I sat down with Brian Bain, on the Investor in the Family podcast, to discuss investing and my early life in the finance industry. Brian’s had a bunch of great guests in the past. You can find the episode on iTunes or at Investor in the Family.
It was a fun experience, though I have a newfound respect for the recorded medium. Writing – with the ability to edit – is a lot less nerve-racking than a live interview. So, if I sound like a rambling fool, I’m blaming first-time jitters.
Anyways, I thought I’d expand a bit on my past experience in the industry since I rarely cover it here.
I’ve probably forgotten more about life insurance than most people need to know. My first stint in the real world was with a life insurance company. I wanted a job having something to do with investing. They sold the job as being help people – via financial planning – through the company’s products. There may or may not have been a dangled carrot of “you can make a lot of money”.
Anyways, I was young and naive and took the job.
I just needed a few things before I could officially give “financial advice”.
First, there was fingerprints and a background check to prove I wasn’t a criminal. Then I had to take a couple exams – the Series 6 and 63 – to be licensed to sell the products. And pay a $100 fee.
That was it. (Really, I didn’t need my finance degree, or any college degree, or even a high school diploma.)
As a reward, I got my very own business cards complete with an official sounding title. It had the word “financial” in it, which was official enough for most people.
As long as I kept the licenses current by paying the annual fee and spending a few hours every few years on continuing education, I could give all the “financial advice” I wanted.
And it didn’t have to be great advice either.
I mean…it was in my best interest to offer the best advice possible. But it was also in my best interest to get people to buy products. I wasn’t doing volunteer work. If I wanted to get paid, you had to buy something from me. That meant buying some type of life insurance, disability insurance, annuity, or mutual fund. As long as my recommendation filled a need, I was covered. If I wanted to put my clients best interest first – I did my best – that was on me.
The company I worked for was very adept at pointing out all the solutions their products solved. Let’s just say, their products were the right solution for every problem, even though it wasn’t always the best solution. For some reason, whole life was the answer to most of those problems (guess what paid the highest commissions?).
To sell this stuff you really had to believe all their claims. I was just smart enough to know some of those claims were a stretch. So I never bought in, which is one reason I got out. Of course, when you don’t believe in what you’re selling, you don’t push it, you don’t make money, and you force yourself out.
My point, if I haven’t lost you already, is that sometimes when financial products are recommended, commissions are involved. Sometimes the higher commission product is recommended because it’s the best solution. But not always, because I watched it happen. (This is part of the battle for a fiduciary standard in the finance industry. You can read more about it here and here).
