Intelligent Investing #61 - Challeges of being a financial adviser. Why this industry is one of the most difficult to succeed in

In this Episode Glenn Leest talks about the challenges of being a financial advisor. Why this industry has over a 90% wash out rate within the first 5 years. Some of the challenges include:

1.       Rejection Rate, why your going to hear a whole lot

2.       Number of people you need to talk to

3.       Marketing yourself and company effectively

4.       Being able to explain complicated financial subjects in an understandable manner

5.       Asking for people’s business

6.       The financial strain of the first few years. Its hard to survive when you make little to no money in the first couple of years

Glenn Leest

Senior Investment Adviser

WT Wealth Management

Office 928-225-2474

INTELLIGENTINVESTING@WTWEALTHMANAGEMENT.COM

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Transcript

Welcome to Intelligent Investing with Glenn Leest. In today's episode, I'm going to be talking about what it's like to be a financial advisor and some of the challenges this industry brings. So going to be a great episode. Make sure to tune in. Uh, we're going to get right to it.

All right. Welcome to Intelligent Investing, Glenn  Leest here it is a Tuesday afternoon. And um, the other day Cody and I were talking about what it's like to be a financial advisor and. That's a subject that I can just talk about on and on and on. Cause I've been doing this about a decade. But, um, I, it's an interesting career because I don't think most people understand what it really entails.

Um, maybe there's this perception that it's just like this cake walk career. And in fact, it's, it's the complete opposite is. An extremely challenging career for a number of reasons. Um, give you some stats. I think it's like within the first three years, um, either the first three to five years, 90% of financial advisors have left the industry.

Mean they started, worked the industry for a couple years and then 90% of them wash out or don't make the cut or whatever it may be. And so, um, you know, one thing is if you've been work, if you work within a financial advisor, Who's been doing it more than five or six years, and they're probably pretty good at what they do, um, because they beat the odds, if you will.

Um, I've seen some people that are absolutely brilliant. You know, they, um, you know, just have these amazing abilities to talk about finance and terms and, you know, all these different, uh, you know, really complicated things. But yet they failed in the industry. And you go, wait, wait. You know, if they're really good at, uh, finances and investing, why would they fail?

Because it's, it's not just about what, you know, it's also being able to communicate with people, um, which is a barrier, which is a challenge, but it's also being able to find people to go talk to, uh, to effectively market. That is something a lot of people. Struggle with this industry is, is marketing themselves and marketing their services.

Uh, well, and um, I've seen advisors over the years that, you know, had those first two boxes checked. They were, you know, great with talking with people were really smart, but they just didn't know how to market themselves. And, uh, they were afraid of going out and putting themselves out there and hearing no.

Uh, and that's something. You know, is one of the biggest challenges in this industry is the, the rejection rate is, is astronomical. Uh, you have to be willing to hear no, no, no, you know, multiple times because you're trying to earn someone's business and, you know, say, Hey, you know, I'd love to work with you and help you with your investments.

No, you know, I already have my own person, or I'm good, or whatever the case may be. Um, you hear a lot of no's, and, and a lot of times there's. Personal about the advisor himself or herself. It's just the nature of the business that, um, for whatever reason, maybe it's just not the right time or not a good fit or what, whatever the case may be, but they're, they're not necessarily rejecting you.

They just, you know, they just. Doesn't make sense at the time. So being able to overcome rejection is huge. Um, because it happens. And, and if you don't ask people for their business, you're never going to get it. Uh, that's the other thing I've learned in the industry too, is that you have to be willing to put yourself out there and say, Hey, you know, why don't we do, why don't we start working together?

Um, any reason why we shouldn't work together? And, and. That's something you have to be able to do. Um, I've seen other advisors, you know, in the past that just never were able to get to that point where they're actually able to ask someone like, Hey, you know, we've covered enough information, covered enough about, you know, what we can do and how we can, you know, improve your situation.

Um, now, um, you know, let's, uh, let's see, you know, would you like to work with us? And, you know, just as simple as that. And, uh, so being able to, uh, go through rejection and then also being able to actually ask for someone's business. And then two, How do you build relationships? That is also a big challenge in this industry is how do you go out and take someone from someone you don't know at all to a loyal lifelong client?

Right? That's, and it's an entire process and it doesn't happen overnight. Um, I've actually had a couple clients that. I, uh, it took me about two years to, uh, convert them into a client or to, you know, build that relationship long enough where they said, okay, you know, I kind of like, you know, Glen and his firm, you know, been talking to him off and on, through just different things, you know, maybe through the community or maybe he gives me a call, talks about investing, uh, for two years and.

Now I'm ready to work with them. And so some of my biggest clients were ones that, you know, I'd been talking to for years and years and years. Um, and they finally came on. Some people, you know, they, they're, you know, they know right away and they're willing to work with you. But some of the bigger clients, it's, um, doesn't happen overnight.

So how do you do that? How do you build a relationship from nothing? How do you build a bridge? And so that's a huge challenge that I've seen in a lot of other advisors. They're just, you know, Uh, completely dumbfounded. Like, I have no idea. I no idea how to do that. How do you, you know, go and introduce yourself to people?

How do you build roles of relationships and how do you know these people, Glenn? Um, and, and that's, uh, I guess the secret sauce and, uh, industry is I found a very effective way to do that. Um, but for those that can't do it, it's, it's a huge challenge. Cause it's also a numbers game too. So, um, that's the other thing that is very challenging is just the sheer number of people that you need.

To and to ask for their business is just astronomical. So, um, I think there's another firm, uh, nationally, uh, based firm called Edward Jones that, um, they have a really good training program for what I hear. Um, but I actually heard their stats. Someone was telling me that in the first year, you have to knock on 10,000 doors.

And, um, , I had heard the Edward Jones guy say that he, him and I went to the same gym, uh, and, and he'd gotten into. Into the industry about the same time as me. And uh, he was like, oh yeah, I, uh, you know, got to do 10,000 doors in the first year. I was like, what do you mean 10,000 doors? He's like, no, I have to go into the neighborhood, you know, whatever area I'm assigned to, and start knocking on doors.

And I'm like, wow. That's, um, How's that working out? He's like, well, you know, it's, uh, sometimes you knock on a door on Saturday morning and you catch the person and give them some helpful information, and then a couple weeks later, maybe you drop off some more help, helpful information by the six or seven time of you making contact, you know, then they're ready to start doing some work together.

But 10,000 doors, I'm, I'm like sitting there trying to think, uh, the math of what that actually is and it's just, I don't even know how many that let's actually see. So 10,000 doors. Um, And I think, um, the, you wouldn't do just 365. Um, uh, because you don't work every single day. Um, you have weekends off and holidays.

Um, so the average, um, amount of, uh, work days, you know, in a year. Um, let me see, I'm trying to find that real quick. Um, average work days per year. I was going to say 250. Oh, it's two 60. So, um, you know, let's use 260. So if you have 10,000 hours divided by, or 10,000 doors divided by 260, that's 38 doors per day.

And so, um, what time do you need to start, start to get in 38 doors? Because it's not like you knock on the door and you're done in 10 seconds. You know, if you reach someone you may be talking to them for a couple minutes. So, um, yeah, just the numbers itself is just. You know, it's just a crazy thing that what needs to happen.

So I think the stats in sales is like for 10 people you reach out to, three of them will book an appointment with you and one will do business, one or two. Um, so that means in order to bring on. You know, what is that 20 clients, you know, potentially, or 10 to 20 clients you'd have to talk with over a hundred people is the math.

So again, and talk about rejection, it's just, it's part of the, the nature of the business. So that's been a, a challenge I've seen a lot of people work through. For me, I actually took a different approach that. You know, I looked at it as the sooner I can get through the no’s, the faster I can get to the yeses.

Meaning there's just naturally going to be a group of people that just, it's not going to make sense for them to work with me. And that's it is what it is. Um, but after I kind of filter through those people, the faster I can kind of, you know, Find out whether or not they want to work with me, I can start focusing my attention, you know, or look forward to, you know, the yeses that I'm going to hear or people that do want to work with me.

So, um, yeah, that's just a big challenge and a lot of people, when they hear that, they're go, man, that's a lot of people to talk to. Um, you know, and you like, yeah. It is, you got to be good at talking to people. You got to be upbeat, you got to be positive. You got to offer some, something that is helpful and beneficial to them.

Um, you know, if you're calling them and you don't really have anything of value to bring to the table, uh, chances are they're not going to utilize your service or, you know, buy your product, whatever it may be. So, um, you know, there's a lot of talking, uh, and that can be very tiring by the end of the. I remember when I was first in the business, um, I'm in year about 10, but the first three to four years were just horrendous for me.

They were just very challenging. Um, talked with a ton of people, was doing tons of different programs and, you know, community involvements and networking events and clubs, and I remember I just was doing 12 hour days, you know? Five to six days a week. So just putting in tremendous amount of hours. And I come home and literally, I, uh, I tell my wife at the time is like, my brain is like putting, you know, I've talked to so many people today, I'm just like completely just exhausted.

Um, not physically exhausted, you know, like, not like digging a ditch, but, you know, talk when people, um, you know, can be. Tiring, depending on what the conversation is. Some people naturally, when you talk with them, you feel really good about it. You're like, man, they're kind of, you know, energizing and some people are, are draining.

Um, so it's just, you know, people are people. So, you know, if you're talking to 50 or 60 people in a day, you know, it's, it's. It's, it's pretty exhausting. Um, just regardless. In fact, my, my junior, uh, my office, uh, so my, sorry, my investment advisor, uh, I was going to call him my junior advisor. He's going to be a junior advisor soon, but Cody Harmon was starting to call some of his people.

Um, and we basically did a list and we said, okay, what are the top, or, or who are a hundred people that you know that. Could probably call and just see if they're interested in working together. And so, um, we put together his list and um, he started getting on the horn. He was like calling him and it took him like two days and he burned through the list and, uh, I think set like 15 appointments out of like 150 people.

So, About the same stats I was talking about. And, uh, of those 15 people we met with, um, I think maybe three or four of them canceled, just no call, no show after we set the appointment time. And then I remember we met with probably seven or eight and, um, Really only one was potentially interested in working with us or was in a place to work with us.

And so you think about the amount of math here. So if you have someone that has, you know, say 200 clients that they have in their book of business, you start back backing into it and going. How many, how many phone calls do they do? How many, you know, people do they have to talk to get to 200 clients?

And that's just a challenge in the industry and there's no real way to get around it. That's just sales in general. Um, even if you're an absolute rockstar and amazing at what you do and your product is awesome, I mean, the sales stats are still, the sales stats. They, they kind of apply across the board.

So that's been a challenge. The other challenge is the financial side of it. This can be a very lucrative and great industry, but it can also be just, you know, atrocious. As far as the first couple years, I think the first two years I was negative, uh, meaning any money I did make, I put right back into the, you know, building my business.

And then, so I was like negative a couple thousand dollars or something like that. So any money I did make, I just, you know, just went right out. So when you hear that, you're like, wait, how do you survive? You're like, exactly right. How do you survive on a negative income or a zero income? Very little income.

Cause the first couple years you're just out there trying to make connections, talk to people, trying to, you know, um, you know, do business with them. And it just takes time to build up a book of business. It doesn't happen overnight. And no one's, people don't just give you books of business either. In this industry, it's not like you walk in somewhere and they just say, Hey, here's a bunch of clients.

That's not how it works. And if it does work that way, like at a bank, sometimes the banks do that. Um, they're, they're paying you pennies on the dollar because the, the bank looks at it as saying, Hey, we're the ones that built these clients and accumulated them and did the hard work to bring them on. So this, uh, advisors really just kind of serviced them and we're going to pay him or her, you know, small fraction, um, because they didn't do the legwork to get, bring them on board.

So, The financial side of it was really challenging. Um, first couple years I just, I didn't, any money I made, I, I poured right in the business. And so I was having to figure out how am I going to make my ends meet, you know, at the time I had a wife and, you know, my first daughter, and so, Unfortunately I had to pick up a, you know, nighttime job.

And so in the evenings I would, after I was done working long hours as an investment advisor call and talking to people and doing events all that I'd go and I was, you know, cleaning houses. I was, you know, trying to earn a little bit of money through managing, uh, short term rentals, um, here and there. And so my wife was still working at the time and we were just, you know, pinching every penny those first couple years.

It was really tough. And that's the other, People in this industry, um, the financial side of it is very hard and a lot of people wash out because they're just tired of working, uh, for either free or very little. I mean, imagine if you had to go two years without an income, would you survive? Most people are going, uh,

I couldn't go two months without income, let alone two years. So that part of it is a very challenging part, is, um, just the financial side, but then. As you've been doing it longer and longer, longer, your income just starts to grow exponentially. Um, so for those that can actually, uh, wade, you know, or, or, or basically wade out those first couple years, cause the first probably three to four years are just, you know, very challenging.

But once you get kind of past that barrier, it starts to become, um, Easier and more fruitful, if you will. Um, so I love my work. I mean, I, from the very beginning, knew I wanted to do this type of work and was willing to do whatever it took. Um, I, when I first got in the industry, I was, um, coming off from a couple different body building shows, um, that I can.

Heed in. So I was, I was accustomed to hard work. I was accustomed to, you know, just the day in and day out, you know, doing what you need to do to become successful. And, uh, it's a big sacrifice, you know? So I kind of took that same mantra, uh, being a bodybuilder and all the dedication it took and just applied it to my career.

And, um, you know, I was, you know, for. Not to toot my own horn, but all my bosses, they, they saw my effort and so they'd be like, okay, even if, you know, in the first couple years he's not bringing a ton of clients on. We can't say he's not working, he's not hustling, he's not doing what he needs to do to talk to people.

Um, so it would just, you, it's hard. Um, so, yep. That's the other thing too, is just the, you know, amount of dedication it takes, the, the hours, the physical, uh, mental toll it takes of just doing that type of work. Um, the other challenges that I've seen is, Uh, you have to be able to really communicate well to clients.

Um, most of the clients that come in, they're, they're not, Investment gurus, they're not like, you know, no, uh, you know, a price to earnings is, or they don't know what, you know, you know, earnings reports are. They, they just, they're not in that world. So being able to talk to them at their level, being able to adapt to say, um, here's this very complicated, you know, subject and here.

Easier way, a simple way for me to describe it. And so almost like being a storyteller is really helpful. Um, so you're taking a very complicated. Subject or, or whatever, and you're translating into a way that they can actually understand. Um, so that's the other thing that I've seen people struggle with is some people are so brilliant and amazing, you know, but when they talk, the people on the other side of the table are just like, eyes glaze over.

They're like, we don't even know what he's saying. You know, he's using all sorts of terms and. What he's talking about. It's so foreign to us. We don't really understand that. So that's, you know, a definite challenge is being able to adapt your, your, um, communication style to wherever the client is at as far as their knowledge and, um, acumen when it comes to investing or finances.

I've got clients all over the spectrum as far as, uh, their, their, uh, knowledge in this area. And we've got clients that really don't know much about investing and. Just kind of leave it up to the professionals. And then I've got clients at those scale that are, you know, very, very involved in the process.

They're looking up the stocks, they're doing research, they're looking at, you know, what Jerome Powell says, they're looking at, you know, unemployment numbers, cpi, you know, so, um, that's something that I've, I've really got good at. I, I, I'd say, or are really developed, um, is just the ability to talk to people, um, and communicate, uh, at their level.

Um, and so, yeah, I've seen people.  just, uh, you know, financial advisors, they're kind of just, they're kind of, I don't know where, how to describe it. They were just kind of a little bit off, you know, or a little bit kind of goofy in their communication. Um, and clients pick up on that when you're, when you're talking to a client or potential client, they, they pick up on the level.

Of confidence or lack thereof. So if you're talking to them and you just really don't have confidence in yourself, they're not going to have confidence in, in you either. Um, you know, so, uh, yeah, you have to be able to, um, you know, communicate well and offer them something that is a benefit to them. It's got to be a win-win, uh, type arrangement.

If, uh, if you're not able to really help them, then why should they work with you? If you can communicate, here's how we can really help you, um, succeed and do well, and, you know, grow your investments and, and really do well in your, your financial life, then, you know, it could be a really good thing. So those are just things to consider.

Um, when, when talking to, uh, a financial advisor is, it's, you know, their, their industry is very challenging and there's a lot they have to do. And there's a lot of stuff on the back end too that, that happens. Not just talking with clients all day long. There's, you know, Procedural stuff you need to do compliance stuff.

So I thought this would be kind of a fun mini-series, is what it's like to be a financial advisor. And so today we're talking about some of the main challenges, but next time I'm going to talk about some of the, the fun parts of the job or the enjoyable parts, the things that I, you know, really, uh, uh, like doing day in, day out.

Um, and which is why I, uh, keep doing what I doing because you know, every job is. Got his pros and cons. I figure if you can find a, a job that you know, 80% of what you do is enjoyable and the other 20 percent's not, then you're in pretty good shape. But if it's 80% un-enjoyable and 20%, you know, enjoyable, then you know, maybe you're, maybe you're in the wrong job for you.

So anyways, with that, uh, thanks for joining us today. Make sure to like, subscribe if you want to give me a call. Happy to talk to you. Um, if you want to get a second opinion. Portfolio, your financial situation. I'm happy to talk about that. And, um, I, I really just enjoy this industry. So, uh, even if you just want to talk and kick around a couple ideas, give a call.

Number here is 9 2 8 2 2 5 2 4 7 4. Or you can email me at IntelligentInvesting@wtwealthmanagement.com. Glenn Leest signing off.