Entrepreneurship in Finance (without being a mutual fund salesman)

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SpareTime

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So one year ago I had no finance background other than an intense curiosity. I’m taking the CFA exams not really to get a job at some investment bank, but because I’m interested in it and I want to gain some basic skills to perhaps be an entrepreneur in the personal finance field some day. I chose CFA over CFP because I want to be well equiped with analytical skills, and I believed the CFA would do a better job of that than the CFP, although it is obviously more difficult.
However, most of the jobs in personal finance planning are glorified salesman. I interviewed with Investor’s Group before I began the CFA and I was pretty astonished to find that they were ready to hire me on the spot…not a good sign! I’m a heavy believer in passive investing for the everyday investor. It’s easy and it works, yet tons of people still allow inflation to eat away at their retirement. My worry, however, is that it will be impossible to start a business charging people to help them do their own finances when they can get the same thing for “free” from a commission-based “financial advisor”. Of course, they are paying much more for the commission based advisor than they would be for a flat fee, but most people can’t figure out the math to know that.
I’ve discovered wealthfront.com, which from the looks of it is the complete embodiment of what I would have liked to have created 10 years from now.
Is there anybody else out there who is using their CFA to help them as an entrepreneur? Anyone who’s using it to work for themselves?
 
Let me get this straight…
You have no background in finance a year ago and you want to start a business investing people’s money for a flat fee - ie, you get paid whether you make money for your clients or not.

Hmm…….
 
NANA Hachiko wrote:
Let me get this straight…
You have no background in finance a year ago and you want to start a business investing people’s money for a flat fee - ie, you get paid whether you make money for your clients or not.

Hmm…….
Click to expand...
SpareTime wrote:
I want to gain some basic skills to perhaps be an entrepreneur in the personal finance field **some day**.
Click to expand...
Like I said in the original post, that’s why I am pursuing the CFA (well..half of it…the other half is just to keep my brain exercised). I’m a full time teacher (plus a part time job) and I’m certainly in no position to quit everything and start a business.
Obviously after one level of CFA I’m not ready for anything yet. I’m still acquiring the skills that I *might* be able to use in an entrepreneurial situation 5 or 10 years down the road. I’m simply curious if anyone else has used their CFA knowledge and/or designation in an entrepreneurial spirit.
Some people like to think ahead, you know ;)
I also find it interesting that you seem to be implying that a flat fee advisor has less invested in the performance of their advice than a commission based advisor. They both get paid regardless of performance. As far as I know, the only difference between commission and flat fee for being tied to performance would be trailer fees for the commission based advisor. However, since these are based on assets under management and not return, this difference is miniscule.
 
I can speak from personal experience. You have no industry experience and you probably dont want to use your first clients as guinea pigs.
1. First, you have to get the CFA and/or the CFP
2. Then you have to “sell” people on the idea they should try you out
3. Or you have to “sell” an employer on the idea of giving you a salary and trench experience since you have a CFA
4. If you fail at items 2 and 3, you better be ready to except a low salary at some financial planning firm because you cant prospect. Financial services and investment management is not like the accounting field: it is hard to find a respectable salary without bringing in new business.
A guy like me might look at you and think “okay I need to pay him 50,000 to keep him interested.” That costs me 70,000 out of pocket because of taxes and benefits. By the time we get started, you’re creating a 70k/year expense. To break even (and nobody is breaking even), I probably have to accumulate 10,000,000 in new assets under management. That’s 10-20 solid clients assuming 5k in annual fee revenue.
Why am I working my butt off to get 10 to 20 new clients? So I can train my future competition?
 
SpareTime wrote:
So one year ago I had no finance background other than an intense curiosity. I’m taking the CFA exams not really to get a job at some investment bank, but because I’m interested in it and I want to gain some basic skills to perhaps be an entrepreneur in the personal finance field some day. I chose CFA over CFP because I want to be well equiped with analytical skills, and I believed the CFA would do a better job of that than the CFP, although it is obviously more difficult.
However, most of the jobs in personal finance planning are glorified salesman. I interviewed with Investor’s Group before I began the CFA and I was pretty astonished to find that they were ready to hire me on the spot…not a good sign! I’m a heavy believer in passive investing for the everyday investor. It’s easy and it works, yet tons of people still allow inflation to eat away at their retirement. My worry, however, is that it will be impossible to start a business charging people to help them do their own finances when they can get the same thing for “free” from a commission-based “financial advisor”. Of course, they are paying much more for the commission based advisor than they would be for a flat fee, but most people can’t figure out the math to know that.
I’ve discovered wealthfront.com, which from the looks of it is the complete embodiment of what I would have liked to have created 10 years from now.
Is there anybody else out there who is using their CFA to help them as an entrepreneur? Anyone who’s using it to work for themselves?
Click to expand...
Stop watching Wolf of Wall Street and get to the real world.
 
SpareTime wrote:
So one year ago I had no finance background other than an intense curiosity. I’m taking the CFA exams not really to get a job at some investment bank, but because I’m interested in it and I want to gain some basic skills to perhaps be an entrepreneur in the personal finance field some day. I chose CFA over CFP because I want to be well equiped with analytical skills, and I believed the CFA would do a better job of that than the CFP, although it is obviously more difficult.
However, most of the jobs in personal finance planning are glorified salesman. I interviewed with Investor’s Group before I began the CFA and I was pretty astonished to find that they were ready to hire me on the spot…not a good sign! I’m a heavy believer in passive investing for the everyday investor. It’s easy and it works, yet tons of people still allow inflation to eat away at their retirement. My worry, however, is that it will be impossible to start a business charging people to help them do their own finances when they can get the same thing for “free” from a commission-based “financial advisor”. Of course, they are paying much more for the commission based advisor than they would be for a flat fee, but most people can’t figure out the math to know that.
I’ve discovered wealthfront.com, which from the looks of it is the complete embodiment of what I would have liked to have created 10 years from now.
Is there anybody else out there who is using their CFA to help them as an entrepreneur? Anyone who’s using it to work for themselves?
Click to expand...
investor’s group is pretty much a multi level marketing scam and you would be hurting your clients more than helping as their products are horrendous. The reason why they will hire you on the spot is that they want to use your contacts as potential clients. You join the firm, bring friends and family over and then quit in 6 months because you don’t have the skills required to bring in assets. Your friends and family then get bumped over to the sleaze ball who hired you or another senior advisor. Many firms are like this. Glorified amway.
 
Investment banking is pretty entreprenuerial once you reach the senior level. It takes a lot of work to get there, but it is an idea.
 
What you are asking for sounds like a mom and pop Investment Advisor ($50k min account size) or Private Wealth Manager ($1MM min account size) that is referall only. The problem is that these businesses are not created in a vacuum, they are usually established Advisors that break away from a big name brokerage or sometimes CPA’s that do taxes and have large book of clients already. Other than becoming a RIA I don’t see a feesible route, and sales is a big part of most of the good finance jobs. Sales is important in finance because it is abstract and unpredictable, so you need someone that you trust to buy from. People trust people they like, and that is what real sales is about. If you are looking to do something creative and challenging without sales or industry experience, you either need to be really gifted in math or you need to be a Professor.
 
former trader I think you read my post and saw “I passed level I CFA and I want to get rich doing financial planning immediately”, when what I really was saying is “I have an interest in finance, financial planning, and being an entrepeneur, and I’m curious if anyone else has any experience combining any of these together.”
I’m not sure why you would bother with a comment like “stop watching wolf of wall street”. I’m also not sure what a movie about pump and dump penny stock fraud has to do with my question. Sometimes I’m baffled at how easily hostile people will get on here when somebody asks a simple question.
Thanks for those of you who actually responded with something meaningful. I definitely agree with the sentiment about IG. Their products offer inferior returns with huge fees, and since they pay no salary they’d of course be willing to hire anyone they think is capable of passing the tests required to sell mutual funds. It’s pretty much the encyclopedia salesmen of finance.
I’m leaning less towards traditional planning, since it is so sales based. Some other things I’m contemplating for 5 or 10 years down the road are things like finance related app development (likely in my spare time), or possibly leveraging my experience and contacts in teaching into touring First Nations Reserves to give personal finance seminars, or possibly even trying to develop a course for high schools in my province. Of course, CFA would be overkill for most of these things, but I’d much prefer to have too many skills than too few.
stlcardinals08 wrote:
Investment banking is pretty entreprenuerial once you reach the senior level. It takes a lot of work to get there, but it is an idea.
Click to expand...
I’ve heard IB is soul crushing, and I have a wife and child (and more in the future) and I’m worried I would have to spend too many hours outside the home to make this feasible. Unless of course I made enough that my wife didn’t have to work, but I’m assuming IB jobs don’t just pop up for somebody with no experience, even if they’ve completed the CFA exams.
Kmelthratter wrote:
What you are asking for sounds like a mom and pop Investment Advisor ($50k min account size) or Private Wealth Manager ($1MM min account size) that is referall only. The problem is that these businesses are not created in a vacuum, they are usually established Advisors that break away from a big name brokerage or sometimes CPA’s that do taxes and have large book of clients already. Other than becoming a RIA I don’t see a feesible route, and sales is a big part of most of the good finance jobs. Sales is important in finance because it is abstract and unpredictable, so you need someone that you trust to buy from. People trust people they like, and that is what real sales is about. If you are looking to do something creative and challenging without sales or industry experience, you either need to be really gifted in math or you need to be a Professor.
Click to expand...
This is one of the reasons I’m leaning away from traditional financial planning. Every time I think about trying to start from scratch I realize I’d be putting my family through a few years of near-poverty, even if I was successful. And it’s not that I can’t be good at sales, it’s that I don’t really enjoy sales. I’m an honest person and, despite what some people may say, that’s not a virtue in sales. I have considered becoming a professor, although that would mean more school (which I love) and student loans (which I despise).
 
former trader wrote:
SpareTime wrote:
So one year ago I had no finance background other than an intense curiosity. I’m taking the CFA exams not really to get a job at some investment bank, but because I’m interested in it and I want to gain some basic skills to perhaps be an entrepreneur in the personal finance field some day. I chose CFA over CFP because I want to be well equiped with analytical skills, and I believed the CFA would do a better job of that than the CFP, although it is obviously more difficult.
However, most of the jobs in personal finance planning are glorified salesman. I interviewed with Investor’s Group before I began the CFA and I was pretty astonished to find that they were ready to hire me on the spot…not a good sign! I’m a heavy believer in passive investing for the everyday investor. It’s easy and it works, yet tons of people still allow inflation to eat away at their retirement. My worry, however, is that it will be impossible to start a business charging people to help them do their own finances when they can get the same thing for “free” from a commission-based “financial advisor”. Of course, they are paying much more for the commission based advisor than they would be for a flat fee, but most people can’t figure out the math to know that.
I’ve discovered wealthfront.com, which from the looks of it is the complete embodiment of what I would have liked to have created 10 years from now.
Is there anybody else out there who is using their CFA to help them as an entrepreneur? Anyone who’s using it to work for themselves?
Click to expand...
Stop watching Wolf of Wall Street and get to the real world.
Click to expand...
+1
 
SpareTime wrote:
NANA Hachiko wrote:
Let me get this straight…
You have no background in finance a year ago and you want to start a business investing people’s money for a flat fee - ie, you get paid whether you make money for your clients or not.

Hmm…….
Click to expand...
SpareTime wrote:
I want to gain some basic skills to perhaps be an entrepreneur in the personal finance field **some day**.
Click to expand...
Like I said in the original post, that’s why I am pursuing the CFA (well..half of it…the other half is just to keep my brain exercised). I’m a full time teacher (plus a part time job) and I’m certainly in no position to quit everything and start a business.
Obviously after one level of CFA I’m not ready for anything yet. I’m still acquiring the skills that I *might* be able to use in an entrepreneurial situation 5 or 10 years down the road. I’m simply curious if anyone else has used their CFA knowledge and/or designation in an entrepreneurial spirit.
Some people like to think ahead, you know ;)
I also find it interesting that you seem to be implying that a flat fee advisor has less invested in the performance of their advice than a commission based advisor. They both get paid regardless of performance. As far as I know, the only difference between commission and flat fee for being tied to performance would be trailer fees for the commission based advisor. However, since these are based on assets under management and not return, this difference is miniscule.
Click to expand...
I just find it a bit pre-mature to say that you plan to open a practice without ever working in the industry.
it’s like someone who is planning to go to med-school (not even in the program yet) and asking for advice on how to open a private practice. The answers you get now may not even be relevant 10 years down the line!
 
NANA Hachiko wrote:
SpareTime wrote:
NANA Hachiko wrote:
Let me get this straight…
You have no background in finance a year ago and you want to start a business investing people’s money for a flat fee - ie, you get paid whether you make money for your clients or not.

Hmm…….
Click to expand...
SpareTime wrote:
I want to gain some basic skills to perhaps be an entrepreneur in the personal finance field **some day**.
Click to expand...
Like I said in the original post, that’s why I am pursuing the CFA (well..half of it…the other half is just to keep my brain exercised). I’m a full time teacher (plus a part time job) and I’m certainly in no position to quit everything and start a business.
Obviously after one level of CFA I’m not ready for anything yet. I’m still acquiring the skills that I *might* be able to use in an entrepreneurial situation 5 or 10 years down the road. I’m simply curious if anyone else has used their CFA knowledge and/or designation in an entrepreneurial spirit.
Some people like to think ahead, you know ;)
I also find it interesting that you seem to be implying that a flat fee advisor has less invested in the performance of their advice than a commission based advisor. They both get paid regardless of performance. As far as I know, the only difference between commission and flat fee for being tied to performance would be trailer fees for the commission based advisor. However, since these are based on assets under management and not return, this difference is miniscule.
Click to expand...
I just find it a bit pre-mature to say that you plan to open a practice without ever working in the industry.
it’s like someone who is planning to go to med-school (not even in the program yet) and asking for advice on how to open a private practice. The answers you get now may not even be relevant 10 years down the line!
Click to expand...
No, it’s like somebody who is in med-school saying “My dream is to someday open my own practice. Does anybody have any experience or insight to share?”
I’m surprised at your responses. These forums are overloaded with people who will jump at every opportunity to make you feel naive or foolish in a convoluted way to make themselves seem like they’re the ones who know what the “real” story is. They also add absolutely nothing of value in these comments. You, in contrast, usually give well thought out responses which actually help the poster - you’ll often give multiple options or avenues of thinking which open up possibilities that actually help the poster think about his or her problem in a profound manner. When I started this thread, I was actually hoping you’d be one of the responders because I know you’re a charterholder who really thinks out her posts and I thought you might have had something valuable to share.
Instead you went with the condescending, unhelpful and completely irrelevant “Haha you think you’re going to accomplish anything!?” in the same vein as former trader and rahul roy (the latter of which is particularly baffling seeing as he’s no further in the program than me). It’s particularly disappointing to see you, one of the very few consistently positive and thoughtful posters on the board, sink into the “I know everything and you know nothing but I’m not going to tell you” camp.
Even if you were to have told me that based on experience, opening a practice (or any of the other things that I’ve mentioned that you seem to be ignoring) is completely futile and it won’t work for this or this reason, that would be far more helpful than going the patronizing without any information route.
And of course it’s premature! That’s the point of planning ahead. If I ever am in a position to do what I really want to do, I hope that I’ll have a good 5 or 10 years of preparation, research and insight from people who have been there before.
 
To answer your original question, I think it’s definitely possible to take an entreprenurial approach to private wealth management, investment advisory, etc.
The charter would help you distinguish yourself as a serious investment professional with the caveat that many clients will have never heard of the charter. If you’re hard working you will have a fighting chance. What a previous poster said about an existing network is spot on. I wouldn’t entertain the idea of opening my own practice unless I had either a bunch of wealthy friends and relatives OR a network of allied professionals (attorneys, CPAs, etc) to refer business. All of this summarizes charterholders I know who have gone down this route.
In addition to working hard and having a good network, you will still have to be an excellent sales person. Does this mean sneaky fees and hiding from performance? Of course not. You will still have to sell your investment approach to a client. You will have to make them feel about about what you’ve done for them when the numbers don’t look outstanding and need to caution them from taking additional equity risk when they do. You can be honest and transparent while still developing business.
Anyway, good luck!
 
SpareTime wrote:
No, it’s like somebody who is in med-school saying “My dream is to someday open my own practice. Does anybody have any experience or insight to share?”
I’m surprised at your responses. These forums are overloaded with people who will jump at every opportunity to make you feel naive or foolish in a convoluted way to make themselves seem like they’re the ones who know what the “real” story is. They also add absolutely nothing of value in these comments. You, in contrast, usually give well thought out responses which actually help the poster - you’ll often give multiple options or avenues of thinking which open up possibilities that actually help the poster think about his or her problem in a profound manner. When I started this thread, I was actually hoping you’d be one of the responders because I know you’re a charterholder who really thinks out her posts and I thought you might have had something valuable to share.
Instead you went with the condescending, unhelpful and completely irrelevant “Haha you think you’re going to accomplish anything!?” in the same vein as former trader and rahul roy (the latter of which is particularly baffling seeing as he’s no further in the program than me). It’s particularly disappointing to see you, one of the very few consistently positive and thoughtful posters on the board, sink into the “I know everything and you know nothing but I’m not going to tell you” camp.
Even if you were to have told me that based on experience, opening a practice (or any of the other things that I’ve mentioned that you seem to be ignoring) is completely futile and it won’t work for this or this reason, that would be far more helpful than going the patronizing without any information route.
And of course it’s premature! That’s the point of planning ahead. If I ever am in a position to do what I really want to do, I hope that I’ll have a good 5 or 10 years of preparation, research and insight from people who have been there before.
Click to expand...
I think it’s great to ask for people’s opinions and experience, i don’t think that’s wrong, i mean, i ask about people opening their own practices even though i have NO DESIRE to open one and it’s just interesting to learn.
It’s just from your original post, you seem to have a fixed idea on how your practice should be structured and you are making comments about how “foolish” people are with their current compensation structure though you haven’t really worked in the industry before… i just find that a little bit naive that’s all.
It’s like someone who is aspired to be a doctor and starts criticising the prices plastic surgeons are charging and then go ask for people’s expereince on opening their own practices…
If i were a plastic surgeon, i would probably not want to talk to you about my own practice… do you know what i mean?
It’s just how you come across in the original post, the question itself is not a problem, and wanting to open a practice is also a respectable goal - and i wish you best of luck!
 
NANA Hachiko wrote:
SpareTime wrote:
No, it’s like somebody who is in med-school saying “My dream is to someday open my own practice. Does anybody have any experience or insight to share?”
I’m surprised at your responses. These forums are overloaded with people who will jump at every opportunity to make you feel naive or foolish in a convoluted way to make themselves seem like they’re the ones who know what the “real” story is. They also add absolutely nothing of value in these comments. You, in contrast, usually give well thought out responses which actually help the poster - you’ll often give multiple options or avenues of thinking which open up possibilities that actually help the poster think about his or her problem in a profound manner. When I started this thread, I was actually hoping you’d be one of the responders because I know you’re a charterholder who really thinks out her posts and I thought you might have had something valuable to share.
Instead you went with the condescending, unhelpful and completely irrelevant “Haha you think you’re going to accomplish anything!?” in the same vein as former trader and rahul roy (the latter of which is particularly baffling seeing as he’s no further in the program than me). It’s particularly disappointing to see you, one of the very few consistently positive and thoughtful posters on the board, sink into the “I know everything and you know nothing but I’m not going to tell you” camp.
Even if you were to have told me that based on experience, opening a practice (or any of the other things that I’ve mentioned that you seem to be ignoring) is completely futile and it won’t work for this or this reason, that would be far more helpful than going the patronizing without any information route.
And of course it’s premature! That’s the point of planning ahead. If I ever am in a position to do what I really want to do, I hope that I’ll have a good 5 or 10 years of preparation, research and insight from people who have been there before.
Click to expand...
I think it’s great to ask for people’s opinions and experience, i don’t think that’s wrong, i mean, i ask about people opening their own practices even though i have NO DESIRE to open one and it’s just interesting to learn.
It’s just from your original post, you seem to have a fixed idea on how your practice should be structured and you are making comments about how “foolish” people are with their current compensation structure though you haven’t really worked in the industry before… i just find that a little bit naive that’s all.
It’s like someone who is aspired to be a doctor and starts criticising the prices plastic surgeons are charging and then go ask for people’s expereince on opening their own practices…
If i were a plastic surgeon, i would probably not want to talk to you about my own practice… do you know what i mean?
It’s just how you come across in the original post, the question itself is not a problem, and wanting to open a practice is also a respectable goal - and i wish you best of luck!
Click to expand...
If a plastic surgeon was hired by a company on the spot with no experience, took a couple months of training, and then told a client their service was free but they need to buy their special propietary breast implants because they’re superior in quality (when really they’re inferior but just make the surgeon a cool commission), then ya I would most certainly be criticizing that plastic surgeon. However, the practice of medicine is far more regulated than the practice of personal finance.
I’m not saying anyone else is foolish for having a commission based pay structure. What I said is I don’t want to do that, because I want to be a 100% objective advisor (if that’s what I ever end up doing). And I am a firm believer that it’s impossible to be completely objective if you earn commission. I’m not passing judgement, I’m just saying that’s not what I want to do. And there are probably plenty of reputable commission based advisors out there (although I wouldn’t trust any of the advisors I interviewed with at the big banks or financial planning firms), but I don’t really want to even put myself in a position where it could be more lucrative to be subjective.
SafetyFirstRoy wrote:
To answer your original question, I think it’s definitely possible to take an entreprenurial approach to private wealth management, investment advisory, etc.
The charter would help you distinguish yourself as a serious investment professional with the caveat that many clients will have never heard of the charter. If you’re hard working you will have a fighting chance. What a previous poster said about an existing network is spot on. I wouldn’t entertain the idea of opening my own practice unless I had either a bunch of wealthy friends and relatives OR a network of allied professionals (attorneys, CPAs, etc) to refer business. All of this summarizes charterholders I know who have gone down this route.
In addition to working hard and having a good network, you will still have to be an excellent sales person. Does this mean sneaky fees and hiding from performance? Of course not. You will still have to sell your investment approach to a client. You will have to make them feel about about what you’ve done for them when the numbers don’t look outstanding and need to caution them from taking additional equity risk when they do. You can be honest and transparent while still developing business.
Anyway, good luck!
Click to expand...
Well I definitely don’t have a bunch of wealthy family and friends, but I am hoping over the next decade to develop some contacts throughout the industry. I’m sure this is easier said than done, particularly when I’m a school teacher, but I’m sure it can’t hurt to try and get a few phone numbers.
Is there anyone out there who is using their CFA charter or knowledge in an educational setting?
 
SpareTime wrote:
I’m not saying anyone else is foolish for having a commission based pay structure. What I said is I don’t want to do that, because I want to be a 100% objective advisor (if that’s what I ever end up doing). And I am a firm believer that it’s impossible to be completely objective if you earn commission. I’m not passing judgement, I’m just saying that’s not what I want to do. And there are probably plenty of reputable commission based advisors out there (although I wouldn’t trust any of the advisors I interviewed with at the big banks or financial planning firms), but I don’t really want to even put myself in a position where it could be more lucrative to be subjective.
Well I definitely don’t have a bunch of wealthy family and friends, but I am hoping over the next decade to develop some contacts throughout the industry. I’m sure this is easier said than done, particularly when I’m a school teacher, but I’m sure it can’t hurt to try and get a few phone numbers.
Click to expand...
Just out of curiosity, what motivates you to work extra if you get paid a flat fee no matter what. I mean, obviously you don’t have to lose money for your clients because they will take their money and leave, but what’s the point of making 8% if 4% covers your flat fee and better than saving account.
I also think that most people open their own practices after years of working in the industries so you are likely to be working for a commion based job for a while… if you are okay with that in the first place.
 
NANA Hachiko wrote:
SpareTime wrote:
I’m not saying anyone else is foolish for having a commission based pay structure. What I said is I don’t want to do that, because I want to be a 100% objective advisor (if that’s what I ever end up doing). And I am a firm believer that it’s impossible to be completely objective if you earn commission. I’m not passing judgement, I’m just saying that’s not what I want to do. And there are probably plenty of reputable commission based advisors out there (although I wouldn’t trust any of the advisors I interviewed with at the big banks or financial planning firms), but I don’t really want to even put myself in a position where it could be more lucrative to be subjective.
Well I definitely don’t have a bunch of wealthy family and friends, but I am hoping over the next decade to develop some contacts throughout the industry. I’m sure this is easier said than done, particularly when I’m a school teacher, but I’m sure it can’t hurt to try and get a few phone numbers.
Click to expand...
Just out of curiosity, what motivates you to work extra if you get paid a flat fee no matter what. I mean, obviously you don’t have to lose money for your clients because they will take their money and leave, but what’s the point of making 8% if 4% covers your flat fee and better than saving account.
I also think that most people open their own practices after years of working in the industries so you are likely to be working for a commion based job for a while… if you are okay with that in the first place.
Click to expand...
Ya I am ok with that, although like I’ve said I’m leaning away from traditional financial planning and hoping to find something similar (such as developing a course for high school students, or perhaps a personal finance app)
For the first part, I could ask the same question. What motivates you to work extra when you make the 5% sales commission regardless of how the investment performs? In fact, for me that would motivate me to change things around as often as possible in my client’s portfolio so I can continue to collect commission on new sales. For the commission based financial planning firms I’m familiar with (including all the common ones at the major banks) there is no performance incentive for the manager other than a 0.25% annual trailer fee, which is tied to assets under management as opposed to return, and as such is not really a performance incentive at all. Moreover, I’m sure many flat fee advisors have similar trailer fees.
Perhaps you can enlighten me, but for either the typical commission based advisor or the typical flat fee advisor, the only real performance incentive is the ability to keep the business. If I sell $100,000 in series A mutual funds I’ll be making $5,000 off that sale, even if it massively underperforms its benchmark, but the downside is that I probably lose future business. Same goes for a flat fee advisor - if I buy something for a client that massively underperforms, I’m still paid the flat fee, but I’ve likely lost future business.
 
Flat Fee is way better for the client’s point of view.
The discussion is flat fee x comission on questionable products. Flat fee wins hands down. I know people that get comission on products. Most basically push bad structured notes or try to get loans for their own bank. At best it’s a significant confict of interest.
It seems that Nana is comparing flat fees x performance fees. I haven’t seen performance fees for financial advisors and, even if they do exist, I don’t think they’re a good idea. It is an incentive for excessive risk taking. Protecting wealth is different than generating wealth.
If you really like finance, I’d say go for broke. The CFA may significantly improve your understanding of everything finance, a cool app may or may not bring you a bunch of money, and with flat fees and good knowledge you really don’t need much experience to have some decent asset management skills (as in protecting wealth, which again is different than generating alpha).
To get customers you’ll need a good network though. The average prospect will probably rather have a sleazebag from a sleazebank because they don’t know any better. So go make friends in golf clubs, expensive gyms, art courses and what not. Some of those may be your first clients and, if they like your honest and clear approach to help them manage their money, you may prosper on word-of-mouth.
There are no guarantees and, as anything entrepreneurial, this should be pretty risky. So don’t throw the rest of your life away while attempting this. Later on you’ll probably want the CFP or partnerships with lawyers and accountants so you can help in tax planning and the like (CFA is too international and is not really helpful in navigating rules for specific countries, even for the US).
 
Crazyman wrote:
There are no guarantees and, as anything entrepreneurial, this should be pretty risky. So don’t throw the rest of your life away while attempting this. Later on you’ll probably want the CFP or partnerships with lawyers and accountants so you can help in tax planning and the like (CFA is too international and is not really helpful in navigating rules for specific countries, even for the US).
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I’ve definitely noticed that. Even though I’m only through 1 level I can tell that I’m not going to get a lot of Canadian Tax Law knowledge from the program.
 
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