I was a guest on Tim Mullooly’s podcast last week, and he asked me a fantastic question:

What do you think is the number one thing that needs to change about the financial services industry?

Rather than revisit the squabble over fees versus commissions or fiduciary versus suitability, I simply said we need to raise the standards to become a financial advisor.

Because no matter if an advisor is charging commissions, an asset based fee, or a retainer, the quality of their advice is more important. The bar to hold oneself out as a financial advisor is low, shockingly low. This is all the more shocking because the stakes are so high. Clients have only one chance to save and invest for retirement. If bad advice leads to the unnecessary loss of capital, there is no time to start over.

There are approximately 272,000 personal financial advisors in the United States according to the Bureau of Labor and Statistics. These individuals work in banks, brokerage firms, insurance companies, and RIA firms. What sort of education, credentials, and work experience do these people have? It depends. You cannot tell by which type of firm, business model, or regulatory space in which they operate if they have the right training and qualifications to give financial advice. One broker is a CFA charterholder, while another down the hall had three weeks of sales training and took the Series 7.

The Series 7 is a license to sell financial products, not a credential. It consists of 125 multiple choice questions, takes 3.5 hours to complete, and costs $245. Famed financial planner Michael Kitces was on the Invest Like the Best podcast this week, and put it best.

The requirement to become a financial advisor is a 2-3 hour regulatory exam and a high school diploma. And the diploma may be optional.

This bar is insanely low. As Kitces goes on to explain, this is the bar to provide advice on an individual’s life savings!

I’ve been thinking a lot about substance lately. Substance is lacking in 21st century America. Success looks easy when a teenager can earn a six-figure income from posting viral videos of pranks on Youtube. Kim Kardashian, and consequently her entire family, made millions from being famous for being famous. Timothy Ferriss wrote that he worked only 4-hours a week mailing supplements to his customers. It’s easy, just order from China and use drop shipping. (or so they tell me).

It is no wonder Elizabeth Holmes believed she could revolutionize medical blood tests after taking freshman chemistry at Stanford. Or that Billy McFarland thought he could host 4,000 people at the Fyre Festival when there were no accommodations, food, or infrastructure to support them. Fake it till you make it, right? Or in these cases, until you’re facing criminal charges.

There’s a common phrase that it takes 10,000 hours to master a skill. Working a 40-hour week with no holidays or vacation, that takes almost five years. I would argue this number is low. I practice ashtanga yoga, a method that adds one new posture when the previous one is mastered. I spent over four years on the same posture. In that daily work of making tiny incremental progress toward the end goal, I overcame fears, corrected weaknesses, and powered through with pure determination. That is substance.

The future of financial advice has to be a profession. Professionals go deep. They spend years getting their education, followed by a period of apprenticeship under a more experienced professional. They pursue lifelong learning in their craft. They possess the humility to admit they cannot know it all and the courage to change course or even start over when the way they have always done things no longer works.

We owe it to our future clients to raise the bar. People deserve the reassurance that the person giving investment advice on their life savings has a baseline of knowledge. Until then, clients must continue to do their research on advisors. Look for those who have put in the time to learn their craft and have degrees and credentials to prove it. Often these are not the best sales people, but at least these advisors have substance behind them.



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