I Want To Be An Advisor, What Do I Do?

0:04Welcome to Animal Spirits, a show about markets, life and investing. Join Michael Batnick and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast.

0:34Hello. Welcome to Animal Spirits with Michael and Ben. We are live from the Morningstar Conference on Navy Pier. It only took us 26 minutes to walk all the way back here. My lordy. So we are, how would you describe what we're in? We're in a booth. It's like a fishbowl. A fishbowl. There's people with headphones looking at us. I'm just going to look at you. You have my full attention, okay? All right. No distractions. We are very close. So today's episode is going to be a little bit different than the normal shows. And it's going to be a little bit self-serving because there is a conversation that I have on repeat and the volume ebbs and flows.

1:12But it's something like, hey, love your guys podcast. I want to get into the business, the industry. Here's what I'm doing. What would you recommend? How would you recommend I break through? And a lot of times it's people who are completely out of finance. Sometimes it's people in finance who say, I want to go from this track to this track. Yeah. A lot of times it's, listen, I love this stuff. I follow it all the time. What do I do? Yeah. So I've gotten pretty good at this, not to brag, because there are only so many different variations of a story that somebody can tell you where they're coming from, whatever background, whether they're in the industry and want to pivot, if they're at a large company, like I know what to say to who I'm talking to.

1:52And so this is self-serving in the sense that anytime I get this, I'm just going to follow them this link. So I had a call earlier last week and the person was our age-ish. Three kids. Middle age. Middle age. Approaching middle age. Not quite middle age. And so I'm like, so tell me your story. And they exited their previous career. And sort of like I was in 2010, what do you want to do? I love the market. All right. Well, cool. What do you want to do? I just, I love stocks. Right, I follow this stuff religiously. I hear all the podcasts. I read all the books, all the blogs. So here, so, all right.

2:36So what are you doing now? He said, I'm actually prop trading. Oh boy. Okay, that's - Wait, wait, wait. Personal capital or like for an actual firm? Because that's, there's a difference. Personal capital with, I guess, leverage from the company that he's working for. No, no, no, it's not, this is not a professional. I just think it would be funny if an individual called their own trading account. Like my Robinhood account is a prop trading account. No, no, no, no. Actually, you know what? Yeah, no, I'm pretty sure he's working like at a place. Okay. Because that'd be a great thing to fudge on your resume, like prop trading.

3:08Yeah, yeah. But it's like your Roth IRA. Yeah. So I love trading. It's a ton of fun. And the seduction of you're going to turn your account into a lifestyle obviously is not real life. we know a lot of people in and around this industry. I don't think I know a single person that trades for themselves that doesn't also have income from either a course and zero disrespect, but nobody is putting food on the table who is reliant solely on their profits from trading. Because once you do that, you introduce all sorts of different pressures. It influences how you trade. It's just, it's not possible. If you're that good, you go do it for a hedge fund.

3:48Exactly. But wait, do you think any of those skills in trading translate into wealth management? Because I'm not sure that they do. Well, it depends on the personality. The skills, and I will use that word very generously or very liberally. No, of course not. Trading has nothing to do with what we do. So no, not transferable at all. So anyway, I'm like, all right, well, he's not delusional, right? Like he's having fun. He knows that this is not going to be a future for him. But he wants something. So paint me the perfect role for you. If you could snap your fingers and create a job out of thin air, what would that job be?

4:23And he's like, you know, equity research, PM. I'm just about to sign up for the CFA. I'm like, time out. The world that you're describing, the role that you're looking for died about 10 years ago. And you also think AI is going to take over for a lot of analysts. That's your take, right? is. We referenced Mark Rubenstein, his sub-stack net interest. He said that he was looking to hire people and AI has made that so that he doesn't have to. Rex Salisbury just put on LinkedIn that perplexity launched a finance assistant. Same thing. He said, I was getting ready to hire one or two junior analysts.

5:11I don't need to anymore. So that role is gone. And the CFA, I'm like, dude, the CFA still has value. If you are at Penn or any other of these Ivy League colleges and you want to get into private equity or you want to work for one of the big banks, sure, do the traditional path. But you think that sell-side analysts are a dying breed then? Oh, for sure. But particularly for what this person is describing, the equity research, the PM, he's like, I just want to roll my sleeves up. and do some fundamental work, maybe some tech. I'm like, dude, that it doesn't exist. We are at Morningstar, the Morningstar conference.

5:56And - Well, part of it is too that the index funds and ETFs. Yeah, it is still a large industry, gigantically large. And in fact, I don't know if it was Jeffrey Patak or Ben Johnson or somebody at Morningstar, I believe, said that even though the flows into active mutual funds or out of the active mutual funds has just been a perpetual tidal wave, the revenue is still going higher because the tailwind of the market. Yeah. Even if the flows aren't, yeah, the market value is still climbing. The fees are still there. It's still a large industry, but it's not growing the way that it once was. Obviously, index funds and ETFs have played an enormous role in changing the trajectory.

6:38Beating the market is hard. And now AI, it's just like the final nail in the coffin. So I'm saying to this guy, like, you are so lucky that you got to me because he's like, I was just about to spend$1 ,800 on the CFA course. And I'm like, dude, you have three kids. You don't have the hours. Takes a lot of time. You are going to waste the prime earning years of your life chasing a figment of your imagination. So what do you tell them to do? The role that you're describing does not exist or it does, but not for you. And it did it for me, okay? Because I was him in 2010. And I was such a pathetic loser that I was willing to go to San Antonio to be an internal wholesaler.

7:22What? That's an internal role. Why would you leave New York City? Because there were no doors that were open for me. Now, in 2010, the world was in a different place. There are different challenges, but it's not going to happen. So you're welcome. Let's talk about what can you actually do. So this is a tangent here, but Bern Hobart on his, on the diff. Yeah. Wrote a piece a couple of weeks ago called what happened to work, working your way up from the mailroom. God, all these stories about ice bear Stearns. I started out in the mailroom or Lehman Brothers. I started out in the mailroom and worked my up.

7:50You cannot do that. There's no mailroom. No. And all the hedge fund managers say, listen, I wouldn't hire myself when I was 20 because all the people I hire now are in Ivy league schools or whatever. You're right. That doesn't exist anymore. He's like, all right. So what about what you guys do? I'm like, all right, well, you have a decent personality. Do you want to give financial advice? And he's like, sure. Tell me more. How do I do that? In the past, my answer was, and it's not a bad answer, is first of all, don't send your resume. You have no resume. Right. Like you were in a different career.

8:29I don't even look at resumes when they come in, honestly. Like people email me. It's funny. I don't either. A resume might or might not be attached. I don't look at it. And if I do, it's only sort of like by mistake. I don't know, proficient in Excel and Word. Right. Right. Ooh. So I said what you have to do, and this is universal advice at this point, go into somebody's branch, ask to speak to the hiring manager, have a nice smile on your face, like go into somebody's office and see if they're hiring and maybe give them your resume physically. So the advice that I had done was getting a job at an RAA with no experience, pretty tricky.

9:09But there are always companies like Vanguard, like Fidelity and Schwab and Morningstar that are hiring for all sorts of different roles. I talk to college students all the time that go start as a customer service associate at Vanguard and learn the business and work their way up and then move on to an RA if that's the path they want. Each one of those paths have different opportunities, different challenges, but that is a viable thing to do, right? Like you can get a role, maybe. Not saying it's going to be easy because you are competing with people that are younger than you, that are cheaper than you, that have less baggage than you.

9:48So it's not going to be easy. Here is advice. If you want to get into wealth management, now it's tricky because this wouldn't work for us, but - You got to have rich parents you can bring on as a client. Right. So let's assume that doesn't happen. How do I get my foot in the door? Right? How do I get my foot in the door is the question. You start at the client service associate level. What is a CSA? A CSA is an operational role. You learn about all the different account types, all the different paperwork, what the steps look like, cashiering. You learn how to talk with people. You work for the advisor.

10:31And you learn the business slowly. Yeah, because you get to do a lot of stuff in that role. So that is the type of role that it's hard to come by. It's like we are always hiring for that role. And it's a difficult role to find. because for the most part, unlike advisors who get a paycheck, who we can talk about if you want, for CSAs, it's mostly a lateral move financially, right? And so things have to be going poor where they are for them to turn over. So there's much less turnover amongst that industry or amongst that job seeker than there is with advisors. So you go in there and you say, here's the deal.

11:11I don't know anything about this industry, but I have aspirations to be the best that I can at this particular function. I am willing to put in whatever time it takes. I will be the best CSA that you will ever hire. And I'm willing to dedicate myself for X number of years and learn the business. And maybe somebody will say, you know what? I like your attitude. I like your smile. You seem sincere and genuine. You're saying all the right things. You're not bullshitting me. You're here to learn. I'll give you a chance. And then you stay in that seat until they pluck you out of it. You put your head down and you'd be the best CSA possible until somebody recognizes your talents and says, you know what?

11:52Would you like to do something else? So that's a family feud. Good answer. Thank you. Okay. So I had a guy come up to me. I actually, I was speaking at a CFA event. You think CFA is dead, but I still speak at their events. I don't think it's dead. Um, and a guy came up to me and he said, listen, I was one of the guys who asked you three years ago. I want to break into the industry. I think he was a tax something. He said, I asked you what to do. And you gave me advice. I don't remember what I told him. But he said, I'm working for an RA now. I said, what did you do? He said, I beat down every door in my town that I could.

12:19And I said, I'll do anything you want. That's if someone finally took a chance on me. That's it. So when people are talking to me or us about working for Riddle's Wealth Management, the number one thing that I'm looking for is personality and drive. and email etiquette and email etiquette and don't be annoying. And I don't care where they went to school. I just want somebody who's like, listen, because this is how I was. I said to Josh and Barry, I will do anything you guys need me to do. And I meant it. And that's mentality that I had. And that's the type of mentality that I respect and admire that I want to work for us.

12:59That's kind of funny because yeah, your role actually was a CSA, even if it wasn't called that at the time. Yeah. A little bit. Yeah. All right. So I want to talk about more wealth management when you're in the industry. So I've had probably 4 calls in the last 3 weeks. And we have advisors reach out to us, ask for advice. Hey, I'm thinking about moving from this place to this place, or I want to grow my firm. And I've had 3 calls in the last 3 weeks, 4 calls, a lot of people saying, Listen, we're stuck. We're only getting bigger on referrals. We've reached our ceiling of what I think our growth can be.

13:27The older advisors, the gray hairs don't want to grow anymore. They're happy with where they are. They're happy with the clients they have, they've checked out, but they're not leaving yet. Us younger group, the next group, we're in our 30s, our 40s, late 20s. We want growth. Here's our plan. What do you think? Or what can we do? So I had one specifically. And a lot of them ask, we want to do content like you guys. That seems like a good way to... And I tell them that is a good approach, even if they probably can't do what we do. Exactly. But one guy said, listen, I'm walking into a potentially$800 million to a billion dollar RIA based in the Midwest.

14:01They want me to grow the firm beyond the 10 or 15 referrals they get a year. What do I do? Is this person an advisor? This person is in the sales growth role. He's coming from out of the RIA industry. And he said, should I do this? And I said, not knowing you've never worked in wealth management before, that might be kind of tricky. I said, well, they're going to give me equity. I said, well, that might change it a little bit. That's the incentive. I guess that's a carrot on a stick. But he said, I'm trying to figure this out. Wrap my head. Like, how would you grow a billion dollar firm into a$5 billion firm?

14:36Yes, beyond the referrals. No, but like not buying other RAs. Yes, yes, organically. He said, how would you do this? And I said, first of all, you're probably not going to be able to do that. It's very hard. Maybe you can, but like temporary, because he said, I want to do this and I want to do this like in a one, two, three year plan. I'm like, I want to have goalposts. And I said, all right, well, just whatever they are, kind of like any kitchen remodel you have in your house, it's going to take longer than you think. Like this is going to take a long time. You have to get the advisors on board and can they close business and these things.

15:08And I said, I'm speaking from experience. The only experience I have in wealth management is content marketing. But I do feel like a lot of RAs have figured out that's the way to do it. Even it's not like building an audience or building a sub stack or building a social media following or something. but it's creating a library of content for your clients that that's, it's like, that's the resume now, right? Because that's your level of expertise that shows you thought about this stuff. I feel like half the time when we get questions from clients, what do you think about this geopolitical event?

15:41What do you think about the debt situation? What do you think about interest rates or inflation? Half the time, they just want to know that you've thought about it. So they don't have to think about it. Yeah, but yes. And talking to clients. So doing content for the sake of being official with your time, if there is an event, talking to all of them at once, instead of sitting on the phone or sending emails one by one is an effective strategy, but that's not a growth strategy per se, right? Like, so you're talking. That's planting the seeds for a longer term growth. But yeah. This person's talking about what building an audience and then attracting clients.

16:14Yes, but I kind of said, there's no way your mile markers are going to be reached that way. So I said, can your advisors close business? Do they reach out to current clients and ask for referrals or ask if they have more money? Well, no, they don't do any of that. I said, that's part of it. Part of being an advisor is selling and closing business, which is not something that they teach people. Some people are born with that skill. We know some of those people that they're naturals. Other people have to actually learn it. And we've seen that path with plenty of our advisors. Yeah. But what would you tell someone in that situation?

16:53Your best bet is buying other advisory firms? No, I would be honest. And I would say, I don't think it's going to work. I would say, think long and hard about what you're going to do before you get there. Have a game plan. Talk to people in the industry and do a sanity check. Does this make sense? But I've had multiple conversations where we talk a lot about the inheritance that's coming, the inheritance wave from baby boomers to the next generation. I feel like that push and pull, I've had a ton of those conversations about, there's a group of young advisors, three or four of us, and there's a group of old advisors that own the firm or whatever, and them butting heads.

17:33And they're not leaving when they said they would, or I thought I was going to be handed the business. What do we do? And I think maybe the thing is you roll out into your own firm or something. All right. So before we get to that part of the conversation, financial advice is a weird industry. I heard Carl Heckenberg talking with Michael Sitchmore. It's a lonely industry in the sense that we are all very much doing our own thing. It doesn't really feel like you have competitors in a sense. Right. So we do. We just don't see them and we don't really interact with them. So we've made a lot of investments in young wealth tech companies.

18:12And oftentimes I'm asked, hey, what other advisors do you know that you think we should be talking to? And my answer is like, I know this sounds ridiculous. I really don't know any. I mean, I know one. I have like one friend in this industry outside of our firm. Now, we communicate with all of the advisors. Like they listen to our podcast. But okay, fine. Well, who should I reach out to? Who do you respect? Like, who do you think is doing a good job? I don't know. How would I know? It's not like the NBA where you could see like what, what teams and coaches and players are doing. Well, I guess the answer is, unfortunately, it's probably the biggest firms are going to continue to get bigger.

18:48Cause I, I still think that you talk about the CFA when people ask me CFA versus CPA, I say CPA or CFP, CFP all day long, because I think there's a huge growth potential for advice in the years ahead. And there's also, there's a demand for CFPs. 70 million baby boomers, they hold all the money. They hold 60 % of the wealth or whatever it is. A lot of them are going to need advice on their money. So the problem is I think a lot of the bigger firms are just going to get bigger. Yeah. All right. So here's my point about the industry and the fragmentation. Even though we don't directly see our competitors, it's pretty rare for a prospect to be like, all right, I'm talking to you and I'm talking to three other REAs, right?

19:28It doesn't, at least for us, it doesn't happen that way. But just because you don't see your competitors doesn't mean that it's not insanely competitive because you're not just competing with REAs, you're competing with wire houses, you're competing with Vanguard and Schwab, they have low cost solutions. And on the content side, you are competing with Netflix, you are competing with Joe Rogan and The Ringer. Like it's insanely hard to get somebody to be Like, yeah, I'm going to listen to this person's podcast who's on their second episode, who doesn't know how to talk coherently into a microphone.

20:04Because we've been doing this for eight years now. And I had butterflies in my stomach for the first two years. It's hard. It takes practice. We were shit. Yeah. Because I didn't go to broadcasting school. I don't know how to – I didn't know how to talk to a microphone. So it was difficult. And we were doing this on the back, let's be honest, of Josh and Barry. They had the audience. And absent then – Yeah, they helped build our audience. Absent them, we wouldn't have been able to do this. I don't know. So there's not really a good answer to that. No, there is a good answer. Figure out something else.

20:34That's the truth. How about this? What I tell people all the time is find your niche. So we just had a guy come in here before we started and he said, I cater exclusively to dentists. I think we talked to someone before who just does Delta airline pilots. If you really want to stand out, it's a niche in your expertise. Yes, yes, yes. Because it used to be, I'll just go to the place down the street or in downtown and that's my advisor. But now the pandemic blew this doors off of this. Your competition now is everywhere because people are willing to talk on Zooms and find an advisor somewhere else, right?

21:08It's not just the place down the street that you're willing to go anymore. Josh put on LinkedIn the other day, what would you do if an acquaintance of yours comes to you with a really bad idea that they're passionate about? What would I do? Tell them no. It's a dumb idea. So I - I would say, good luck. Yeah, you would say, yeah, you would say that sounds good. Good luck. I really enjoy being frank with people because most people, there's no upside to telling somebody that their idea is not a good one, especially if they're passionate about it. Now, there's times where I'll bite my tongue, obviously, if somebody's like, you know, I've got this whole, it's tricky.

21:45But for somebody like the conversation that I had last week, like, hey, I'm thinking about doing the CFA, prop trading. I love that. I just saved that guy's life. The chances of that working out are very small. And had he not spoken to me, he would have gone down a really bad path. So I love being able to do that for people. Now, I'm not always right, but I know when I'm right. So you want to start the CFA prevention hotline? Yeah, listen, my side gigs are a bald consultant. That's true. And no, the CFA is not for you. That ship sailed. We should mention we both have our CFA designation. You know, ironically, it helped me get my second job.

22:21My renewal just came yesterday. I got mine too. You know, badgering me about it. I've told this story before, but it's just so funny how life works. I so for people that are outside who are not familiar with with my story, our podcast, I was a jackass of all jackasses growing up in college. I kicked out of Indiana University, shout to Kelly twice for just not caring. And so I fell very far behind professionally when I got out of college in 2008. I was like, oh, this is why people actually put time into their education, dumbass. So I went down the CFA route because I needed something. We had nothing.

23:02I had nothing going on. And I'm in an interview with Allianz or PIMCO. I think it was when Allianz bought the merger, whatever it was. And it was going great. This was for an internal wholesaler role. And my first interview was going wonderfully well. And I felt like adrenaline and excitement. I'm like, finally, like finally, I found a home. And then he introduced me to his hiring manager. And the guy was like, wait, CFA, this is not the role for you. This is an internal wholesaler. I was like, no, no, no, no, no, no. Like I'm only on level one. I'll stop doing it. And he was like, no, dude, like you're in the wrong, you're in the wrong role.

23:43I don't know what EBITDA means, I swear. He goes, apply for something else. This is not, this is not the role for you. This is more of like a sales, you know, relationship role. So had I not done the CFA, I would have been in on much, I would have gotten that job. Like I would have gotten that job and my life would have been very different. How about this though? Sales is one of the few places where AI is not going to disrupt. If you have the ability to sell, AI is not going to take your job. Not yet. Well, you think AI is going to take all jobs. No, I don't. What are we going to do if no one has a job?

24:13Well, here's a role that's disappearing, and I'm sure of it because I won't hire for it. The power planner role. That is a very difficult role to fill because typically, not typically, always, these are younger people who are new to the industry. Maybe they went from CSA to power planner, so they might have some experience, but they need mentorship from the advisor and tutelage. Is that the same thing? I think so. Yeah. They need to learn. They need to grow and develop. So you're saying it's an investment. They need to make more money. They need to grow up emotionally, like how to learn how to, you know, the soft skills.