's how much you need.
What should I invest in?
you: 3 fund portfolio. Next?
What should my AA be?
you: Your age in bonds. The rest in Equity. If you want international, 25% of equity.
you: That'll be $100 please.
How much will I need to retire?
you: Figure out how much you spend now. Multiply by 25. That's how much you need.
What should I invest in?
you: 3 fund portfolio. Next?
What should my AA be?
you: Your age in bonds. The rest in Equity. If you want international, 25% of equity.
you: That'll be $100 please.
Bogle: Smart Beta is stupid
Re: Becoming a Financial Advisor
The little to no money isn’t a concern for me, though the apprenticeship is a good point.
Re: Becoming a Financial Advisor
As I noted in my original post, I’ve counseled lots of my friends with mixed results. This would be an opportunity to help more people. Income is not a big concern for me.Jack FFR1846 wrote: ↑Thu Apr 25, 2019 12:21 pm What do people want to know?
How much will I need to retire?
you: Figure out how much you spend now. Multiply by 25. That's how much you need.
What should I invest in?
you: 3 fund portfolio. Next?
What should my AA be?
you: Your age in bonds. The rest in Equity. If you want international, 25% of equity.
you: That'll be $100 please.
Re: Becoming a Financial Advisor
Doing financial planning and investment advice can be very rewarding for both you (and I’m not talking about money) and your clients.
What you are suggesting sounds reasonable. It will take time, money and effort on your part.
Going the “fee only” route is the honest way to go (just like Vanguard).
Always treat others the same way you would treat Jack Bogle if he was your client.
Good Luck to you.
What you are suggesting sounds reasonable. It will take time, money and effort on your part.
Going the “fee only” route is the honest way to go (just like Vanguard).
Always treat others the same way you would treat Jack Bogle if he was your client.
Good Luck to you.
Re: Becoming a Financial Advisor
And when they lose money.....
Re: Becoming a Financial Advisor
So then, what is the purpose?
My point is that the underlying principle the OP is highlighting is the behavioral phenomenon where people don't respect/value information that seems simple or free. However that is exactly what the OP seems to be proposing to some degree here.
My two cents, just counsel them to read/discover on their own. I really don't see much of an upside here, particularly because the OP seems to feel as if he would be doing people "a favor". Hence my question "When they lose money...."
-
- Posts: 291
- Joined: Mon Dec 07, 2015 9:59 pm
Re: Becoming a Financial Advisor
Give it a go. There was a post a few days ago about how easy it is to get the Series 65 license, so you can hang your own shingle as an RIA doing that. Unsure what the start-up and ongoing regulatory costs are as an RIA, but looking at small firms on https://www.adviserinfo.sec.gov/IAPD/Co ... earch.aspx I don't think the regulatory filings look that complicated.
- White Coat Investor
- Posts: 17338
- Joined: Fri Mar 02, 2007 8:11 pm
- Location: Greatest Snow On Earth
Re: Becoming a Financial Advisor
I've experienced this as well. I charge $5K to fly across the country to give a talk. Dozens to hundreds show up and thank me profusely. Then I give the same talk for free at my local alma mater and perhaps 25/400 medical students show up. Something about "a prophet in his own country" maybe?
But yes, I agree that paying more does make you pay a little more attention and value the information a bit more even if it is the same information. That actually affected how I priced one of my products, as silly as it sounds, I thought it would do more overall good (although admittedly more good per buyer for fewer buyers) at a higher price.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy |
4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
Re: Becoming a Financial Advisor
-
- Posts: 11
- Joined: Wed Apr 24, 2019 11:06 pm
- Location: U.S.A.
Re: Becoming a Financial Advisor
It sounds like you are a "teacher." Go for it. You'll figure it out as you go.
Ask for advice, but do what you think is best. -Greek Proverb
Re: Becoming a Financial Advisor
....they are apt to blame the advisor for losing it. A reason some investors use advisors is because they then have someone to blame if things go wrong.
OP, this piece by Michael Kitces on "Do Clients Hire Advisors For Their Experties, Or Simply to Pass The Buck on Blame?" may be of interest:
https://www.kitces.com/blog/steffel-fin ... nsibility/
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
-
- Posts: 1115
- Joined: Tue Jul 29, 2014 11:29 am
Re: Becoming a Financial Advisor
Getting a fee for babysitting AUM is the nearest thing to a tollboth. Go for it. Some of us actually have do something to get paid.
Oh, and WC Fields had some thoughts on this...
Oh, and WC Fields had some thoughts on this...
Re: Becoming a Financial Advisor
Great point. I also realized that I will be competing with a lot of other advisors who also offer "free" advice and how do I differentiate myself by telling people my advice actually is free and I'm not trying to sell you products that will generate a commission for myself. I guess that becomes a question for this board...how can I market myself so that people get that I'm giving advice that will benefit them and not me.coachd50 wrote: ↑Thu Apr 25, 2019 12:45 pm
So then, what is the purpose?
My point is that the underlying principle the OP is highlighting is the behavioral phenomenon where people don't respect/value information that seems simple or free. However that is exactly what the OP seems to be proposing to some degree here.
My two cents, just counsel them to read/discover on their own. I really don't see much of an upside here, particularly because the OP seems to feel as if he would be doing people "a favor". Hence my question "When they lose money...."
Re: Becoming a Financial Advisor
I am planning on doing the exact same, OP. Good luck. Plan is to launch (beta/private) later this year for a very limited group. Then quit full time job sometime early next year.
I will be charging all clients however, because I do think that people will (i) be more apt to follow advice if they are paying for it, (ii) I want them to continually evaluate whether i am adding value, and (iii) I am concerned I won't do as a good job if I don't feel like I need to "deliver". I don't want that many clients anyway, since this is not about making money - its about staying busy, staying helpful, exploring my interests. So I agree with some of the other commenters about charging.
I also think that a lot of people who are "not interested" in finances will not do the reading that you point them too. I expect that a number of my clients will want to be completely hands off, though I will offer to walk them through everything (even if my teaching them results in them dropping me as an advisor, or scaling back usage). But you will need some manner of getting clients - unless you are already networking (which has been my approach). Also, my partner (and various siblings) are in high income professions and i expect a substantial number of clients will come through those contacts.
I will be charging all clients however, because I do think that people will (i) be more apt to follow advice if they are paying for it, (ii) I want them to continually evaluate whether i am adding value, and (iii) I am concerned I won't do as a good job if I don't feel like I need to "deliver". I don't want that many clients anyway, since this is not about making money - its about staying busy, staying helpful, exploring my interests. So I agree with some of the other commenters about charging.
I also think that a lot of people who are "not interested" in finances will not do the reading that you point them too. I expect that a number of my clients will want to be completely hands off, though I will offer to walk them through everything (even if my teaching them results in them dropping me as an advisor, or scaling back usage). But you will need some manner of getting clients - unless you are already networking (which has been my approach). Also, my partner (and various siblings) are in high income professions and i expect a substantial number of clients will come through those contacts.
Re: Becoming a Financial Advisor
That is my point. The OP seems to think that his gesture will be received as a magnanimous one, and that relationships forged with those counseled will be live enrichening. I am just pointing out the very real possibility that things will get sticky in a downturn.Fallible wrote: ↑Thu Apr 25, 2019 1:38 pm....they are apt to blame the advisor for losing it. A reason some investors use advisors is because they then have someone to blame if things go wrong.
OP, this piece by Michael Kitces on "Do Clients Hire Advisors For Their Experties, Or Simply to Pass The Buck on Blame?" may be of interest:
https://www.kitces.com/blog/steffel-fin ... nsibility/
-
- Posts: 1115
- Joined: Tue Jul 29, 2014 11:29 am
Re: Becoming a Financial Advisor
Getting a fee for babysitting AUM is the nearest thing to a tollboth. Go for it. Some of us actually have do something to get paid.
Oh, and WC Fields had some thoughts on this...
Fields also nailed the annuity thing in "It's a Gift."
Oh, and WC Fields had some thoughts on this...
Fields also nailed the annuity thing in "It's a Gift."
Re: Becoming a Financial Advisor
My thought was to only offer free services to people who otherwise couldn't afford to pay a fee-only advisor. Above a certain income or asset level, I would charge.TheMadEph wrote: ↑Thu Apr 25, 2019 1:52 pm I am planning on doing the exact same, OP. Good luck. Plan is to launch (beta/private) later this year for a very limited group. Then quit full time job sometime early next year.
I will be charging all clients however, because I do think that people will (i) be more apt to follow advice if they are paying for it, (ii) I want them to continually evaluate whether i am adding value, and (iii) I am concerned I won't do as a good job if I don't feel like I need to "deliver". I don't want that many clients anyway, since this is not about making money - its about staying busy, staying helpful, exploring my interests. So I agree with some of the other commenters about charging.
I also think that a lot of people who are "not interested" in finances will not do the reading that you point them too. I expect that a number of my clients will want to be completely hands off, though I will offer to walk them through everything (even if my teaching them results in them dropping me as an advisor, or scaling back usage). But you will need some manner of getting clients - unless you are already networking (which has been my approach). Also, my partner (and various siblings) are in high income professions and i expect a substantial number of clients will come through those contacts.
Re: Becoming a Financial Advisor
By directing them to sites such as this, books written by people who share your philosophy.mchampse wrote: ↑Thu Apr 25, 2019 1:50 pmGreat point. I also realized that I will be competing with a lot of other advisors who also offer "free" advice and how do I differentiate myself by telling people my advice actually is free and I'm not trying to sell you products that will generate a commission for myself. I guess that becomes a question for this board...how can I market myself so that people get that I'm giving advice that will benefit them and not me.coachd50 wrote: ↑Thu Apr 25, 2019 12:45 pm
So then, what is the purpose?
My point is that the underlying principle the OP is highlighting is the behavioral phenomenon where people don't respect/value information that seems simple or free. However that is exactly what the OP seems to be proposing to some degree here.
My two cents, just counsel them to read/discover on their own. I really don't see much of an upside here, particularly because the OP seems to feel as if he would be doing people "a favor". Hence my question "When they lose money...."
Lets face it, the financial advice most that frequent this board adhere to can be put in a pamphlet as opposed to a book.
How can one in good conscious create a business plan to disseminate a pamphlet worth of thoughts and theories that aren't even original in nature?
- willthrill81
- Posts: 32250
- Joined: Thu Jan 26, 2017 2:17 pm
- Location: USA
- Contact:
Re: Becoming a Financial Advisor
That's better than my track record, which hasn't been mixed much at all. Friendly advice I've offered and at times even been solicited for has been robustly ignored nearly every time.mchampse wrote: ↑Thu Apr 25, 2019 12:24 pmAs I noted in my original post, I’ve counseled lots of my friends with mixed results. This would be an opportunity to help more people. Income is not a big concern for me.Jack FFR1846 wrote: ↑Thu Apr 25, 2019 12:21 pm What do people want to know?
How much will I need to retire?
you: Figure out how much you spend now. Multiply by 25. That's how much you need.
What should I invest in?
you: 3 fund portfolio. Next?
What should my AA be?
you: Your age in bonds. The rest in Equity. If you want international, 25% of equity.
you: That'll be $100 please.
I believe that your heart is in the right place. I've actually considered a similar route myself post retirement, but the problem you're likely to encounter is the same as that of most consultants: hard work on your part followed by the client doing something else entirely.
The Sensible Steward
Re: Becoming a Financial Advisor
Have you thought about working for a company that best approximates the Boglehead philosophy like Betterment?
-
- Posts: 12262
- Joined: Wed Jan 11, 2017 7:05 pm
Re: Becoming a Financial Advisor
OP,
I posted a similar idea and got some good feedback, not all positive. The big problem is getting certified and maintaining insurance, compliance, etc. The only way to get CFP certification is to work in the industry, which I am unwilling to do.
viewtopic.php?t=214368
"Financial Coaching" is one possible model that might work.
https://www.kitces.com/blog/financial-c ... ecome-one/
I posted a similar idea and got some good feedback, not all positive. The big problem is getting certified and maintaining insurance, compliance, etc. The only way to get CFP certification is to work in the industry, which I am unwilling to do.
viewtopic.php?t=214368
"Financial Coaching" is one possible model that might work.
https://www.kitces.com/blog/financial-c ... ecome-one/
Re: Becoming a Financial Advisor
Ah, the 'ole pester the friends and family for contacts. The first play in every FA's playbook and every young college grad that gets duped into working for EJ, ML, et all.TheMadEph wrote: ↑Thu Apr 25, 2019 1:52 pm But you will need some manner of getting clients - unless you are already networking (which has been my approach). Also, my partner (and various siblings) are in high income professions and i expect a substantial number of clients will come through those contacts.
Sounds delightful.
Re: Becoming a Financial Advisor
Glad you clarified that WC Fields reference. Whenever I hear his name, I usually think of the phrase "...never give a sucker an even break, or smarten up a chump", which I've always assumed was the motto of so many in the FA field.skepticalobserver wrote: ↑Thu Apr 25, 2019 1:54 pm Getting a fee for babysitting AUM is the nearest thing to a tollboth. Go for it. Some of us actually have do something to get paid.
Oh, and WC Fields had some thoughts on this...
Fields also nailed the annuity thing in "It's a Gift."
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers
Re: Becoming a Financial Advisor
My question about financial coaching is how many people actually change their habits and actually keep them changed? While well meaning, I suspect that financial coaching has some similarities to the diet industry.aristotelian wrote: ↑Thu Apr 25, 2019 2:00 pm OP,
I posted a similar idea and got some good feedback, not all positive. The big problem is getting certified and maintaining insurance, compliance, etc. The only way to get CFP certification is to work in the industry, which I am unwilling to do.
viewtopic.php?t=214368
"Financial Coaching" is one possible model that might work.
https://www.kitces.com/blog/financial-c ... ecome-one/
-
- Posts: 12262
- Joined: Wed Jan 11, 2017 7:05 pm
Re: Becoming a Financial Advisor
If someone is willing to pay for the advice, they should be able to follow it. More like a personal trainer than a fad diet.
-
- Posts: 544
- Joined: Fri Nov 01, 2013 2:17 pm
Re: Becoming a Financial Advisor
What about losing money? Is that important?
What about the $5k per year in registration and compliance costs? Is that not important?
If you’re charging money, you have to register. And that costs money. Either do it for free, or charge plenty of money.
- AerialWombat
- Posts: 3102
- Joined: Tue May 29, 2018 1:07 pm
- Location: Cashtown, Cashylvania
Re: Becoming a Financial Advisor
deleted
Last edited by AerialWombat on Fri Feb 04, 2022 7:38 pm, edited 1 time in total.
This post is a work of fiction. Any similarity to real financial advice is purely coincidental.
Re: Becoming a Financial Advisor
I think you are going to be disappointed trying to convince the hand holders. Many want unreasonable assurances and will go for the FA who sweet-talks them with things they want to hear.mchampse wrote: ↑Thu Apr 25, 2019 11:37 am Sometimes they meet an advisor and its like who are you going to believe, a professional or your friend that manages his own money? So it occurs to me that there is probably a need for people who really could manage their own money, but need some hand holding and assurance that a "professional" is giving them that advice.
Re: Becoming a Financial Advisor
Not to mention the awkwardness that will undoubtedly come when the market slows down/drops/tumbles. Because remember, this is you counseling other bogleheads. This is you "arm twisting" people to conform to the boglehead mentality.zlandar wrote: ↑Thu Apr 25, 2019 6:51 pmI think you are going to be disappointed trying to convince the hand holders. Many want unreasonable assurances and will go for the FA who sweet-talks them with things they want to hear.mchampse wrote: ↑Thu Apr 25, 2019 11:37 am Sometimes they meet an advisor and its like who are you going to believe, a professional or your friend that manages his own money? So it occurs to me that there is probably a need for people who really could manage their own money, but need some hand holding and assurance that a "professional" is giving them that advice.
Re: Becoming a Financial Advisor
There is a market for this. It is serviced by fee-only fiduciary financial planners and advisors.
Okay. I can understand the appeal of "free".I'm reasonably financially secure so I wouldn't need to do it for the money and could charge accordingly. My thought was to offer my services for free to anyone under a certain asset threshold or income level and then offer my services at a reasonable cost on a fee-only basis to anyone with assets or income beyond that threshold.
Why would folks above the threshold want you rather than other advisors? Would you compete based on low cost?
It's feasible. Particularly if you lots of time to learn and find a client base without relying on an income.Is what I'm planning feasible?
Yup, there is that.I know that there are compliance costs and such and I assume that I might have to work for an advisory firm that may or may not be thrilled by my plan.
Depending on the credentials you choose, you might not have to work for a firm. You could just hang out a shingle.
This isn't just my wallet. It's an organizer, a memory and an old friend.
Re: Becoming a Financial Advisor
It's only pestering if you need the clients - if the clients need you, it's not pestering, its providing a service.FlyAF wrote: ↑Thu Apr 25, 2019 2:02 pmAh, the 'ole pester the friends and family for contacts. The first play in every FA's playbook and every young college grad that gets duped into working for EJ, ML, et all.TheMadEph wrote: ↑Thu Apr 25, 2019 1:52 pm But you will need some manner of getting clients - unless you are already networking (which has been my approach). Also, my partner (and various siblings) are in high income professions and i expect a substantial number of clients will come through those contacts.
Sounds delightful.
The whole point is that I am doing this after I have made all my money and I don't need the money. (Not to mention we can live super comfortably on my wife's high income, even if I didn't work at all). That was in the top part of my comment, which you skipped over, so that you could make a point reflecting your unfortunate personal experience that wasn't germane to my point (or OP's goal). The point was that if OP wants to help people who don't know/care about financial planning, how is he going to find those people to offer his services? I have plenty of contacts who, when i mention what my plan is for after my early retirement, indicate that they would want to be a client. Obviously a lot of those will dissappear when I actually start my practice, but... oh well - I don't care cause i don't want to be overworked anyway.... If I wanted to make lots of money and work 40+ hours a week I would stay at my current role.
-
- Posts: 544
- Joined: Fri Nov 01, 2013 2:17 pm
Re: Becoming a Financial Advisor
Boy, you can say that again.
"Hi, my name is mchampse, and I'd like to come to work at your RIA. My business plan is to give away our principal product (which is our knowledge) for free to half the clients. Then for the other half, I plan to price my services in a way that will not be profitable for neither me nor the company. Your firm will most likely lose money if you hire me. When can we set up an interview?"
- Dialectical Investor
- Posts: 527
- Joined: Mon Dec 03, 2018 10:41 pm
Re: Becoming a Financial Advisor
Part of being a professional is telling a good story and selling a good image. A lot of people aren't going to find your investing philosophy compelling at face value, and they might even be offended to hear it, so you would need to appeal to people in different ways. Oftentimes the facts of the situation don't matter as much as you think, which can mean trouble for you if the facts are on your side and you're overly reliant on them.mchampse wrote: ↑Thu Apr 25, 2019 11:37 am
Sometimes they meet an advisor and its like who are you going to believe, a professional or your friend that manages his own money? So it occurs to me that there is probably a need for people who really could manage their own money, but need some hand holding and assurance that a "professional" is giving them that advice.
Re: Becoming a Financial Advisor
If your thoughts are to help others there are many organizations that would jump at the chance to get these free services.
My spouse is in the health industry, and has been coaching individuals on how to improve their health. Her clients pay her to not only teach them but she drives them to be accountable to her. She also will spend many hours working/volunteering with different organizations to help those that are less fortunate than we are. Ex. last night she was with a women's group where the women were once homeless and are now getting back on their feet.
If creating an income is not a concern, seek out these groups, they will listen the most.
My spouse is in the health industry, and has been coaching individuals on how to improve their health. Her clients pay her to not only teach them but she drives them to be accountable to her. She also will spend many hours working/volunteering with different organizations to help those that are less fortunate than we are. Ex. last night she was with a women's group where the women were once homeless and are now getting back on their feet.
If creating an income is not a concern, seek out these groups, they will listen the most.
Re: Becoming a Financial Advisor
Greenman72 wrote: ↑Fri Apr 26, 2019 12:01 pmBoy, you can say that again.
"Hi, my name is mchampse, and I'd like to come to work at your RIA. My business plan is to give away our principal product (which is our knowledge) for free to half the clients. Then for the other half, I plan to price my services in a way that will not be profitable for neither me nor the company. Your firm will most likely lose money if you hire me. When can we set up an interview?"