The financial services industry offers plenty of excellent careers opportunities, but many students and career-changers are unsure of which part of the industry to join. Here are various reasons for and against pursuing a career as a financial adviser in the private banking or wealth management division of a bank or broker-dealer.
Sink or swim
It may be easier to get your foot in the door in the industry via private banking or wealth management compared to investment banking, hedge funds or private equity, because major financial services firms hire plenty of smart, outgoing people as financial adviser trainees. Most train them well over a period of several years. That said, it is a steep learning curve.
- Con: Unfortunately, the turnover rate is extremely high.
- Pro: If you can survive for about three years and start building up your own book of business, then you can thrive for the rest of your career.
You have to be able to win friends and family as clients
Finding your own clients is about 99% of the new adviser’s job. You need to build your book, starting with your natural market, that is, your peer group and relations. The firm likely wants accounts started with a minimum of $ 250k of investable assets.
- Con: If you don’t like this type of sales activity targeting friends, acquaintances, neighbors and relatives, then this isn’t the career for you.
- Pro: You’ve heard that about 10,000 Baby Boomers are retiring every day. Most people spread their money around, using several advisers. If you are good at finding new clients, then you can literally write your own ticket.
It’s all about how much revenue you bring in
Not all new hires start their careers on the same track. The traditional approach was the sole proprietor model, later joined by the team structure and advisers domiciled in bank branches.
- Con: If you aren’t directly connected to bringing in new revenue, you are overhead. This puts your job at risk.
- Pro: Team members take on roles like portfolio management and client service. Advisers in banks often look for clients within the depositor base. Ultimately, you must be bringing in revenue.
Whether it works out long-term or not, it’s a brand name for your resume
Getting a job as a financial adviser gets your foot in the door of a large organization, which often has retail banking, investment banking, commercial/corporate banking and private banking operations.
- Con: Once you get established and are successful, there are few cons, but, as discussed, getting over the hump is challenging.
- Pro: You can apply for other jobs within other departments at the firm as they are posted. You make contacts. Transition into management. Recruiters call to lure you away with bonus checks. At worst, the experience looks good on your resume.
The way you get paid may be changing
Initially affecting only retirement accounts, the Department of Labor’s fiduciary rule requires advisers to act under the fiduciary standard, not the suitability standard, which threatens the commission model and gives a boost to fee-only advisers. It took effect on June 8th, but its fate is in limbo due to scrutiny from the Trump administration.
- Con: It raises the likelihood of being sued. The courts will take time to establish precedents. Lawyers will work overtime trolling for unhappy clients.
- Pro: Most of the industry will likely move to an entirely fee-based platform with the simple rationale: “We don’t run the risk of not recommending the most cost effective produce if everything costs the same.” The best advisers will likely make more money.
Robo-advisers/automated investment platforms are growing in importance
Suppose a client defines professional money management as a portfolio aligned with their investment objective and risk tolerances that use ETFs and rebalances automatically. They want to pay the cheapest price possible. Today, there’s an app for that.
- Con: The vast majority of people who are both in love with technology and building their nest egg will see this as the logical choice. Your own firm will compete against you, offering the service to the general public.
- Pro: Many investors buy at the top and sell at the bottom. They need someone to advise them, to hold their hand and commit more money. If the Indexes deliver flat returns, then they will want something better.
Continuing education is highly recommended
There are many professional certifications available, both relating to the role of financial adviser and other industry careers such as research. Many are costly and time-consuming to get, but some employers will pay for their employees to get them, and they will give your career prospects a boost.
- Con: You will likely find you have CE credit requirements to keep your licenses current. You will need to take time away from being productive to attend classes.
- Pro: Your firm will likely pay for everything, including an advanced college degree.
Successful advisers get paid a lot
The major reason people get into the wealth management industry is to make money. You must put up with lots of pressure and achieve hard-to-reach performance milestones to stay employed and eventually become successful. Assuming you don’t wash out, the rewards can be tremendous.
Bryce Sanders is president of Perceptive Business Solutions, a consultancy specializing in financial services client acquisition training, author of “Captivating the Wealthy investor” and a former director, sales manager and financial adviser at Merrill Lynch.
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