By John Lohr
A long time ago in a Galaxy far far away I ran training for the Consulting Services Division (CSD) for EF Hutton. I was also the head of the Portfolio Management Group (HPM). When Shearson bought Hutton in 1988, I went up to NY to meet with their head of training. I asked him what they did for training on equities. He replied, “We have a great equity program. We spend a whole day on equities.” Wow, a whole day?
I don’t pretend to follow what is happening today in training Financial Advisors, but, I do know there is a dominant emphasis on sales. Recognize that that’s not wrong. Nothing in the Advisory world would happen without sales. If a sale didn’t happen, Advisors would have no clients. Recently f1360 put out a podcast that concluded that the DOL in their new ‘fiduciary” rule were clearly distinguishing between sales and advisory functions. I guess the implication was that sales are sales and advisory is advisory, and never the twain should meet. How wrong that is.
Back in prehistory I told my 300 portfolio managers that they had the toughest job in the world. Sure they had to manage client portfolios, but that was not the hard part. Managing portfolios not the hard part? No. They had to have an identifiable active investment process, with guardrails. My analyst and two compliance people monitored the portfolios to ensure that they were following their own process. You could not get in the program without a defined process; you couldn’t stay in if you deviated from it. Not the hard part.
The hard part was growing their business through sales at the same time. To have the skills to develop and apply an investment process and the skills to sell is difficult to achieve. Yet, this group grew their business 1000% in 7 years (a multiple of 10X), with an extremely high client retention rate.
The way you manage portfolios and grow your client base and keep them is by training. Research departments provide research. We did our own training. We bought Value Line and later First Call, and other resources. We taught developing investment objectives, writing investment policies, portfolio analytics. The usual stuff. But we also taught sales processes, communications, client needs and client-centric techniques. We talked about how to do goals-driven investing while we waited for Dave Loeper to invent it.
So, that’s prehistory. With today’s technology, it should be easier, right? I don’t think so. Today’s advisory world is much more complex. There are more products; many of them incomprehensible. There are more product providers, wholesalers, distribution channels. Do the brokerage firms provide adequate training? Not a chance. There is too much pressure on quick production.
How about the Regulators? Look at the licensing requirements:
A Series 7 General Securities license in an antiquated plethora of useless information sprinkled with some compliance tips and a few nuggets of “I didn’t know that” (options, for instance).
The Series 65 Advisor license? A watered down legal treatise with little practical use.
The Series 63 and 66 combination? Junior High stuff.
Yet, you have to be licensed.
A well trained professional, knowledgeable about investing who is a good communicator, that works in the clients’ best interests and is a business builder, is not easy to find. There are more than 350,000 licensed financial representatives in the US today. There are 400,000 insurance sales agents (sure, there’s some overlap). No one knows many have a thorough grasp of both investing strategies and client-level sales communications. The point is that the barrier to entry in the financial advice world is nominal to ridiculously low.
So, Financial Advisors seek ways to differentiate themselves from the herd. They look to designations, and affiliations, many not worth the frame they’re hanging in on the wall.
A few, very few, have genuine academic merit.
CFA, for instance. It has to be at the pinnacle. I have an MA, a JD and passed the Bar, and would’t take the CFA because it was too tough. How many CFAs are in our advisor-sales world? Not many.
The Investment Management Consultant’s Association (IMCA) has the Certified Investment Management Analyst (CIMA), a high cost short intense program you can get from the University of Chicago and Wharton. Good for analysts and mathematicians; not so good for communications and sales. They also have others.
CFP: At least here you learn financial planning methodologies, some portfolio management fundamentals and even sales practices. It is the most utilitarian set of courses a financial advisor can take. There are 20 or so colleges that offer a CFP course of study. It’s good. I cannot understand why the FPA is losing members.
There are a lot of other self-designation programs out there. Most of them do little more than add letters to put after your name. I’ve seen a lot of financial advisors with a string of alphabet soup after their name, to try to “distinguish” themselves. It doesn’t mean anything to your client.
What does matter to your client, and should, is that you have taken the time and expense to educate yourself and stay informed so that you can put forth the best solutions to your clients that you can. If you have invested in your profession, it will show in how you treat your client; how you advise your client. Yes, there are glib charlatans out there that are a phony as a Cheyenne dollar, but there is nothing we can do to prevent that.
If you want to be a Financial Advisor that builds trust among your clients, you need to live it. Sure, it may be “all about sales” but given time, training, communication and sincerity, sales will follow. It’s hard to do in today’s financial world, but try not to be hasty, do invest in yourself and believe in yourself.
Project that, and you’re steps closer to building Client trust.