by Jack Waymire
Every year the financial service industry hires thousands of new investment advisors to sell more than 30,000 investment products. They replace the thousands of investment advisors who quit or were fired because they could not make it in the dog-eat-dog world.
Why is it so difficult to make it in the financial service industry? Isn’t it a profession like accounting and legal? It should be, but it’s not. Unfortunately, financial service is dominated by a powerful sales culture that impacts all of its decisions. New investment advisors are paid straight commission when they sell products and many of them pay their own expenses. If they are successful they make a lot of money. If they are unsuccessful they usually leave within three years. They head for greener pastures. Just hope you did not follow the advice of one of these newly minted experts who left.
Who Needs Training?
Investment advisors do not receive a lot of training. They are supposed to know how to sell before then enter the industry. And, how much do you really have to know to sell mutual funds. Not much, use a few buzzwords and sell the fund’s track record. It is easy to sell hot funds if investors believe they will earn those high returns in the future. It just doesn’t happen to be true.
What about Apprenticeships?
Even carpenters have apprenticeships. How can people obtain licenses on Monday and start selling investment products on Tuesday? Who wins when there is no training or apprenticeships? If you guessed financial service companies you would be right. The sooner reps start selling the sooner companies start making money.
No Disclosure Requirements
Wall Street companies make it easy for investment advisors to trick investors into believing they are knowledgeable experts. First, they hire new advisors who are in their 30’s and 40’s. Investors assume they have been in the industry for years. Also, there are no mandatory disclosure requirements for investment advisors. It is up to you to ask the right questions and know good answers from bad ones.
Titles Sell Products
Wall Street has developed another sales tactic that is designed to trick investors into buying from inexperienced investment advisors. It made sure there are no rules that prevent its representatives from using the titles that help them sell the most products. Sales representatives tell investors they are investment advisors, financial advisors, and financial planners because these titles reduce sales resistance and help them sell investment products.
Friends & Family are Targets
You are at risk if your best friend or a family member decided to sell investment and insurance products. New reps are told to start selling products to friends and family because they already trust you. Even if the rep fails companies derive revenue from the assets of friends and family. Plus, reps do not have to go through the lengthy sales process of developing trust.
I don’t know about you, I may like my brother-in-law, but that does not mean he has the specialized knowledge I need to achieve my financial goals.
The Warning Label
New reps, financial planners, investment advisors, or whatever they call themselves should come with warning labels like packs of cigarettes. Smoking is a health hazard. New sales reps are financial hazards. The warning should say: “I have been in the financial service industry for 23 days. I have had no training and I passed an easy test to get my sales license. Even though I do not know what I am doing, I need your assets so I can keep my job and make some money to pay my business expenses”.
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