Friday, August 04, 2006

Interview with an Investment Firm 
Sorry for the light posting, but I've been engaged in a flurry of economic activity. After a certain lag of indeterminate length, it seems to be correlated with my capacity to buy food, clothing and shelter.

Blogging, on the other hand, not so much.

I did interview this morning for a position as an investment advisor with Edward Jones, which I'm very excited about. I selected EJ because they managed to keep their noses reasonably clean in the late 1990s while a tangle of conflicts and abuses was exposed at a lot of the other investment firms.

EJ got into a little bit of trouble a while back for failing to disclose soft-dollar arrangements with mutual fund companies paying them to be included on their "preferred list."

Yes, that's kind of scuzzy, but it doesn't bother me all that much - first of all, it's not just Edward Jones. It's just about everybody. The practice is absolutely pervasive in the industry - almost universal among transaction-based firms. And I wouldn't be surprised if a little digging suggested a fair amount of it at fee-only and fee-based houses as well.

Second, Safeway doesn't disclose that Frito-Lay paid them a "stocking fee" for premium, eye-level shelf-space, either, when I go to buy a bag of chips.

I'm not a fan of the practice at all, but it's very difficult to regulate and prevent, number one, and number two, I have my own moral and ethical compass, and I know lots of good funds that are on the preferred list - and deservedly so.

Main thing I wanted was the opportunity to build my own practice, do what's best for my clients, be able to offer a wide range of financial services and products, work with people with modest net worth levels and middle income people, and not have to borrow money to open a branch.

Edward Jones is a pretty good match on all these counts.

I would have liked to have seen a bit more openness towards index funds (not a huge deal since ETFs are still available). Other than that, it was a good interview. At this stage, it was really me interviewing EJ. Their interview of me comes later!

I would also have liked to have seen a more fiduciary model, but the Rep I spoke with said they are very careful not to set the bar of service that high. The folks who handle separately managed accounts are fiduciaries, but not the Reps in the field. Even though the woman who interviewed me was herself holding the Certified Financial Planning credential, they are very careful NOT to describe what they do as "financial planning," nor can they provide the client with a written financial plan - lest the client confuse the fact that he received a financial plan - which the advisor would have to do regardless - with the idea that the advisor who just worked them through the financial plan actually did financial planning.

Perish the thought.

I suspect a lawyer's involvement someplace.

Nevertheless, these are problems throughout the industry, except in the little independent fee-only shops where people like me so often go to starve, at least in the short-term. The idea of being independent appeals to me, but not the E&O premiums at this point, nor the thought of having to invent the wheel from scratch.

New advisors have enough problems. I don't need to compound them with learning how to administer the whole thing at the same time.

I did cruise the Internet looking for postings on professional boards by disaffected EJ reps. Didn't find much, but there are a few. The ones that I found seemed to have quit over the soft money problems.

Thanks for your patience. I'll let everyone know how it goes. There are other terrific firms out there, with terrific training programs, to be sure, but I like the face-to-face model that EJ uses.

In the meantime, I'm staying reasonably busy as a freelance writer at the moment, with a sudden uptick in agency work, which is nice. It's good not to be desperate, but the transition to the financial advisor field, as longtime readers well know, is a long time coming.

Anyone else out there with experience in the biz feel free to weigh in.

Splash, out


Sounds like a good move. Best of luck to you.
Oh boy, so you're going to become a retail broker. From your comments it is painfully obvious that you don't have a single clue about how that business works. Which tells me that you're probably about 25 years old.

Oh well. You'll learn, and the first thing you'll learn is that blogging your criticisms of a potential -- or shall I say, formerly potential -- employer's business model is dumber than dirt.

If you do get the job, for your own sake don't run up any personal debts. Wait, scratch that. Go buy a hot new car like all the brokers do. There's nothing as entertaining as a wingnut going bankrupt.

Sounds like SOMEBODY couldn't produce!
Jason, I wasn't a broker, retail or otherwise. But I've gotten close looks at that business. That's as far as I'm going to go here. Something tells me that you'll get over your initial stumbles -- seriously, don't blog about an employer, you idiot -- and succeed. Why? Because all retail brokers think they're God. You're on the way.

It might sound like I've had some terrible experience with brokers or something, but it ain't so. I just think they and their inflated egos are an endless source of entertainment. Seriously: Save some money along the way. Fortunes change so quickly in that business that you wouldn't believe it.
Well, I don't see what most retail brokers would have to inflate his or her ego about, given the typical risk adjusted returns.

I'm not going to build a practice on stockpicking, though. That is not my intent. I'm more interested in the fields of risk management, asset protection, and goal-achievement.

I'll leave the stock-slinging to the kids.

Thanks for your input. And yes, one of the reasons I liked the EJ model is because I wouldn't have to borrow money to open a branch. I actually have friends who DID go bankrupt after getting a Series 6, etc., borrowing 40k on office furnishings, then got plopped down in an office with minimal support and few prospecting skills.

What attracts me to the field isn't the wealth of the bad brokers with short term track records of success. It's the good I know a good advisor can do for a family - for example, protecting a nest egg from the ravages of estate and income taxes and preserving tax-deferred or tax free growth for generations with proper planning. Ed Slott, author of The Retirement Time Bomb, and How To Defuse It, is a real pro at this.

Besides..I wouldn't be much of an advisor to anyone if I didn't believe in compound interest working for me instead of against me.

Feel free to email me, confidentially.

Jason, you can bullshit yourself until the cows come home for all I care, but I just thought I'd tell you that you are going to be a retail broker. I always think it's better for people to tell themselves the truth about things, but hell maybe a little self-deception is necessary in life.

But: "risk management" and "asset protection" and "goal achievement" is retail broker-speak. Goal achievement is my favorite. Are you going to help me get laid, too, or have you just been reading too many brochures?

Brokerages make their money on wrap fees not trading. That's because trading is a commodity. Anyone can do it on-line. You're right not to be a stock picker. That's a loser's game. In fact, you should read "The Loser's Game" by Charlie Ellis. It's the truth about how this crap gets done.
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