Jump to content
bjackson

Becoming a Financial Advisor for Teachers (My Calling)

Recommended Posts

A couple years ago,  I did a deep dive into my AXA portfolio(along with 403B wise resources) and discovered I was a 403B Equivest scam victim.  I quickly moved all funds to Fidelity and learned to manage my own account.  I  decided I would learn as much on  investing as possible by reading every post on 403B wise, listen to every podcast from Warren Buffet, Bogleheads, etc, and reading finance articles. I learned that I enjoy Investing and want to help as many as teachers as possible not fall into the same trap I did.  With assistance from my union, we are attempting to vet policies, ban salesman from our buildings, and overall bring transparency to the process.  I've discovered that the problem is bigger than I thought with over 200 of the 500 teachers in the district using AXA.  While district leadership is somewhat receptive, I've encountered a problem... or possibly an opportunity.

While I originally hoped all teachers would switch to self-managing their funds through Vanguard or Fidelity, many teachers were not comfortable investing without a manager and sadly the only companies offering "advisors" are the annuity sharks.  In addition, I have been considering a second career (I am in year 17 teaching, so 13 years until full retirement) that allows more flexibility.  I had a thought..What if I became a financial advisor that served teachers?  It would be a second career and I'm a minimalist so I would be happy to offer very low fees for teachers.  I would also offer to teach my clients investing with an end goal that they fire me and manage their own portfolio.  After some research, I found that the requirements for becoming an advisor are to pass a few tests and complete a bachelors degree (I have a Ph. D. in Ed Leadership).  That is the easy part.  The hard part is that I would want to be completely independent because otherwise I would lose autonomy of my vision to the bureaucracies of corporate America.  

Has anyone followed a similar path?  What advice can anyone provide or do you have a person I could reach out to?  Thanks and together we can put an end to this 403 BS!

Share this post


Link to post
Share on other sites

If this was as easy as it might seem to do more people would be doing it. This sound like almost charity work and our economy is not built on charity work. To survive you will have to charge commissions or flat fees. Teachers might not discern the differences between you and others.I would suggest becoming a consultant and provide in-services  to school systems on picking the right 403b choices. This way you might actually encourage changes in  current district 403b mentality. You will need  credentials, licenses and permits otherwise to sell mutual funds. I actually knew a person years back-an ex teacher who tried something similar and he failed. Corporate America has resources you will never be able to match and good luck getting teachers to abandon their current plan. Many won't do it . Its admirable what you intend but its going to be tougher than you think. 

Share this post


Link to post
Share on other sites

We all LOVE your idealism but the financial system has no infrastructure so you can offer financial advice and services for teachers at a low cost. We have a very low cost 457(b) at L.A. unified and the record keeper can only field two agents! They get no commissions or other financial incentives. Our committee which thinks just like you deliberately constructed a very low-cost portfolio of Vanguard and other indices with very low costs. Unfortunately, while we have an Award Winning 457b plan, very few of the 50,000 district employees know about it because there is zero money for financial workshops and to field more reps to talk with teachers. Our third party administer cannot sell any of their expensive products, so they are NOT making much money at all. Meanwhile, on the 403b side, which we have little control, the record keeper, the agents, and the broker/dealer advisers are making lucrative salaries and commissions. As you found out, teachers have no idea they are in a hideously expensive plan. 

The adviser world has changed. They are finding out that commissions don't pay as much as assets under management. So that's the AUM (or retainer fee) is currently the new business model. There are many great financial advisers who are also fiduciaries and are making the financial world with the 403(b) so much better. But in addition to the hourly fee, they charge an AUM fee up to 1.00% or higher which is superfluous if the teacher has all index funds. As you know, index funds don't require an expensive manager.  So, IMO even these ethical advisers would greater improve the financial conditions for all K12 educators if they charge .50% or less. More than .50 AUM almost puts them back in annuity territory.  

However not all is lost, buy Scott D's book Wild West: Providing Fiduciary Advice to Public School Employees,  He shows you how you can supplement your income by consulting and other gigs as a CFP adviser. BTW, I am told earning the Certified Financial Planner (CFP) designation is not easy. But it's a must if you want to be a genuine fiduciary. 

Share this post


Link to post
Share on other sites

Hello bjackson,

Welcome and thanks for posting. I could have written the same post but I recognized what Tony and Steve have said to be spot on. Being an advocate for change is the big picture while leading professional development and in-services for teachers is effective for the present situation in order to educate teachers. But understand, as you observed, some will hear and take action and some will hear the message but still won’t take action. It’s inexplicable.

This is where I am but there is room for so many more teachers who learned the hard way to speak from experience. I led a PD recently. The administrator behind it told me straight out he wanted me to present it because it is clear there is no conflict of interest and I am not selling a product. While that is well and good, this model is not sustainable unless I figure out how to get a sponsor. Though I would gladly volunteer to present, there comes a point where one person can’t scale it.

Perhaps like-minds can join together, form a consortium of teachers who can lead workshops throughout the country, find a sponsor and educate teachers. In the meantime, do what you need to to spread the message: blog, tweet, website, PD, YouTube, one on one, etc. 

 

Share this post


Link to post
Share on other sites

I do know some school systems (like my old one) would have in-service days and on occasion would pay folks to come in and do an inservice. So maybe that would be a way to help teachers and school systems see the light. You will have to sell yourself, network and make contacts. Unfortunately I remember some of the folks they called in to do the financial inservice at my school system where annuity salesman LOL!! representing the well known names in the industry.  And, I doubt the school systems would pay you much. The salespeople probably didn't care about collecting any payment for their inservice because  after all you get to speak to large audience at once. KA-CHING!!! KA-CHING!!! $$$$$   

Share this post


Link to post
Share on other sites

There is a real dilemma when it comes to starting an ethically sound advising business. You need to charge fees to support yourself and from your perspective those fees will be small, but from the investors perspective those fees will be large. The only way to solve that mathematical imbalance is through scale, but how are you going to accomplish that?

Don’t let me rain on your parade. I’m just highlighting the underlying problem. Maybe there is a solution, maybe there isn’t. Maybe what you want to do is part of the solution, but I’ve focused my efforts on helping people for free and contributing to an online community where people can find help. 

Share this post


Link to post
Share on other sites

Thanks Mo, Ed, Tony, and Schulo for the thoughtful responses,

 

         I know this is lofty and idealistic, but worth pursuing.  I am aware of the Catch-22 of helping people without becoming part of the problem.  I guess my thought is that I could be the ethical business that teachers flock to.  Since I really don't need to make money (I am more than happy living on my teacher compensation), I am fine with making very little in commisions/fees.  The only way I would make substantial money would be if I ended up with a ton of clients, which means I would be removing these same teachers from the time-share salesmen, annuity crooks.  I did come across this guy, Tony Isola, from the Barrons article.  His journey is similar to mine and he charges .62% fees, but invests clients and in low cost Fidelity and Vanguard Funds.  I am going to reach out to him.

As far as advocacy, I am already busy in my district. I will also follow Moe's advice and spread the word through social media.  I purchased the book as well Schullo.

The biggest hurdle right now is the difficulty of starting a private financial advisory business.  I'd like to find a mentor, but few would want to follow a model that limits profit in favor of helping clients.  That is where I am hoping someone like Tony Isola can point me to the right person.

Once again, your replies have helped me greatly in the first steps of my journey and I greatly appreciate!

Share this post


Link to post
Share on other sites
10 minutes ago, bjackson said:

he charges .62% fees, but invests clients and in low cost Fidelity and Vanguard Funds

That is still a large fee. If you assume the average portfolio has a 3% real return, then that fee consumes 21% of real profits on the year. Of course that compounds over time making things worse and worse for the investor.

Is having such an advisor better than an advisor who takes 1-2%? I guess so. I guess losing a finger is better than losing your legs, but I’m not excited about either option. I’d never refer anybody to such an advisor. 

Share this post


Link to post
Share on other sites

BJackson,

Anthony  (Tony ISOLA) is currently heading the Educator/403(b) Division at Ritholtz Wealth Management LLC.  So he does not work for himself privately.  He has resources at his disposal  of a big firm that you may never have. Personally l think your business model makes no sense to me  but if profit isn't important than you will have at very least  a good time helping others. I hope you prove me wrong and succeed at your venture . I agree with Ed that I am paying much much less than what you portend to charge clients but then again, .62 % is a move in the right direction for teachers because most are paying much more.  I think that is more than reasonable for most  average people. For us here that's way too high to pay for a basic index fund but you are also  giving advice which is worth something.

Please keep us informed of your journey. You have my support for what its worth. What do I know?

Incidentally Tony Isola just got back from Italy and he states " In Italy older workers are covered by a pension that replaces 77% of their salary, In America, you need to save for yourself. 

I'm Italian too and was born there. I can tell you what Tony is saying is not the whole story. Salaries are much lower there overall and taxes are much higher. If they didn't have that pension security most Italians could not survive. You are better off here if you are a saver . Unfortunately ignorance abounds in finance here. My relatives are all living on a very fixed income .They are amazed at the benefits I have-teacher pension plus social security plus roth/403b/IRA savings vehicles. But Italy is more fun place to live if you are wealthy enough. I think the clincher is Italy has free health care for everyone and markedly cheaper college tuition subsidized by the government. So it might even out.  Definetely better sense of financial security in Italy as not many Americans have defined pensions like teachers do anymore .

Share this post


Link to post
Share on other sites

While some see the 403(b) model at Ritholtz Wealth as still too expensive, it invest in low-cost index funds and is unheard of in the 403b annuity-laden world, as we know. No one else is less expensive that I am aware of in this space. Especially when you add that Tony is a former teacher and one that is vehemently opposed to high-cost products and acts with his clients best interests in mind. When you compare it to a do-it-yourself 403b, you might say it's high but that is not the case as very few teachers, have the vehicle or the wherewithall to DIY within their 403b.

You can be happy with providing your service for free or low cost but again, that is not a business model that is sustainable or scalable. At best, you can educate and direct "clients" to resources (like Ed describes and Steve does, and Dan does here and others too)  but how long will they stick around if they get something for free. It devalues the product. And that does not solve the problem that most want someone to hold their hand. 

And yes, Tony, you are correct again (no surprise) that the PD will call in a "free" provider to "teach". I wrote a blog post on that the other day, after I met with my superintendent. I called it "When the superintendent doesn't get it". He suggested doing just that, only with the multitude of vendors we use. He mentioned VOYA and I knew my audience immediately. What I want to do will definitely take spearheading and ingenuity, networking, references and resources. I am building my plan out and the summer hiatus might slow me down, but I'll have a new audience in Sept.

bjackson, what state are you in? Don't get me wrong here. You are 100% right, it is lofty and altruistic and others do it. Reach out to Tony and Scotty D (Dan's cohost on this podcast). He makes a living doing what you envision. And there are many others too on twitter. Follow them, make connections. And then there's also One Million Apples podcast, a new one by Breanna Reisch, out of CA who is a CFP and teacher advocate.

Be the change agent you want to be in your school, your district, your county, your state, etc.

Share this post


Link to post
Share on other sites
35 minutes ago, MoeMoney said:

While some see the 403(b) model at Ritholtz Wealth as still too expensive, it invest in low-cost index funds and is unheard of in the 403b annuity-laden world, as we know.

If you have a 403b with Vanguard can you utilize Vanguard’s Personal Advisor Services (PAS) for a 0.3% fee?

There’s just a built in conflict of interest even for an ethical Financial Advisor because they can only sustain themselves by eating into their clients’ profits. That pill would be easier to swallow if they were bringing serious knowledge/skill to the table, but if they’re picking appropriate investments then what they’re providing can be taught to the clients in an afternoon instead of charging them a lifetime of AUM fees.

Share this post


Link to post
Share on other sites

Of course, Ed, that is correct but more don’t then do have access to index funds, such as Vanguard, I believe. The difference between 0.3 on the phone with Vanguard, and 0.6 (I thInk they lowered their fee even since then) for an in-person advisor is worth it and at least it is not an annuity salesmen in-person but rather, an index fund in-person advisor. Education will take them only so far.

Share this post


Link to post
Share on other sites
20 hours ago, EdLaFave said:

What they’re providing can be taught to the clients in an afternoon instead of charging them a lifetime of AUM fees.

You have a lot of faith in your fellow man. Most folks I've known struggle with the simplest of financial knowledge. One afternoon would never do it. This is the consequence of no exposure in school or home to financial literacy or basic economics.

Ed amazes me and I like his attitude that basically a mutual fund should be clear of any fee, PERIOD. But it's not realistic for many people who need some guidance especially in their early years  of investing. Many need some handholding and are willing to pay for it. What we should aim for is keeping them away from the sharks who simply are out to gouge them out of every penny they can under the cover of being a guiding light.

Share this post


Link to post
Share on other sites

I’ve taught financially illiterate people how to invest in a couple hours and I bet I could have the same outcome with children.

Can they speak sophisticatedly about tax policy and the intricacies of different types of investment accounts? No, but they know that they need to invest every dollar in a target date fund or they know how to split money across three total market funds.

Cutting through the financial BS on your own is tricky. Following a total market index investment philosophy that is laid out for you, well that can be done by anybody.

...people in my real life would laugh at me having faith in humanity because the bar I have set for humanity is beyond low, some may say I’m overly pessimistic.

Share this post


Link to post
Share on other sites

Ed,

    I agree with you 100% as I manage my own account on Fidelity and could teach a primate how to set up an index portfolio or target date fund in less than a half hour. However, the idea of managing their own finances scares some teachers to death. They want an “expert” managing their account and in the absence of ethical advisors, they stay with their annuity Shark.  I would never pay an advisor any fee as it is an unnecessary charge..for me. However, an advisor charging .6% AUM and investing wisely is much better than an annuity shark charging over 3% and unknowingly selling the teacher Equivest 3.0 with a 60% surrender fee. As noted, I even hope to have my clients fire me when they finally feel comfortable. 

 

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

×
×
  • Create New...