Aggressive financial salespeople and test scores

Just reading this column from John Henschen at ThinkAdvisor and had a little flashback to my days on the brokerage side.

What he’s saying here – about brokers who just barely pass their Series 7’s being more successful than those who ace the exam – is absolutely true, from what I can remember.

Today, FINRA wants to make advisors’ test scores available on their public website. They should take note that wirehouses have for decades sliced and diced data on advisors because they ultimately need to put their money where their mouth is, which is in direct opposition to the regulators, who put other people’s money where their mouth is.  Regarding test scores, wirehouse data has concluded that reps that passed in the 70% to 80% range were far more likely to be successful advisors than reps that tested at 90% or above.  Those that scored unusually high generally lacked the social skills necessary to build and maintain a book, and were better suited to becoming CFAs working in more technical roles that require less social interaction.

Those that tested in the 70% to 80% range had the best social skills.  If FINRA wonders why people with lower test scores have more marks, they need to realize the likely answer is they have larger books on average and with more business volume comes greater risk of compliance issues.

One of the most frustrating aspects of the industry for me back then was watching the dumbest people in the room consistently do the highest levels of gross commissions every month.

I chalked it up to the fact that they weren’t deep thinkers, which enabled them to slip further into the necessary brainwashed condition that all successful salespeople must. If you’re thinking too much about something you are supposed to sell, then doubt enters the equation. Doubt lessens the degree of aggression with which you go about your appointed task. It comes through in person or over the phone when talking with a prospective buyer.

In order to successfully sell an intangible, like the future profits of a stock trade or mutual fund, you must be absolutely convinced that the intangible will materialize. Only when you’ve completely sold yourself on it can you influence and persuade others.

I washed out of the business because I became too aware that there was a better way to invest than building portfolios of concentrated positions and turning them over rapidly. It takes inexperience or willful stupidity to conclude otherwise.

Everything I was reading and learning at the time told me that diversification and a slower pace were the best thing for my clients – which would effectively put a commissioned broker out of business if acted upon. “Diversification means you don’t have enough confidence in your ideas,” the so-called “senior producer” would tell us during the marathon rah-rah meetings that began each morning.

Moreover, the books about history’s greatest investors were poisonous for my brokerage career. They detailed the many, many failures of people like Buffett and Templeton and Graham and Lynch. How could I pitch a financial product, with 100% certainty, with the nagging knowledge in the back of my mind that there’s no such thing as certainty, for any investor, even the greatest of all time?

We were taught that doubt was the enemy. That it was counterproductive to our own success. Looking back now, 15 years later, I know that it’s just the opposite. Doubt and skepticism are the things that keep us safe from the madness. They are the handmaidens of good portfolio stewardship.

There’s an old Wall Street saying that’s apropos here: There are old traders and there are bold traders, but there are no old, bold traders. Substitute ‘traders’ with ‘advisors’ and you arrive at the same conclusion. I don’t know if the brokers I used to look up to are driving cabs or Ubers these days, but one thing’s for sure – they’re not in the business anymore.

For the record, I think I scored somewhere in the 70’s on my Series 7 back in the late 90’s. This was ideal for the orcs who trained me, they supposed, because I probably wouldn’t have been overly thoughtful. Man, would that have screwed up their plans for me.


Stock Jocks Get Their Knocks at BDs (Think Advisor)

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