I started my Not Experts category so I would have a common location for my ramblings about the mainstream financial media and how they know little about managing money.
But it appears that the category may have broader applications than I first anticipated.
As exhibit #1 of that, let me take you to a recent conversation I had.
A Long Path to Financial Advisor
Several months ago when I was still working, we were looking to hire a VP of Sales. Our previous one had been fired prior to my arrival and one of my key duties was to hire a new one.
I found an awesome guy who agreed to move to Colorado, but then had some family issues. He had to decline the position since he could not move. I was disappointed as he was a gem both professionally and personally. I’d worked with him before and he’s a good friend and colleague.
But he did agree to consult for us remotely and to help me find a great VP to take his place.
We looked FOREVER to find someone for one main reason:
My employer was cheap and had a limited budget to pay the VP of Sales.
Most great salespeople earn a ton of money. Since we had about 70% of the salary we needed to attract top talent, we were stuck trying to find a great performer who believed in our mission so much that he or she would take a substantially lower salary.
As you might imagine, this was a difficult task to say the least. We got what we were willing to pay for and interviewed many people who would take the salary but were way below what we wanted professionally.
One such person was Dan.
Dan had held seven or so jobs throughout his career, all in increasing levels of sales responsibility. A couple red flags were that 1) he never stayed with a company more than four years (many were two years or less) and 2) was always fired for “philosophical differences” with his bosses.
Since working for others wasn’t going well, Dan decided to start and run his own business. He had done that for five years or so, but it was going nowhere, was losing cash, and he was in the process of selling it (not sure who would by it). As such, he needed a job. And fast.
As I write this, I wonder why we ever talked to him in the first place. One reason was that he connected with my crazy boss who saw something in him and just “knew” he was a “winner”. Ugh. The other reason was we were desperate.
In the course of interviewing Dan I also got the idea that his personal finances were in shambles. His business had been failing for years and he’d just been through a messy and financially tough divorce. He NEEDED a job badly.
Needless to say, we didn’t hire him, though unbelievably we did have him in the office for several interviews (he was local). I got to see and talk to him a few times and got to “know” him (as much as you get to know people through an interview process).
How Someone Who Knows Nothing about Money Becomes a Financial Advisor
Then a couple weeks ago I received a LinkedIn invitation from Dan. My policy is to accept almost any LI invite as long as I know the person (it’s part of my networking strategy — which is why I have over 1,800 connections there), so I accepted his.
I then received the following email from him (with edits to protect specifics):
Thanks for connecting with me on LinkedIn. I didn’t know you had left [former employer]…do you have time for a coffee? Name a day/time that is good for you. Looking forward to reconnecting.
Then I noticed his title and employer on his email signature. It read:
Merrill Lynch Inc.
Not Going to Be My Financial Advisor
I immediately knew why he wanted to have coffee: 1) to solicit me as a ML client and/or 2) ask me to recommend others who may need his services.
I was going to accept since I enjoy free coffee, but I had just heard a podcast about how taking meetings that really don’t benefit you are huge time sucks. They cost you much more than you might think. There’s travel time there and back, the meeting itself, and the disruption of the day that costs time as well (for me, my most productive time of the day is before 4 pm — did I want/need to give this guy any time simply to pitch me on his services?)
So instead of accepting I emailed him back with the following:
Hi, Dan. It’s good to connect on LinkedIn.
Yes, I retired in August and am enjoying the life quite well.
I’m actually fairly busy and don’t really have time in the foreseeable future for a meet-up. Christmas season is upon us!
If it’s just a coffee to catch up, we both probably don’t have that much to catch up on (unless you have something specific in mind).
If it’s business related in some way, let me know what you’re thinking via email and I’ll be more than happy to give you any thoughts/help I think is appropriate.
I had to write this three or four times to be both cordial and non-committal. I wanted to be nice but not give the impression that I would do anything to help him (since I wouldn’t).
Here’s his response:
A couple things come to mind:
1. Would like to know how [former employer] is doing.
2. Would like to ask your advice on ways to reach the [industry] community (specifically executives in [industry], but also key [professions]) to earn their financial services business.
The more ideas/advice I can gather, the better prepared I become to build business with Merrill Lynch. I would love your perspective.
Now I knew this was not a meeting or conversation I wanted to have.
I wanted to tell him what I really thought (and almost did), but then re-wrote my response as follows:
I can’t really answer the first question. I really don’t have access into how [former employer] is doing. I communicate with several people there but we rarely talk business.
You probably know the [industry] business better than I do, so I’m afraid I can’t be much help there.
I’m going to be honest with you since we know each other and my thoughts may give you some useful perspective. I would never recommend Merrill Lynch to anyone I know. Their fees are too high and people can get the same products for much less money elsewhere (Vanguard, Fidelity). I also find that their advisors are really sales people, not skilled financial professionals. I may be wrong on this, but that’s my perception.
I wish you the best in your business and hope you can prove my thoughts wrong.
He responded back with this:
Thanks for the honest answer. Obviously I don’t agree with you, but I respect your take nonetheless. My experience has been different…the team here is highly professional and the clients seem to be here because of the great advice/care they are receiving. I look forward staying connected with you and hope we can still grab coffee at some point in the future.
I do respect him for at least getting back to me. I was actually surprised he responded. He was kind of a hot head in one of the interviews so I thought he’d just blow me off.
Not Experts: Many Financial Advisors
That’s what I sent him, but what I really wanted to say would have included these points:
- If I was to choose a financial services business to buy from, ML would probably be the last on my list. Unless they’ve changed from when I had experience with them, their fund fees are way too high. They offer the same investments as others but at a much higher cost. Why pay $5 for a gallon of milk when you can get it for $2.50?
- If I was to work with a financial advisor, I’d want one with knowledge, experience, my best interests in mind, someone who was not a sales person, and someone who was actually financially well off himself. You are none of these. I REALLY thought about meeting with him and having him ask me to use/recommend him. At that point I would have asked how he was doing financially (which I knew was poorly) and followed up with “Why should anyone take advice from you when you have no experience and can’t manage your own money?” But 1) this would have taken time I didn’t want to give and 2) it would have been mean, so I resisted.
- Why do I need your advice? I’m retired and you’re broke.
- You know next to nothing about creating wealth. You are a sales person designed to turn my money into your money. Why would I ever work with you? Or why would I recommend my friends to you?
- Given the above and that we barely know each other, why would I want to give you 2-3 hours (all told) of my free time?
Thankfully, this blog allows me to vent and say what I really want. So I can be kinder when I actually respond to people, which is what I want to be. But where does he get off even asking me? We hardly know each other. And he’s certainly not qualified.
Back to my original point: we have another type of entry for our Not Experts category — people who become “financial advisors” who have no business being money advisors.
They are good at something (if they remain employed long), but it’s not financial advising — it’s SALES! They stay employed because they can sell their high-priced, inferior products to enough people to earn a good amount for the company. It’s not because they help people become wealthy (unless it’s by accident).
I think we’re seeing a trend here. Many people who hold themselves out as financial experts are truly experts, just in something besides finance (journalism, sales, etc.).
How about you? Have you ever been pitched by someone who wanted to manage your money and you knew 1) you had more knowledge and skill than they did and/or 2) they were highly unqualified? How did you respond?
Agree with many of your points. We have had to deal with FA with my wife’s 403b due to not taking some benefits and got money contributed to 403b instead and my impression is the used car salesman of this generation. We NEEDED to meet with a FA for 403b contributions. They don’t disclose all , changes to plans, rolling over due to no longer participating in plans. That was early in my financial education and I did not really understand 403b’s. That is the reason why we stop contributing due to educating myself and learning about their higher fees than my 401k was charging.
One of my hubby’s childhood friends asked us to meet to discuss life and such things. Turns out he had recently started selling financial services and wanted to pitch us. We met him due to the childhood connection. It was an interesting conversation. He really couldn’t tell me anything I didn’t know. And I was the one informing him instead. Unfortunately we did not get any coffee.
I’ve been pitched to by someone at church…. I actually helped him out when he first started his business in financial advising by shooting some business portraits and designing his identity. I know he hadn’t been in FA prior to starting the business and all of a sudden he was a CFP. I don’t necessarily know more than him but I sure don’t believe he is qualified to handle my money. I politely turned him down and said we were happy with our current financial advisors. He called me again several years later to update the portraits after he closed his business and went to work for someone else. I also politely turned that down for various reasons.
I know we’re going to get pitched again this weekend when we attend a Christmas party (put on by a FA company) with a family member whose friend works for the FA.
Mike H says
I haven’t had Financial advisers harass me but I’ve had many from Amway, Unicity, etc push me with their pitches. Usually a meal or a drink was included but it was painful to listen to otherwise.
Well, I can say that they work for some who do sign up with them so it’s a case for different strokes for different folks.
I lived in the hometown of Amway so I got my fair share of “can we get together for lunch and talk?” invitations.
I fell for the first one (I did get a free lunch) but after that I knew what they were up to.
Funny thing is my wife befriended a lady here in CO whose husband is big into Amway. They kept wanting to go out with us to talk about a “business opportunity.” I kept saying no and my wife eventually had breakfast with her friend to get them off our back.
ESI, that is a fascinating experience, really admire how you handle your interpersonal communication. One thing that really stands out to me; if this guy, who you know in a tertiary way, as an unsuccessful candidate from a former employer’s staffing search is soliciting you, how many people do you think he contacted before you? 40? 400?
You have mentioned your positive experience with LinkedIn, and with 1,800 connections I’m happy you were able to leverage that. This story you tell above is actually my experience, exclusively, with LinkedIn. People who want to take, but have nothing to give. What do you think the odds are, that ‘Dan’ now has visibility to your connections and has reached out to Link them?
The ‘Financial Advisor’ thing, as a career, is awful. I do know that Merrill Lynch has a very minimal draw (it used to be $1,500/month years ago) and the turnover for people who try it out is over 100% per year. They often get family-and-friends into the ML system, but once those sales are made and the ‘Dan’ leaves, the account will stay (along with the 12b-1 fees) and probably for a good long while. I recently had to help my folks extract some investments from Merrill Lynch, and it was street-fight getting cooperation. You wouldn’t believe the hoops we jumped through, including a document that required their signatures in 23 places! All sigs had to be Silver-medallion certified (notary wasn’t good enough).
Have also taken those ‘coffee meetings’, and that too leaves me feeling bad. Nobody likes to be told ‘no’, and it actually feels worse to be tricked into taking a meeting and then forced into saying ‘no’. The secondary ask is that you ‘open up your contacts’ to them, so they can make a call (and of course tell the mark that they got the number from you, so it is a ‘warm’ call). I have had old acquaintances and friends ask to meet up, without telling me it is a sales call, and when they buy the coffee or lunch it is rude to just walk away; you have nowhere else to go, you have blocked the time out for them. Ugh!:-)
Anyway, you really handled it quite well, and I admire your forthright communication without being cruel or rude. Maybe tell your kids about this, because when they get out of college this will be one of their job choices.
Yes, those are some of the drawbacks with LinkedIn. But for me the benefits are much more valuable — that’s why I stick with it.
I know Dan contacted one of the other guys from work. I had texted him and let him know I was contacted and he should expect a call. I bet Dan’s working his way down the list right now…
Darron Davis says
That definitely is a tough situation. I have had a couple of instances of former colleagues (whom I liked and respected) contacting me for similar reasons. I will give them credit, they were honest and upfront about why they wanted to meet. I took the meetings because I valued both of their friendship. The first occurred when I was a bit younger, and not as “financially seasoned” as I am now. “John” worked for Edward Jones, and convinced me to open a couple of small IRA’s for myself and my wife. I quickly figured out that with fees I would never make anything on the money I put in, but decided to leave it in for a bit so as to not to hurt “John’s” feelings. 10 years later I finally closed it, at a net loss.
The second was “Arnold”, who went to work for New York Life. I was much more seasoned by then, but took the meeting because I like free coffee! After he spent 45 minutes trying to sell me annuities, whole life, etc., I ended the conversation politely. About a week later, “Arnold” called me back and asked if I would be interested in a free insurance review. I relented, because it was free, and I sent him my policy details. To his credit, he found a life insurance policy for my wife that saved us a significant amount of money. I give him credit, because I doubt he got anything out of that sale but the first year premiums, but he worked hard for it, and found us something that fit.
I have considered several times over the years switching careers to be a financial advisor, but can’t get past trying to sell people things they don’t need, or things I know they could get cheaper elsewhere. Definitely a broken system in my opinion.
So let me ask you, if you ruled the world, how would you change the system?
I am ok if the person is upfront about the meeting’s purpose. It’s when they want to meet and are vague about it — trying to trap me into a sales pitch — where it gets off for me.
Also, a close friend is one thing, but I barely know Dan. Another example of poor form from him IMO.
If I ruled the world the world would be in a lot of trouble! 😉
Theoretically, financial advisors would:
1. Not only know what they were talking about intellectually but also be able to implement wealth-building principles in their own lives and have a reasonably solid net worth to show for it.
2. They would act in the client’s best interests, even if those interests contrasted with theirs. As such, they would be completely trustworthy.
If these two things could be made to happen, I think customers of the financial services industry would be much better off.
Point 2 is in my opinion non negotiable and I agree with the general thrust of point 1. Only downside I can see is some allowance on the solid net worth for those who are younger starting out. I’d want to see them implementing wealth building principles but if you have to have the solid net worth already then its going to limit the pool somewhat albeit I acknowledge this is a risker approach than yours as they have don’t have a measurable track record. The other challenge for a lot of people seeking financial advice is that in many instances they don’t have the knowledge to make any objective judgement. Some may know they don’t know but many will be completely unaware.
Full Time Finance says
I tend to wait to talk to a sales person until I’ve thoroughly analyzed anything I’d buy. As such I routinely determine I’m the more knowledgeable person in the discussion. Not because I’m smarter or anything, just because I dig deep before I talk to someone about a potential purchase. I’ve avoided surprise sales calls so far, which would change the dynamic I’m sure. I definitely want to complement you for the professional way in which you deflected the letter, I’d have less patience and simply ignore him.
Jon @ Be Net Worthy says
Wow, that’s an awkward situation ESI and I think you handled it well. Once you reach a certain level in a corporation, I’ve seen that the financial advisors start seeking you out. I’ve been lucky in that I’ve never been contacted by anyone I knew personally.
For other folks that have contacted me, once I tell them I handle things myself and use Vanguard funds, they don’t usually end the call very politely. I guess they figure I don’t know them and they’re not going to get a sale anyway.
I did take a free consultation from a fee-only financial advisor recently that was a specialist in our corporation’s benefits. To their credit, they were very knowledgeable but they did admit at the end of the conversation that I seemed to really know my stuff and they didn’t think they could help me. I respected them for being honest and not trying to push for a sale!
Physician on FIRE says
I’ve been helping someone close to me untangle a mess of 28 funds from many different fund companies in a portfolio that was managed by a financial advisor with a fiduciary responsibility. There was obviously no need for that level of complexity; it was a 60 / 40 stock / bond portfolio appropriate for a retiree. I think the huge collection of funds serves to make it seem complicated and discourage the client from managing the money on his or her own.
The weighted average expense ratio was ~0.67 plus an AUM fee of 0.73 = 1.4% drag on returns. We’ve got it down to under 0.1% with a three fund portfolio (or will in a few days when the trades have settled).
Several years ago I was in a finance class with several bankers. One was a VP that was absolutely floored that the inflation rate for college costs was so high. Why? His bank software defaulted to a rate of 2%. So, he had been advising clients for years on college savings using the default college cost inflation set to just 2%. Never questioned it and never changed it. Yep, he was just a salesman that worked at the bank.
I actually thought about becoming a financial advisor, because the tests seems pretty easy based on what I read (compared to the CPA exam) and I have a finance background. Also, my current company pays for the Seris 7 and 63 exams. But personally I believe in Vanguard and low-cost index investing, so I don’t think I’d be a very convincing sales person trying to sell others high-cost fees. I’d secretly try to convince them to just invest in Vanguard and lose my job lol
Mr. RIP says
“Why do I need your advice? I’m retired and you’re broke”
You made my day 😀
You’ve been kinder than I would have. You said it would have been mean, my opinion is that being mean is ok in such situation. Ok, maybe not ultra direct, but a question about “hey Dan, how are your finances going?” would have been well suited.
I have a group of friends that all seem to be pretty well off financially, or at least their lifestyles and lake homes make it seem that way. They have recently become friends with a new group of guys that all live in the same neighborhood on the lake. These homes are generally in the 700k to 1 Million range. All of these new guys are Edward Jones advisors. So the advisors live on the lake in mansions. How many of their clients do? I’m going to take a wag and say very, very few. If any.
At the beginning of the description Dan sounded like my ex. As far as I know he never married though. He definitely had philosophical differences with bosses. Or he’d get bored, or not be as prolific as the ‘rain makers’ at that company and become discouraged. Friends encouraged him to consider other careers if he wasn’t happy in sales but it was the experience he had. Info from friends who insist on giving me updates confirm even though he ended things, I’m better off for it.
Right after college I joined Foresters Financial. Although I’ve gained a lot of experience and knowledge I still feel all the points that have been made.
Are all full service broker firms bad? Who do people go to then to get help with their personal finances? If there’s a need and who has the solution?
I’ve been having doubt in staying in this industry or been trying to find what industry I can translate my financial services skills, but I still find meaningful work to help people.
I don’t think they are all bad. It’s just hard to find the good ones. To me it seems like many of them are in smaller, private firms.
This is why I advise people to educate themselves on finances — so they can tell the difference between a good and bad planner.
I can deal with greed and bad actors; attorneys are even worse, but as recently as yesterday I listened patiently as this puff-haired talking head calmly hacked way on BTV about all the exciting growth in ETF markets, a vigorous sign of consumer confidence (if not common sense and sound investing), while a scroll line stunningly suggested there are still so many great actively-managed funds run by smart, hip people, and most shocking of all, another line describing passive index funds as risky as subprime CDOs. Okay, now I HAVE seen it all. You can only trust maybe one or two, here and there, if you can read them like a family member, a colleague or great friend, except so many of those are strangely cloaked and suspect until you actually know them i.e. see and hear their motivations. It’s usually about money (lol) . . . good luck kids.