The Addiction of Commissions
The goal of the commission-based salesperson is to close more and larger deals. As humans, we are hardwired to experience pleasure and pain, and everyone is in sales in one way or another. Selling yourself to but some salespeople are often thrill-seeking adrenaline-addicted junkies. The high-power and award-winning advisors, agents, bankers, brokers, and planners are told no more than yes. The get ridiculed, avoided, ambushed, lied to, and feel tortured on a daily basis. The result is rage, anxiety, and emotions that cause many to turn to alcohol, drugs, cigarettes, caffeine, and pills. All the pent-up energy from selling without success can be toxic. The adrenaline highs and lows associated with landing the financial whales like the movie Wall Street with Charlie Sheen and Michael Douglas is real. The off-Wall Street salespeople, of which 99%+ are off-Wall Street, are judged like their big city cohorts, ‘mo money, ‘mo commissions, ‘mo attention, ‘mo addiction.
Do You Want to Work With a Junkie Marketer
It takes a unique combination of skills and characteristics to sell an inferior or complex product like a variable annuity loaded with worthless income and death benefit riders, equity index annuities and life insurance, non-traded real estate investment trusts, gas and oil limited partnerships, and Ponzi-based private placements. The pressure to ignore reality and stick with the big-lie at work and at home, that the off-Wall Street salesperson is fiduciary, planner, and wealth manager is overwhelming for most. According to Investopedia (January 7, 2018): “The first few years (as an advisor, agent, broker, or planner) can be especially grueling. During this time, the vast majority of a stockbroker's energy is put into finding new clients with assets to invest.” The same article states: “While some stockbrokers get lucky or have great connections, the vast majority of new brokers initially keep a daily schedule that is built heavily around marketing themselves”…. and then “most new brokers usually end their day by spending two to four early evening hours making cold calls, networking or teaching seminars to prospective clients. It's not uncommon for new brokers to spend four to six hours on Saturdays doing some kind of marketing as well.” Lastly, Cerulli Associates, US Advisor Metrics, 2016, reports that over 55% of advisor time is spent on “client-facing” activities; in other words, selling. As for actual investment management, less than 20% of the advisors time is spent doing what they are selling.
According to AdvisorHub (November 8, 2017): “Brokers who fail to increase customer money by 2.5% in 2018 or do not sign up at least three new affluent households will have their payouts reduced by 2%. Alternatively, those who increase new customer assets and liabilities (such as loans and deposits) by 5% and who bring in five new household accounts will get to keep 2% more of the commissions and fees they collect.” It’s no secret that salespeople are paid to sell, not plan, advise, or counsel. All of those words are hollow-gestures at best to close and seal the deal. AdvisorHub also states: “Compensation plans designed to drive sales behavior typically include year-end bonuses that give cash and stock to brokers for hitting sales growth targets or selling certain products or account types.”
Thanks But No Thanks
The fundamental flaw with commissions is the inherent conflict of interest that will always exist. This is what differentiates a con artist salesperson posing as a fiduciary from a true fiduciary. Although it sounds logical to use a true fiduciary, many investors defy common sense because of deep-seated biases against change. In addition to change resistance, Americans are near the bottom of the industrialized world when it comes to mathematical capabilities. The combination of recency bias, an unwillingness to change, and numerical limitations have resulted in most Americans struggling to cope with even the simplest financial tasks. As a result, the complex-bundled financial products that razzle and dazzle are easier to sell than boring, historically-tried and true basics.
The brains of humans and other animals contain a mechanism that is designed to give priority to bad news. By shaving fractions of a second from the time needed to detect a predator, improves our odds of living long enough to reproduce and prosper. Pain is felt 50% more than pleasure. A 10% drop in value has the same intensity as a 20% gain in value.
Better, Simple, Works
Instead of trying to change the world, which we cannot, we accept the reality of the situation and are dedicated to improving the lives of our clients, one at a time, by doing it better with simplicity, because it works. There are greener pastures on the other side of the fence, and that side is called True Fiduciary.
A Small First Step
We strongly urge everyone to start small. Test what we have to offer. Take one small step before making a significant commitment. Why? Because we are not paid based on a flawed commission scheme. There is no long-term contract. The price is right. You know this is better in your heart, now think rationally and take action now.