Have you ever considered becoming a professional financial advisor? You can read about one man’s story in this article Evolution of an Investor from Conde Nast Portfolio. Blaine Lourd started out as a stockbroker, and found out he was really good churning accounts for his own profit:
“It was amazing, the gullibility of the investor,” he says. “When you got a new customer, all you needed to do was get three trades out of him. Because one of them is going to work. But you have to get the second one done before the first one goes bad.” [...]
It wasn’t exactly the career he’d hoped for. Once, he confessed to his boss his misgivings about the performance of his customers’ portfolios. His boss told him point-blank, “Blaine, you’re confused about your job.” A fellow broker added, “Your job is to turn your clients’ net worth into your own.” Blaine wrote that down in his journal.
Although he kept at it and became rich and successful, Lourd eventually got tired of picking investments for his clients based on whether it made him richer and not them. When he tried to change his investment recommendations in a manner that followed his conscience, the large brokerage firm he worked for fired him. (A.G. Edwards, now Wachovia Securities) Now, he is a fee-only financial planner who makes less money advocating passive investing, but sleeps better at night. (I doubt he’s eating Top Ramen, however.)
His job, as he now defines it, is to tell investors that the smartest thing they can do is nothing. He acts as a brake on, rather than an accelerator for, their emotions. For that, he takes between one-half of a percent and 1 percent annually, which is more than they’d pay if they simply bought index funds on their own. “I tell them, ‘Look, if you can control your own emotions and you want to go to Vanguard, you should do it.’ And every now and then, someone asks the question, ‘Why do I need you, Blaine? What are you doing?’ And I say, ‘Howard, be careful or I’m going to send you back to Smith Barney.’ And they laugh. But they know exactly what I mean.”
The comments on the article seems to focus primarily on the whole active vs. passive investing debate, which is valid but I think misses the bigger point mentioned above that one way happened to make him a lot more money. Even if you believed in active investing, you could still avoid things like promoting high-cost, in-house mutual funds, trading in and out excessively to generate commissions, and selling unnecessary insurance products.
I also enjoyed this article because it reminded me of my idle fantasies of becoming a financial planner. Wouldn’t it be cool to help people manage their money better on a 1-on-1 basis? Unfortunately the reality seems to be that most people starting in this field have to put in at least a few years in a commission-based brokerage firm making cold calls and aggressively pushing whatever products they say to push. Otherwise, with no experience and no big recognizable company name behind you, it will be impossible to get any clients.
My own idea was to join some firm with low entry requirements like Ameriprise or Edward Jones, but only sell products that I felt were appropriate like index funds or term life insurance. I wonder what would happen? I suppose that I would be fired quickly for not meeting quotas. Even Mr. Lourd, who was still making lots of money for his old company even while advocating index funds, got fired for not following the company line. Still, it would be fun to try.