The Role

Are you considering a career in financial services or already in the industry with lingering questions? After years of recruiting, training, and coaching financial professionals, I’ve found that both new and experienced advisors often seek clarity on three key areas: contracts, training, and culture.

Contract

Let’s focus on contracts. Every financial services contract is unique, whether it’s offered by a bank, investment firm, insurance company, independent shop, or career agency. Without diving into every variation, here are the three most critical aspects to understand: Compensation, Costs, and Client Data.

1. Compensation

Everyone wants competitive compensation, but it’s important to do your homework. Here’s what to keep in mind:

• Investment Firms: Compensation may be tied to something called a “grid.” If you’re in fee-based advising, the fee comes from the client’s account balance, but you don’t receive 100% of that fee. The firm takes a portion, and your compensation depends on how much they keep. Some large firms may pay you 15-40% of the fee, while smaller firms may offer 50-90%. Generally, the bigger the company name, the smaller the cut for the advisor.

• Insurance Firms: Compensation in this space can be front-loaded or long-term. Some contracts offer higher upfront pay for product sales but little to no renewal or residual income later. Others may offer smaller initial payouts but higher long-term residuals, encouraging deeper client relationships.

• Direct vs. Indirect Compensation:

• Direct Compensation: Money flows straight from the financial institution to your bank account.

• Indirect Compensation: Money goes through an intermediary, such as your firm or manager, before reaching you. Beware—some firms deduct expenses (e.g., rent, office supplies, parking) from your earnings without making this process clear.

Make sure your compensation structure is fully explained to avoid surprises down the road.

2. Costs and Allowances

As a financial professional, some costs—like client lunches—can be enjoyable, while others—like office supplies—are just part of the job. Some firms offer “expense allowances” to cover these costs, but even then, you might still be footing the bill.

It’s common for firms to say, “You’re a business owner, and business owners have expenses.” While that’s true, be cautious. If you were opening a pizza shop, your expenses would go toward tangible assets like ovens and furniture—things you could sell if things did not go well. In financial services, firms often pass on operating expenses to the advisor. While this reduces the firm’s overhead, the advisor owns no tangible assets.

3. Client Data: Your Most Valuable Asset

In financial services, your client data (contact information, social security numbers, bank details, etc.) is the real foundation of your business. But here’s a key question: Who owns it?

If you work at a large firm that controls your schedule, tracks your performance, and requires you to log client information into their system, you might wonder—are you an independent advisor or an employee?

If you leave, retire, or get fired, what happens to your clients and the data you’ve entered into the firm’s CRM? Without ownership of your client data, you may find yourself starting over from scratch. The financial services industry has done a good job of turning advisors into salespeople. They give you a salary, and in exchange you load their client data base with all the investments and information of your friends and family. If you leave, the advisor retains nothing.

Align Your Contract with Your Goals

Understanding your contract is essential for building a long-term career in financial services. Focus on these three areas—compensation, costs, and client data—and ask as many questions as possible before signing anything. No contract is perfect, but the right one should align with your professional goals and give you the clarity and confidence to succeed.

Best of luck out there!