Usually, you get a broker in one of four ways:
4. a member of an Affinity Group
An Affinity Group
There is a growing trend in affinity group marketing in the area of financial services. Affinity groups are groups of people brought together by a shared experience or background. A member of the group uses that common background or experience as a way to market products and/or services to other members of the group.
Relating it to the topic at hand, there are a significant number of stock brokers that find their clients based on a shared experience or background that has little or nothing to do with their experience or acumen as a financial advisor. For example, an airline pilot that retires from active duty, becomes securities licensed and registered, and then promotes himself to his former airline pilot friends and associates. He relies on their common background as pilots as a basis for their trust and willingness to do business with him. He hopes that they will equate his skills and acumen as a pilot to his ability to manage money.
There is of course very little correlation to flying a plane with managing money. While you may argue that both require a certain degree of intelligence, and may share certain traits like patience and being cool under pressure, there is no tangible basis for believing that just because a person is a good pilot they will be a good broker. This is not to say that a pilot cannot be a good broker; it is just as a potential client you need to make sure that you make your selection of a financial advisor based on criteria associated with money management and not some unrelated occupation.
Another affinity group where the lines between common interest/experience and money management can be easily blurred involves the clergy. Specifically, there are a number of spiritual leaders that supplement their non-secular income from other occupations. Some become licensed securities and/or insurance salespersons.
As with the pilot-turned-financial-advisor discussed above, there is no direct correlation between the skills and acumen associated with being an effective spiritual leader and being an effective financial advisor. However, unlike with the pilot, there is an added element to this relationship beyond shared and/or common experience of the spiritual leader/follower relationship. While there are limits, and rightly so, on how much you can trust your financial advisor, the degree of trust and confidence you place in your spiritual advisor is for all intent and purpose limitless. Most people, whether consciously or subconsciously, cannot bring themselves to question any advice their priest, minister, rabbi, etc., may provide. This is a potentially perilous situation when that advice is financial in nature.
You have to feel free and unencumbered to question your stock broker about what is going on with your account, not fearful or guilty about the repercussions of questioning someone you believe holds the key to your spiritual well-being and salvation. There are enough inherent conflicts of interest in the customer/broker relationship; to add religion, faith, and a sense of dominion to the equation is too precarious.
Some faiths do not allow their leaders to mix secular and non-secular activities within their congregation, but that is the exception, not the rule. Therefore it is incumbent upon you to recognize the pitfalls associated with this type of relationship and not let yourself be caught up in the fantasy that by virtue of ordination your money and your spirituality are intertwined with the same person. As with the pilot scenario above, it does not mean that a spiritual leader cannot also be a good broker; but the potential risks and conflicts associated with doing business with your spiritual leader will most likely far outweigh any possible benefit.
Remember, when choosing a stock broker, by whatever method, look for someone who understands you and your specific needs, whom you can understand and not feel intimidated by and who will answer your questions in writing versus talking over the phone. None of this will guarantee a good relationship, but using this methodology will increase your chances for success.
To learn more about Richard Lewins, visit him at www.lewinslaw.com.