Executive Summary
In the past, learning to be a financial planner was something that you only did after spending years successfully selling financial services products. If you couldn't "pay your dues" by doing the marketing and business development to get enough clients in the first place, you didn't get to go take CFP classes and become a financial planner. You lost your job by failing to validate your (sales) contract.
In today's environment, the tables have turned. Now, increasingly, new financial advisors arrive having already completed their financial planning education and passed the CFP exam. And not surprisingly, they're looking for jobs where they can implement that financial planning knowledge with clients. Only to be told that they, too, must still spend time "paying their dues" in a back-office job before they get the opportunity to work directly with clients.
In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we dig into the whole concept of "paying your dues", and why it actually is still relevant for financial planners today, even for those who studying financial planning before seeking out their first job.
Because the reality is that doing financial planning well is more than just having the technical financial planning knowledge. It's also about having the skills to communicate with and interact clients - to show empathy - and find and bring on new clients as well. And if you don't understand the inner operations of how the advisory firm works in the first place, you will also struggle to be successful as an advisor, as the reality is that a successful advisory career still means successfully working within, or creating, a business that serves clients, not just sitting across from the clients in meetings.
And in this context, "paying your dues" is no longer just about doing busy work for the sake of busy work, but actually learning what it takes to be a successful financial advisor, and practicing those skills (which takes time, even for the best of us). Just as Michael Phelps trained 6 hours a day for 6 days a week throughout his career - not to pay his dues but because that's what training is - so too should new financial advisors be prepared to put in the time. Not because they're paying dues, but because that's how you really practice and develop and ultimately master your skills as a professional!
Accordingly, new financial advisors should embrace the opportunity for any kind of real job in an advisory firm, even if it's not client-facing. Because anything, from helping with trading to doing operations paperwork, is relevant knowledge when you're getting started and have so much to learn and experience.
Of course, once a skill is mastered, it's time to find a new opportunity - which means moving up in the current firm, or finding a new job at a new firm if necessary. Failing to do so can turn a learning experience into a dead-end career track. But ultimately, that still doesn't mean it's bad to "pay your dues" - it's simply an acknowledge that once you've taken a few years to learn the tasks, do what it takes to move forward and continue to advance your career to the next stage!
(Michael’s Note: The video below was recorded using Periscope, and announced via Twitter. If you want to participate in the next #OfficeHours live, please download the Periscope app on your mobile device, and follow @MichaelKitces on Twitter, so you get the announcement when the broadcast is starting, at/around 1PM EST every Tuesday! You can also submit your question in advance through our Contact page!)
#OfficeHours with @MichaelKitces Video Transcript
Welcome, everyone! Welcome to Office Hours with Michael Kitces!
As you can see, I've got an unusual setup this week. I'm actually hanging out here in Des Moines, Iowa. You can see the State Capitol of Iowa right in the background. I will be presenting the keynote session tomorrow for the FPA Iowa Annual Symposium.
I wanted to talk today about the whole phenomenon of "paying your dues". You'll find in the financial planning world in particular, we have lots of these discussions, on whether a new financial advisor should "pay their dues", and I want to address this issue.
The particular question that kicked off this week was from Charlie, who asked:
"I graduated in May with a degree in financial planning, passed my CFP exam this summer, now I'm searching for a financial planning job. I got an offer from what I thought was a great firm in the area, but they're requiring me to start out in operations doing paperwork, and I want to do financial planning. Why is it so hard to find a firm that doesn't have this "pay your dues" mentality?"
I think this is a good question, Charlie, because the whole "pay your dues" mentality is definitely a challenge. This is the infamous: "When I was young I walked uphill, in the snow, both ways, so you should have to as well."
But while I'm not really a fan of a "pay your dues for the sake of paying your dues" approach, I think sometimes the value of "paying your dues" actually gets short shrift.
What Does It Really Mean To “Pay Your Dues”? [Time - 2:02]
Let's step away a moment from the financial planning context, and I'm going to take you on another road. We're going to talk about sports instead.
When it comes to sports, some people out there are just natural athletes. They're pretty good at any sport they try. Others, including me, are not so naturally inclined.
For everyone, though, getting really good at a sport is really hard work. It's something that you train for. Even Michael Phelps trains 6 hours a day, 6 days a week.
From my perspective, as someone that really grew up not an athlete, I was really proud that when I was in college, I actually played varsity squash for my last two years. It was a sport I had never played seriously or even tried playing until my sophomore year.
For me, getting to play squash competitively was not one of those, "Hey, I decided I'm going to do this and it worked out" situations. I worked my ass off. Our team did a lot of practice drills for the stuff you have to be good at to succeed in the sport - lunges, volley shots, recoveries off the back wall, and so forth. So I did my drills. Not because I was paying my dues, but because I was learning to play the game.
As I got better, I started doing pick-up games with other people on the team so I could practice more. They beat me over and over again, because I wasn't very good and I didn't know how to play the game well yet. But I kept doing it over and over again. It might have felt like I was paying my dues while they beat me. But in truth I was learning to play the game.
Eventually, I was good enough that I earned the right to actually practice with the team. I got close to being on the competitive ladder, which meant I got more on-court time doing drills, playing scrimmages. And mostly still losing, because I was still training. But again, this still wasn't simply an exercise of me paying my dues – this was learning to play the game.
Throughout the season, our team would practice a little over an hour a day. So I practiced three hours a day. I'd do an hour of drills beforehand, then I practiced with the team, then I'd find pick-up games or scrimmage matches afterwards. Anything I could do to put in my time. And I can't emphasize enough that while I was putting in the time it takes to "pay your dues", I don't view it as trying to pay my dues.
I did it because that's how you train. That's how you develop a skill. That's how you get better at something. You put in the time.
Paying Your Dues Is Really About Training And Practicing Your Skills [Time - 4:21]
When it comes to financial planning, I think there's very much of a direct parallel here. If you want to be a professional, you have to put in the time. It's not really because you're "paying your dues" – it's because financial planning is a series of skills that you have to learn and hone over time. And you learn them by doing them over, and over, and over again.
That's why we have, as Jay is saying [from Periscope], apprenticeship-style financial advisory jobs. That's why the CFP Board built the apprenticeship version of the experience requirement.
As Gary is saying [from Periscope], this is essentially a version of the 10,000-hour rule, that you have to put in 10,000 hours of focused training, doing something over and over again, to really learn it. Not because you're paying your dues, but because that's how you learn and train and master a skill!
I think this is what we're seeing evolve for the entire financial advisor career track now. It's about learning the knowledge and the skills and then practicing them so that you can move up. The progression looks something like this:
1) Paraplanners learn technical competency.
2) Once you master that, as an associate advisor you learn empathy and client relationships.
3) If you do well with that, then you move up and you learn sales and business development as a senior advisor.
4) And then some people move up further and learn management skills and take on other management roles in the firm.
But this isn't a situation where you're simply paying your dues at each stage – you are learning skills and putting in the hours to master your professional skills! That's how you get it done.
And in the context of Charlie's question, I really see it as the exact same thing. So, Charlie, when you asked this question:
"Should I take a job that's in an operations role even though [I've] completed the CFP educational requirement?"
My answer is yes, you should do it!
In point of fact, I did the same thing. There was a period of time where I worked in an operations role, even though I was done with my CFP education. I had passed the CFP exam, and I was actually done with my CLU and most of my ChFC at that point as well. But I still worked in an operations job for an advisory firm for a while.
I'm not saying you should work in operations after you pass your CFP exam just because I did. My point is that this is a normal career progression. This is how it's supposed to work. You have to practice and learn skills before you can move up to the next level. And if you don't know how the basic operations of an advisory firm work, you're not going to be a very good advisor.
Pay Your Dues To Learn Your Skills, But Move On When It’s Time [Time - 6:33]
Now, it's worth noting that even when I was in this operations role, I only did it for a period of time before I moved on. For me, it was a little under two years.
When I started in the role, everything was fascinating and new. I didn't know the difference between ACAT transfers and non-ACAT transfers. I didn't know what it means when paperwork comes back NIGO. I had never gone through a life insurance application or an annuity application before. I had to learn all of that. By doing it. Hands-on. I had to experience it, to really know how it all worked.
Eventually, I outgrew that position though. I guess you could say I finished paying my dues. As I view it, I had learned the role, mastered what I needed to learn to grow my career as a financial advisor, and so I was ready to move on.
Ironically, for me, this actually turned out to be a problem for the company I was in. It was a firm that was really focused on doing financial planning. It was a great opportunity to learn hands-on financial planning. But the firm wasn't actually growing. It was a financially successful firm – a very profitable firm – but it was not a growing business. As a result, once I paid my dues and I learned the role, I had to leave, because there was nowhere else to go. There was nowhere to move up.
But that's not about a problem of paying your dues or this particular path – it's simply an acknowledgement that sometimes in the process of learning your skills, you will outgrow the position, and may outgrow the entire firm that you're at. From there, you may need to go somewhere else to keep your career moving forward.
In fact, when I hear discussions of people paying their dues and having a bad outcome, the version of that that worries me is not actually that you have to put in the time to learn your job and become a better professional – it's when you get stuck in the dead-end job that doesn't leave you any path to move forward. But that's a problem with the firm. Not a problem of "paying your dues".
The Bad Version Of Paying Your Dues [Time - 8:13]
While I've said you should pay your dues because it's really about learning how to be a professional, it's worth recognizing that there is a bad version of paying your dues.
The bad version of paying your dues is when you're stuck doing tasks that are really not relevant for your future career at all. If you're stuck in a firm where you're just doing paperwork, filing and scanning documents, and so on – then you're not even learning about how operations and transfers work. If you're just moving paper around in the office, then you aren't learning the skills you need.
In this case, we're a little too close to simply paying your dues, and doing busy work for the sake of busy work. Doing nothing but this work isn't within the constructive realm of learning to become a professional, because these are not skills-training tasks on a professional track towards becoming a financial planner. If you have a boss that gives you tasks that are just utterly and completely irrelevant to learning anything about the execution of a financial advisory firm, then I think that's a problem.
But that's a narrower situation. And even then, you do have to recognize that even a great job isn't just doing "the fun stuff" all the time. There are things that you have to do to get the job done. That happens at any job, no matter how amazing and awesome it otherwise feels. There will always be things you just have to do because they need to get done, not because they're fun or challenging or educational. After all, remember that when a firm owner starts a business, he or she is doing all of that paperwork, filing, copying, scheduling of appointments, planning, and everything else that goes on in between. But they still became a professional and built a firm. So some of those may be your tasks for a period of time as well. Again, that's not a paying your dues thing. That's a matter of pitching in to do what needs to get done in a successful business.
The real issue is when you get stuck in a position, where you're not learning and not having any opportunity to learn and grow. To me, that is the moment when there is cause for concern. And even then, it's less about being stuck in a pay your dues role, and it's more being stuck in a job that's simply not growing in a firm that isn't providing opportunities in the first place.
So getting back to Charlie's original question and wrapping up here: Charlie, my advice to you is if you've already recognized that this is a good advisory firm, then I'd encourage you to take this job. Because if you're at a good firm that's planning focused, it's a great opportunity to get the experience and learn. Later, you can decide what comes next in your career. Don't view it as "paying your dues" just because you have to go and do operations work for a year or two even though you are training to be a financial planner. You will learn skills that are relevant, because frankly, when you're new and you're coming in fresh, there's a lot to learn. Recognize that a part of what it means to be a good financial planner is that you have to actually know how the paperwork works and how accounts transfer and how the operations of a firm are done.
If you go into that role, and you've mastered it after a few years, and you can't figure out where to go next – then that's a problem. But that's a bridge you can cross when you get to it. Maybe you'll get there and find out the firm has grown to the point where there are other opportunities. Maybe you'll get to that point and decide that it's time to leave because you got the job, you learned the tasks, and you're ready to move on to the next thing. But that's why my number one recommendation for any financial planner coming into the industry is to just "get A job!" - because anything you do that's attached to the advisory industry is going to start that learning process. And from there, you can figure out what you like, what you don't like, and what you want to move on and do next.
The bottom line is this: I really want you to think differently about the whole concept of paying your dues. When you're a professional and you're training for an advanced skill set, "paying your dues" is not just a thing you do to put in your time – paying your dues is how you learn and develop the skills that make you a real financial planner. It's how you get to the infamous 10,000 hours for mastery. It's how any expert trains. It's how athletes train. It's how professionals train.
And if you get to a point where you're moving along and you hit a wall and can no longer advance, then that becomes a problem. But that's not a "pay your dues" problem. It's just a sign that maybe it's time to find a new job, or go to a new firm where you have more opportunities to grow.
So I hope that's helpful food for thought. Thanks for hanging out with me here at the Iowa State Capitol. This is Office Hours with Michael Kitces, Tuesdays, 1 p.m. East Coast time. Thanks for joining us, even at this late hour. Have a great day, everyone. Take care!
So what do you think? Did you have to "pay your dues" in the early stages of your career as a financial advisor? Do you think it was a waste of time? Or did you learn skills that are still relevant for you today? Please share your thoughts in the comments below!
YES!! While in college I interned at a RIA firm, graduated in 2008 and have been paying dues ever since. It was EXTREMELY hard and got emotional at times but it was all worth it. My career has come a long way, I am confident with my client meetings and service. It took years of practice, picking the brains of some of the best, seeing different ways to run a practice & even preparing taxes for a little while to build up knowledge. I pull from my arsenal of experience all of the time.
I feel like we never stop growing and evolving, so I will be paying some sort of dues until I retire myself.
Sometimes its all about building the discipline of paying your dues. It is hard to control your urges in spending that you realize you got no money to pay anymore.
God, this is brilliant stuff. If it were in my power, EVERY person involved in financial services…Advisors, brokers, agents, RIAs, IARs, company principals, board members….anybody that draws income from insurance or financial services should watch this. And READ this. I think about clients over the years that have complained about their “rep” or agent and the number one complaint is that the rep couldn’t wait to tell the client what they knew. What the client wanted or needed? Who cares? After some of these geniuses were done, their clients would know everything they needed to know, right?
As far as I’m concerned, that CFP, or CLU, or ChFC, or whatever other alphabet soup that appears on a business card is nothing more than a union card…okay, you know numbers. What do you know about ME? When those reps know and care about the client, then and only then will they be an “advisor”. Up until that point they are just numbers wonks and Glide Path pilots.
Ouch! Your second paragraph hits pretty hard, John. I’m 27 and have all three of those designations. I agree for the most part though. The CLU and ChFC were extremely disappointing in how little I “learned.” Even the master’s degree program in Personal Financial Planning from one of the top FP schools didn’t prepare me for holding client meetings. There was one counseling course, but that is only a microscopic drop in the bucket.
I’ve been “paying my dues” for nearly 4 years now. I’ve worked over-the-phone as a mutual-fund/stock/option trader filling client orders. I’ve done over-the-phone investment guidance, largely for new accounts. I’ve served the role of a financial planning help desk to field advisors that may not have the same knowledge base that I do. I’ve been an over-webcam financial planner where I’d gather data, create a plan, and then present it back later to smaller clients. Now, I churn out financial plans so that they can be presented to clients. The related salaries have varied from $35k/year to now just under six figures (all in fairly low cost of living areas). “Paying your dues” accumulates a lot of good experience and income growth.
“Paying your dues” is vital in my eyes because it helps you figure out what role you want to play in this vast industry and what your strengths/weaknesses are. In high school, I thought I wanted to be a financial planner because I was good with math and I wanted to use that to help people in a tangible way. Honestly at this point in my life, I’m elated to be behind the scenes. I get my one or two cases done a day and then go home. My strength is the analysis and problem-solving of financial planning. I guess that makes me a number wonk. I’m good with that for now.
Greg, I do not worry about your place in our industry. It sounds to me like you are actually carving your place out, and we ALL welcome you. Your work only serves to strengthen the industry, our industry, and for that you are not the competition, you are a colleague. Welcome.
Greg,
Congratulations! It sounds like you’re doing a great job of carving a path for yourself.
Your last paragraph in particular makes the point that many just don’t realize when they’re getting started in the industry – sometimes, you just don’t know what you REALLY will enjoy doing, until you do it for a while and find out for yourself.
Glad to see you found your direction! 🙂
– Michael
Another thing…to all the publishers of our industry journals….stop putting these teenage geniuses on the cover of the mag. I don’t care what they know, I want to read the accomplishments of those that have DONE. And those reps in fact “paid their dues”.
Who say’s the youth haven’t accomplished or “DONE” anything worth celebrating? Besides, there is a huge gap between the people who own the firms and those coming into the profession… seems pretty short sighted to restrict participation/celebration to those with gray hair. This is exactly why “inclusion” and “diversity” are focused initiatives… people need to have a place where they have the ability to contribute just as much as anyone else.
Jim S. Please Please Please read Greg T’s post reply to my first comment. I am one of those firm owners. As I responded to Greg, I have NEVER been above taking a lesson, even from my grandson. But this brilliant piece of insight from Mr. Kitces is (or should be) vital direction for you, if you are in fact a young gun in this industry. Make no mistake, 20-30 years in, you will understand waaaaaaaay better than you probably do now just what Michael is saying. Good luck.
I would say that knowledge comes from your coursework, studies, passing the CFP exam, etc. Wisdom comes from application and experience which takes the time, practice, observation, instruction, re-instruction etc. From my vantage point, I’ve paid my dues at multiple intervals of my career – and there was always something that I was supposed to learn in that station of life that would be useful in my toolbox later (to this day I find filling out forms oddly soothing or answering the phone a great opportunity to get a client more deeply engaged).
So, as a firm owner, I wouldn’t rob my team members of the experience of learning different facets of the profession – from the most mundane tasks to the high level and complex tasks. But, I couldn’t fathom dumping all the mundane tasks on a team member without finding opportunities to engage their strengths and passions in the industry. Heck – even our interns build marketing plans that we use, challenge our portfolio models, engage with clients and begin to accumulate the experiences that will move them from one station of their career to the next.
Amen. I too take the position that I am NEVER above taking a lesson, even from an intern or newly hired advisor, particularyly in the field of technology. But (here it comes!), I resent to a large degree that intern or newbie telling me how to do this business. That intern just paid for an expensive education, as did I. But that intern did NOT pay for the gray hair at the temples, late nights planning client meetings and/or strategies, nor the time it has taken to build a reputation (which cannot be purchased an ABC community college or Wharton).
A lot of great points here – struggles most younger/newer planners deal with. There are also a few points that I think are beneficial to this discussion.
I graduated from a board registered program in 2013, earned my
letters mid-2015, and understand that my CFP marks only prove that I
have the minimum competency to practice… But I don’t subscribe to the idea that “paying your dues” equates to pure grunt work at the beginning (which I know Kitces isn’t saying). I think a lot of firms see recent grads as cheap labor who don’t have the bargaining power to step into different work within the firm – and that is incredibly disappointing to me. Having said that, I see tremendous value in doing paperwork, understanding compliance, doing research, pumping out plans etc. because it allowed me to learn and create capacity for the lead advisor to do things I was/am not yet capable of doing.
One of my major issues is with the way much of the profession onboards new planners – many firms haven’t adapted higher levels of organizational development/consciousness. I’m appreciative of those who have helped build the profession into what it is today, a more ethical and client oriented profession than in the past – although, if the mission is to provide financial guidance/literacy to the masses, it seems counterproductive to have the incoming class of professionals spin their wheels unnecessarily. Firms shouldn’t prematurely discount potential/future employees ability to add value because of their age or experience, rather it should be handled on a case by case basis. Too many firms don’t have clear and formal career paths, don’t “have the time” to help the new planner understand the specific steps to move forward, or are unwilling to adjust their career path based on the drive and interests of the specific employee.
It seems that Daniel Pink’s research on the need for Autonomy, Mastery, and Purpose is lost on many firm owners or managers, which (I’d be willing to bet) is probably the primary reason for high employee turnover among new planners. Just because someone cut their teeth a certain way doesn’t mean those same circumstances should be blindly imposed upon the next generation. I feel that firms are going to need to start differentiating themselves on how they attract young talent (like some of the Residency Programs that are popping up) otherwise they won’t be able to bring in the talent necessary to serve their clients effectively.
Michael,
Have you written a piece for a person desiring to enter the profession (CFP or not) about the relative merits of starting out via the broker/dealer sales channel vs. administrative support position in a planning firm?