Sunday, February 13, 2005

Financial Planners...

Here's an excerpt of a letter I wrote to a friend of mine who I met as a result of them being a financial planner... Before they read this note, they had already quit there job; but I think this breaks it down pretty well. Check it out...

1. Your job is to help people establish financial security so that in times of need or retirement they will be able to provide for themselves and not rely on the state or relatives to take care of them; and yet, your job provides no financial security in and of itself. While I’m sure your job offers an array of investment and retirement options, it does so, not to take care of its employees, but instead to further profit from the portion of the money they give you out of the investments you acquire for them.

There are three classes of jobs, actually more, but three works for this purpose. At the top are the people who make money by overseeing the work of others – CEO’s, managers, etc. Then there are the people who are paid some small fraction of the profits for the actual work created. Some of these people are given bonus pay based on how much money they bring in for their employer but this group is paid a direct salary of some sort. Finally, there is the category that your job falls into – direct sales, canvassing, independently contracted financial planning, etc. These jobs are on the lowest rung, not that they are the least important or even make the least money, but they are, by far, the least financially secure jobs and actually the most oppressive.

It costs Hartford virtually nothing to have you as an employee, any money that your clients invest helps pay to run the company, and some portion of their profits is trickled down to you. If you don’t garner investments then you’re SOL, but Hartford has assumed none of the risk and are only out the costs associated with keeping your training up to date and other in sundry expenses.

While this is an enviable position for Hartford, it’s a weak situation for you. It doesn’t matter if most of the financial planners are getting a significant amount of investments, as long as enough of their employees are productive, the less-profitable employees become inconsequential. In other words, the financial risk is not on the employer that can afford the risks, but is instead on the employee, who typically cannot.

At least at Banana Republic, I’m still paid my hourly rate despite the condition of the business, and even there, the amount of payroll hours allotted is dependent on the profitability of the business.

From my vantage point, it can sometimes make sense to work in an environment in which your wages are not guaranteed. In working as an intern, it can frequently make sense to work for nothing or a small stipend in the hopes of using the position as a stepping-stone towards a paid position. In the case of starting a new company or cooperative, it often makes sense to work for a net gain of zero if it’s something you believe in and especially if its something you anticipate becoming profitable in the future.

2. Aside from the actual economic structure of your job. Being a financial planner is problematic in and of itself. While you do make an excellent point that your clients would otherwise allow their money to sit in the bank, thus allowing the bank to invest in any number of exploits. By investing with you, they will earn more money and also have some level of control in what they are investing in; that doesn’t change the fundamental problem that no matter what you invest in, you’re betting on a company being able to cut costs and increase profit margins thus earning you a share of that profit. The problem is that in order to increase its profits and appease its shareholders companies are frequently put in a position of having to lay-off working people as a means to decrease their net expense.

So on the one side, while you are personally helping your clients in ensuring a prosperous future, you may be doing so at the expense of working people losing their source of income. Admittedly this point is moot in that these companies will rely on their shareholders regardless of you, and the money that your clients would otherwise store in the bank would still be invested into this system, but do you really want to immerse yourself in an environment that participates in such inhumane practices?

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