Ep 33: Are financial professionals stuck between self-interest and best interest advice? featuring Amit Dogra

Episode 33 of Rethink Financial Advice, co-hosted by Derek Notman, CFP® (Founder & CEO, Couplr AI) and H. Adam Holt, CFP® (Founder & CEO, Asset-Map). (34:35)

Episode 33 of Rethink Financial Advice, co-hosted by Derek Notman, CFP® (Founder & CEO, Couplr AI) and H. Adam Holt, CFP® (Founder & CEO, Asset-Map). Listen on Apple Podcasts, Spotify, YouTube, or Acast.

Episode Summary

Amit Dogra joins Adam Holt and Derek Notman on the tension between how advisors are compensated and how they are expected to act. Holt opens with a cartoon he drew when the Department of Labor rule landed, showing an advisor confronted by a fifteen-step process to prove something he believed he had been doing all along. The hosts’ position is that this is a question of incentive design rather than individual character, and that greater transparency has made it harder to leave unexamined. Dogra’s contribution is about presence, arguing that while advice can be delivered consistently, how a firm shows up cannot be one size fits all once borders and time zones stop constraining who you serve. He also pushes on language, objecting to advisors who ask what a fee means in basis points when the business-owner question is what share of revenue it represents.

What this episode covers

• Why compensation incentives keep the best-interest question alive regardless of intent
• What greater transparency has exposed in back-office arrangements
• Presence as a differentiator once geography stops limiting who you can serve
• Why advisors leave large firms, and the one-size-fits-all training model behind it
• Thinking about fees as a share of revenue rather than in basis points

Full Transcript

Machine-generated transcript of this episode.

Welcome to Rethink, the financial advisor podcast. My name is Adam Holt. And this is Derek Notman. We are your hosts, both veteran advisors and FinTech CEOs who challenge the status quo, question everything and have fun doing it. Hear honest commentary on the challenges facing advisors today and be part of a community where we can all rethink the profession. Now on to our episode. Adam, are financial professionals stuck between self-interest and best interest advice? Why don’t you pick a simpler topic? This is gonna be the third rail of podcasts. You know this, right? Yeah, but we gotta talk about it. When the Department of Labor rule came out a bunch of years ago, you might recall, I did this cartoon that talked about how the average advisor walks into a room with their compliance officer, sees this massive new 15-point process that now has to be followed in order to prove that one is acting in the best interest of their client.

And the advisor looks at this and says, well, wait a minute, I already acted my client’s best interest. And you and I, who’ve been veterans of the business for many years, would probably argue that despite compensation, have been acting in our client’s best interest for years. So why is this even a question still? It’s a slippery slope and I think it comes down a large part to advisor’s incentives, right? Compensation, typically incentives are compensation-based. I think that’s why this keeps coming up as a problem, especially as we have more transparency into our profession, into the product manufacturers and all of those things. People are asking more and more and when the regulatory bodies are saying, hey, you better be doing the right thing, laser focus, right?

They’re on it. So I think again, stems from this incentive environment that I know that I was a part of for many years and I’m sure you were as well and a lot of advisors listening probably are right now. I think the thing that keeps popping up in our circles as we met many times, obviously we went to several conferences ourselves and together in the last couple of months and this move towards independence or this concept that I’m free as a professional to charge what I think I’m worth, structure it in a way that’s transparent, finally break apart the, we’ll call it back office selling agreements for which there’s compensation nobody knows about and really get aligned with this idea that we’re in our client’s best interest.

It’s been a really refreshing process but I still think it’s got so far to go, Derek, so far. In fact. It really does. Yeah, I think that still advisors have choices that they have to make. I was thinking about this. I basically prepared dinner for my daughter, gave her mac and cheese, put mac and cheese on her plate, put it on my plate. I was very fair, right? It’s the same size spoon but invariably she says, Dad, which has more mac and cheese? Now I thought I gave two equal plates and someone just take the plate that’s near you, right? No, she wants to actually measure what’s in her self-interest before she makes what seems to be an equal choice.

And I think the same thing happens in compensation associated with the different products that are out there. There is still a choice to be made, whether you take upfront or levelized compensation. There’s still a choice that if I use an annuity versus a CD versus a rap account, there’s a difference in compensation across the board which means no matter what I do, regardless of the product choice and suitability, I am forced to address the fact that I’m gonna get paid differently more or less, more or less mac and cheese by making this choice for which I will automatically be judged based upon my quote unquote incentive.

Well, that’s it. And further to that point, if you are sitting there assessing these decisions, this decision for which product to place, and then you’re like, well, geez, my incentive says that if I sell more of this thing this quarter, that’s gonna help me for the next three months or six months. So I’m gonna get a higher payout on this or that. And I think that’s what’s putting advisors in this stuck place. They’re being forced to choose between the self-interest of, okay, I’m running a business, I gotta get paid. Do I sell this thing that helps me? Or do I truly figure out what’s best for my client for the regulations that are out there and that what we’re claiming.

I think that’s a really tough spot to be in. How do you navigate through that? I don’t know. I don’t know either. And I don’t know that we’re gonna be able to figure it out on this podcast, but we wanted all of you to start thinking about this one because our argument in a sense here is that we all know that we care about our clients. 99% of the advisors I’ve ever met, we care about people because that’s why we’re in this business. It’s genuine, it’s authentic. We care about them. It’s why we’re passionate about this business. But I’m telling you that I don’t even think that the organizations are structured in such a way to align best interest based upon incentives just because they’re giving advisors a choice.

Well, that’s it. It’s a conflict of interests like at its origin. Yeah. And it hasn’t changed. And it hasn’t changed. I’ll share a quick example that I’d like you to introduce who we’re actually gonna have talk more about this today. But there’s this advisor that I knew at my previous company I was with, and he had had the opportunity years ago to lock in his payout rate on the GDC grid for any managed money he had. So regardless of how many other products he sold, a ton or none in a given year, his comp was not affected. So I would say that by doing that, they actually removed this conflict of interest at some level where he didn’t have to worry about, well, geez, I got to sell this other thing so I can maintain my payout on that thing.

And so that was gone. I’ve been in experiences like that and it’s really stressful when I know that my comp might be going down substantially if I don’t sell this other thing that may be in direct contradiction to best interest. Yeah, absolutely. It’s an interesting, I think, but you’re right, as long as that decision remains, I think that was your point. We have a- Well, who knows what my point really was, but- You talked about mac and cheese. I don’t understand why you use a spoon instead of a fork. Well, no, I was serving the mac and cheese with a serving spoon. Okay, you should use a fork, by the way.

Sometimes the way it is, yeah, you’re right. Sometimes the way it mounds up or it like spreads out, it looks like there’s more mac and cheese, right? But I know, I only put two scoops. Anyway, I’m sure all your parents can relate because you probably would have taken more mac and cheese than others. But look, we had an opportunity to talk to Amit Dogra. Now, if you don’t know Amit, he’s at COO of True Independence, which is actually doing a little bit different model. We were really intrigued by this than the typical RIA independence. And we had an opportunity to talk to Amit a couple of months ago and give you an idea.

He’s been in the business like both of us, 20 years of experience, Fintech firms, family offices, worked with Sanctuary Wealth as their chief experience officer, and also national head of relationship for Hightower. So he’s seen a lot of high net worth practices and advisors coming and going, succession in and out. And he had some really passionate statements that we thought were really worthy of putting in this podcast so that we could rethink. So you ready, Derek, for this? Yeah, let’s hear what he has to say. All right, this is Amit Dogra. What would you say your perspective or opinions of the financial advice, profession, industry, what’s going on today?

I think the one word we can say is changing. Maybe better words is evolving. I think one of the things that, and evolving is a very impacted kind of word because it’s involving with the DOL and different sort of impact. It’s evolving with different socioeconomic client. It’s evolving with a pandemic. It’s evolving with technology. So it’s evolving with the democratization of alternative investments. So I would say that we are now experiencing more change in our industry than we ever have. That’s only to add on top of advisors are still leaving in record numbers. Advisors are still retiring in record numbers. And there’s more money in this space than there’s ever been before.

It’s a real big statement to say that that’s the norm. Well, that’s so much change right there and all these other things are evolving. So I really feel that the advice space has become one that you have to have some fluidity to it. You have to understand, I think more now than ever, there’s an understanding. There should be an understanding and appreciation that it is not one size fits all. That it is different strokes for different folks. And not only that, but it also is environmentally driven, socioeconomic driven, geographically driven. And in a world in a post-COVID environment where you can truly have clients who you’ve never met.

I had this conversation just last week with an advisor who says we have more clients out of our state than we do in our state. New business that they’ve never actually met. That it changes the way how you market, how you try to develop a relationship and how you evolve. And so to me, I think the people who will continuously grow are those who are nimble and recognize that while we may say it’s not about bricks and mortars, it is about presence. And how do you define presence in this marketplace will be very important. So the advice piece needs to be that one size fits all, but how you show up, which your business presence also cannot be one size fits all as we start to be able to transcend borders and time zones.

Yeah, that’s great. We’ve talked about that several times and I’m glad to hear you support that because there’s no question changes all over the place. Well, given that, what is the missing opportunity or challenge that advisors are just not addressing or what they can’t see coming? Yeah, I don’t think advisors by definition are great marketers. They like talking to clients. They like doing what works. I’ll use a sports analogy. In football, it’s a copycat lead where one team goes out and they do something well the next year. Everybody wants to do it. Advisors are like the Titanic. They are slow to turn, slow to change.

Oh, if anyone really truly cared about what was in the best interest of their clients, why would you stay at a warehouse? It’s a stockholder-driven environment, right? And it’s not client-centric. At what point it was, but again, I think things have evolved. Things have changed. And when you’re living quarter to quarter, month to month from a shareholder perspective, you’re not always gonna do the right thing by the clients. Why am I saying that? I don’t know, go read the headlines. I think they’ve all been out there and they speak for themselves. I don’t need to address them. Any warehouse has got more than enough press clippings that actually are on the negative side of the ledger than the positive side.

So if it was all about the clients, everybody would lose. And so it’s the marketing of yourself as a fiduciary. It’s the marketing of yourself as someone who gives financial advice and being open to that change because advisors just fart. And if you’re going to transcend those borders, you have to recognize that how you meet those clients, how you intersect with them, how you engage them and find more effort is gonna be different than they ever have. And so it’s been one of those things, ah, now I’ll just go to the country club. When you’re picking up clients who are 2,000 miles away, you’re not really going to the country club.

You better be able to virtually show up there in some way, shape, or form. But I think that really matters. As much as there might be virtual fatigue, but being able to market in that direction is becoming more and more popular and more and more needed. And I think advisors are still neglectful when it comes to that. I’m hearing two themes here almost, but one is that the corporations, the enterprises, the wirehouses have an opportunity here. And then also that the advisors have some opportunities with all of the evolution that’s going on that you talk about. So if I were to pin you down and say, all right, what is one action step that these wirehouses can take to evolve and what’s one action step advisors can take to evolve, what would they be?

Yeah, you know, from a corporate wirehouse perspective, I actually think some firms are getting it right. But when you move to a salary bonus structure, it’s compensation, right? Number one, you move to a salary bonus structure at a wirehouse, you’ve taken away the need to be transactional oriented and commission oriented, right? When you think about where advisors go south, it’s in that churning or trying to get that rip or trying to make that money, right? But if you’re chasing that money in a salary and bonus structures and you put the right incentives in place, there’s no reason a wirehouse can’t operate in a fiduciary like manner because it’s all about the incentives.

So I think as you look at some of these programs, they’re actually moving to that model where it’s salary bonus driven and you can make a really good living doing that. And so now you’re putting the onus on the advisor to do the right thing. And if the corporation is focused on the right things, it’s a ripple effect, right? And it’ll impact the client positively, it’ll impact the advisors positively. And you’re talking about sending younger generations that aren’t going to quote unquote build a business by dialing for dollars, that’s gone, right? Elvis has left the building on that one, guys, right? We’re not talking about that.

So you’re gonna have to incent them in different ways but then you also get to reduce that compensation differently because they’re not gonna have to grind as much as you did before. The bank might be walking them in because they opened a checking account, no problem. But now you’ve got a captive audience and you get some really smart quality people, you salary incentive doesn’t sound so bad instead of trying to go out and open up the proverbial phone book and see if I can get a new lead. So I think more salary bonus, while it seems counterintuitive, is the right way to go because you can get the alignment corrected if you’re incenting the right behaviors.

We know advisors will follow that because you incentive them incorrectly and they follow that behavior. And that’s why some of these large institutions got whacked with these large bills by opening up phantom checking accounts, right? Because they’re gonna get more money. So who’s to say if you don’t align your priorities with a fiduciary mindset, you can’t get the same outcome. So wake up, do it the right way, you’re gonna win. You got the army and droves of people in a captive audience. And I think that’s one of the things that I would share that they could really take advantage of and really kind of change the game.

That’s from the White House perspective. But if I were to flip it around from the advisor perspective, oh, what they could do, they should recognize the shortcomings of this. And that’s to create that next level of advisor. Everybody talks around solving for next gen. You know what? Most of these friends out there that say, hey, come, let me buy your book. I’ll solve your succession plan. They’re not solving for nothing. What they’re doing is solving for the advisor by giving them a paycheck. But I haven’t seen many who said, oh, and by the way, let me introduce you to your succession plan. They’re still kicking that can down the road.

What they’re trying to do is do a land grab of assets. There’s no succession. Find me a firm that truly got a written succession plan. I’ll put you guys on the spot. Name someone who’s really said, okay, I’m gonna sell you my bit. We’re gonna buy your business and here is your name successor. If there was, we’d all know about it. So I call that folly. I think what it all it is is a land grab to get critical mass under so that you can ultimately flip it. Because all these firms that are doing it, they’re not altruistic. They’re backed by big money that’s looking to make a profit.

But if we really care about this, we would recognize that financial sort of mindset of what the wirehouses are doing, salary and bonus. It’s a great way to incent that next gen and get those people. There are a handful of advisors that are considering doing those things, but it’s the apprenticeship. Have them come in and be a part of that. Understand the system, understand that culture, understand what you’re trying to do, understand the impact of the lives that you can have and have it be an apprenticeship, right? All these wirehouses, you got a six month runway and then you’re on your own. Go out there and try to dial for dollars.

There’s no success in this. We have done a poor job of incenting brains into our industry. And the brain drain is in and by cities, by profession. There’s not a logical reason why advisors aren’t coming into the space. We haven’t done a great job of creating a career path. Suck it up buttercup, create the apprenticeship program, create an opportunity for advisors and that next gen to come in, they will come in droves, right? They will come in droves. Why do they think people become lawyers and doctors? I wanna say it’s because they wanna help people, but it’s also part of the money. We’re helping people every day, right?

We’re changing lives every day. We may not be saving lives, but in some instances we might be saving their money, which is maybe in some ways more impactful. So create the path, right? Create that opportunity and then you’ll see these things kind of work their way towards the middle and the entire industry will be better off. So there was a bunch of stuff in there, Derek, that I thought just churned up enough to talk about and I had to get your opinion about this. What do you think? Well, there’s no question in his passion for the profession and trying to do what he can to affect change.

And I do think he is coming from an altruistic point, at least in part, but he also said, look, gotta get paid. So he’s doing that. So I had some good takeaways from his passionate response there. Yeah, love that. But I love it. I mean, we need that type of stuff, right? We need that. This is how change happens. This is how we rethink things. This is how things get better. So some stuff that stuck out for me is that we have this massive evolution going on in our profession and our industry, but a lot of advisors are leaving these mainstream firms in record numbers.

And if I’m understanding correctly, it seems like it’s because there’s still this one size fits all approach to bringing an advisor in, training them, letting them loose after six months, and then telling them to sell, sell, sell. And then there’s this conflict of interest with these incentives. So it’s not fitting. Just like you and I have talked countless times about personalized advice, leading with advice, comprehensive planning, things of that. Each situation’s gonna be slightly different. So one size fits all approach just doesn’t work anymore. There’s growing pains. We know we’re gonna have to go through that, but I think, well, hopefully this is helping people realize that, hey, maybe we should customize this stuff a little bit more.

I like that he said that advisors are bad marketers. I was a terrible marketer for years myself. And let’s face it, we don’t come into this industry to be marketers. We come in this industry to help people with their money. So no worries there. Like I get it, but at the end of the day, we do have to market our services. He mentioned many times, think more about this as a business owner. And how are you going to market yourself? You have to let people know. And what’s the two most important things about any business? You have to have a product service that you can sell, and then you gotta be able to market it so you can sell it.

You don’t have those two things. You’re kinda out of work. So he talks about that, he talks about more marketing around advice and leading with advice. He talked about marketing more as a fiduciary, which I think is a challenge, given the best interest thing we’re talking about today. So there’s gotta be some changes there. Cause let’s face it, although there’s this massive growth in RIAs and whatnot, that’s still the small percentage of the overall market. So how do we do that at a warehouse, for example? And then also virtual, he’s all in on virtual and he knows that that’s the future, at least in a hybrid manner.

What else here? I thought his comment about having the right incentives for the right behavior can help lead to a more fiduciary relationship. I really like that. Let’s not just incentivize around selling X products this month so we can hit our expense allowance. Let’s actually go beyond that, which goes to my next point is more about brain incentives, as he referred to that. What’s beyond the money? What are the altruistic things that we’re doing for our clients? How are we helping them get to retirement or plan for a kid’s higher education? These things that actually are really, really meaningful. And it feels like, and I think you said this too, that the younger generation of advisors that might be considering coming into this profession, they’re gonna just come in droves if the wirehouses and other firms are talking about that stuff.

They gotta get paid well, that’s fine. But tell me, what good am I gonna be doing here on top of all that? So let’s focus on that. So those are my takeaways. I don’t know if that answers the question about being stuck between self-interest and best interest, but I think it helps us get a little bit closer. What do you think? Well, there’s a couple of things I also picked out. I like the controversial stuff, right? He did mention that presence is more important, whether it’s virtual or in person. So of course we love that. I know you picked up on that as well. I thought it was interesting that he called out the succession plan basically being marketed as a succession plan, but it’s really an AUM grab with no real succession plan.

Pretty bold, right? It is. But it’s funny because it ties into, advisors want to go to a firm where they feel their clients will be taken care of because they have relationship. And they also want to monetize the business they’ve built, right? They wanna do both. And so they’re looking for a firm that’s gonna do the succession. But he’s right, I haven’t seen a lot of firms basically say, we’re gonna buy your book of business and we’re gonna transition you out. And they don’t actually have an actual plan. Their goal is they wanted to sell you on moving to their firm and they’ll figure it out later.

And so I think a lot of that’s going on. And I don’t know if a lot of customers are gonna be left in the hands of somebody who’s gonna be as we’ll call them, altruistic as their prior advisor with whom they had 20 years of relationship. And that’s also I think it’s gonna fall out. And it’s because why? Because it’s a business argument. And that’s where I kind of had trouble with his comment about salary and bonus. And I was really questioning whether at the end of the day that made any difference. Now, certainly it does make a difference if you don’t even know what products pay different compensation levels.

And of course, that ignorance might actually promote best interest advice for the clients because you don’t have a way to say, well, the firm is gonna make more money. And I think that that could work in the early days like you said, when you’re bringing on the early generations there, they need that mentorship, apprenticeship, come on into the business. I’m gonna pay a salary. You’re not gonna dial for dollars. You’re gonna learn the core of the business. And I think both insurance broker dealers have shown that they’re great and wire houses have shown that they are great. We’ll call them early stages of a career where you learn the basic of the business.

They have deeply sales oriented for years. And we’re starting to see many of them move to salary slash bonus. But at the end of the day, what’s the bonus based on? Performance, what’s the performance? Asset gathering, premium gathering, why? Because at the end of the day, a business person has to make a revenue decision based upon how they get paid. And here’s the irony behind it. I can get salary to start, but eventually once I realized that there’s more revenue in there than the salary they’re paying me, I’m gonna go entrepreneurial, which means I’m going independent. Which really brought up his next comment, which we decided to throw in here because we asked him what he’s doing in independence.

And his answer was just so different than everybody else’s. We thought we would just sneak it in here. So here was a question we asked what’s going on with true independence. That’s TRU independence. I’ll tell you the first thing I do. Your payout’s 100%, man. There is no payout. You are a business owner. I don’t take nothing. There is no kind of tax. You are an advisor. You have chosen to be independent. You set up your own shop. We’re not talking payout, man. I’m not gonna talk to you about payout. And this is kind of the rethink element of it. They’re like, well, what do you mean?

What do you charge? I’m like, I wanna be your business partner. And that business that I am in as your business partner is a provider of service. So as a service, you have to pay something for it, right? You pay for electricity. You pay for your subscription to Morningstar. We are a provider. And these are the things that we’re gonna provide. We’re gonna provide your CRM. We’re gonna provide your investment technology, your performance reporting, your client portal, and your access to human capital as well to overlay all of this technology to make sure it runs smoother and efficient in all these kinds of things. We’ll also be your chief compliance officer and we can support you on the finance and accounting side so you don’t need to do those functions.

Those are the services that this business provider provides. So of your 100%, our fee is 20% of your fee revenue. Let’s be clear. Your fee revenue. I’m not in the brokerage game. You’ve got another million dollars of brokerage assets. I don’t care. That’s not running through me. So you do whatever you gotta do there. So I’m gonna be cheaper than my competitors right off the street because I’m not trying to capture a basis towards getting all your assets. Now in your business of being in the fee-based business, which is what we believe is fiduciaries, and we wanna be the fiduciary to fiduciary advisors, so we’re gonna back it up.

I’m not collecting any fees on your commission. I’m only collecting fees on your fee-based business. Right there, out of the stock, on top. I am cheaper than my biggest competitors every single time. I don’t have to discount a dollar. I will always be cheaper because I’m not billing you on your commissionable business. So that works. And now I’m telling you, you get 100% and you’re paying me a fee for service. Why wouldn’t you want you to be talked to that way? Because that’s what a business owner talks to. And so that’s how we go there. You would be surprised how many people then turn around and say, so what does that mean in basis points?

I’m like, dude, why are we talking basis points? You’re not a broker. You’re thinking like a broker. I’m trying to talk to you like a business owner, right? You wanna know what that percent of your revenue is because that’s all that matters. All that money’s coming to you. You’re gonna cut me a check. I’m not gonna cut you a check. You’re cutting me a check for the services just like you would to AT&T or any other providers of service. And that’s how you wanna brew it. So we wanna change your mindset from how we even do our fee billing from the start. So I thought this brought up an interesting comment and that was he’s treating it like a business.

And I think that may be the mentality I was trying to get to before, which is once you’re an entrepreneur, you are thinking revenue, expenses, ROI, cost of acquisition. You have to think about this. You have to make decisions that are in your self interest as a business because you gotta stay in business. And here we’re right back into the same challenge of if I charge people differently based upon the solutions I provide, are you still working in their best interest? That’s where I keep getting stuck. It’s a sticky wicket that I don’t think is gonna change overnight, unfortunately. It’s tough. And the mentality really is there.

When I started, I was told, what was it? You’re in business for yourself, but not by yourself. So I didn’t really know what that really meant. But it took years to figure out what the entrepreneurial aspect of it all was. Man, maybe it’s just trying to get advisors to feel or think more like entrepreneurs so this stuff becomes more top of mind. But man, to your point earlier, if they have a choice and that choice will directly affect their comp moving forward. And if you affect their comp, you affect their margins, you affect how much macaroni and cheese they get to make their family. How much?

Not much, right? Or less. Then you are truly impacting the advisor’s life and the advisor’s life is just as important. Yeah, here’s the thing that’s annoying me about this topic. Cause I have like this obsession with trying to figure it out and unfortunately I can’t. And the problem is that everyone’s talking about this from the investment management side. Look, I grew up in a world where financial planning and holistic planning had to do with a lot more than just investment management. But the problem is that who’s dominating this conversation is investment managers, RIAs and so forth. What about the annuity guys out there? What about the bankers?

What about the insurance teams? It is so complicated once you break into these other products. They’re already complicated but the compensation is so mired in black box. You really don’t know who’s getting paid, what’s getting paid and so forth. So it’s almost like the marketplace is not even evolved there, right? In our own practice, when we had to do insurances, we just basically said, okay, you know what? We’re gonna go with ignorance. We don’t even wanna know how much we’re paid for these products. Just shop the whole market, do a comparison on the entire marketplace. We’ll break down these products. We’re never gonna find out how much we’re compensated because we just don’t care.

Whatever it is, it’ll be fine, okay? So we chose the ignorance route on compensation, right? And that’s what we do. We tended to build portfolios. The other thing is that when we did have a choice, if they were given us a choice, we always took levelized compensation instead of heaped compensation. The reason was because we never wanted this perspective that, oh, so you got paid all this crazy amount upfront and see around, never gonna talk to you again. We wanted to basically create this stickiness or longevity alignment that we’re in it for the long haul. We don’t get paid if we don’t have you as a client.

So the key is to then focus on what’s in the client’s business. But unfortunately- That’s an important statement right there. Yeah, too many insurance companies haven’t offered levelized compensation or spread as opposed to heaped compensation. That means all upfront. And I think that you can’t get there and say, you need to be a holistic advisor doing all of these lines of business because they’re licensed and state registered products. So they have compensation built into them. You can’t wave them, you can’t get rid of them. And you can’t pay referral fees back to the client. So you’re stuck with having to be a licensed agent and accepting this compensation.

And all of a sudden, boom, it kind of messes up this whole best interest alignment. And I don’t know what’s gonna happen. I don’t know how you get unstuck from that. Like your example’s a good one, but I would argue you guys are probably in the minority of saying we just chose ignorance because maybe I can’t as an advisor one year in, maybe I can’t have the ignorance option because I don’t know if I can pay my rent next month. Yep. Right, that’s really tough. I wish we had a solution for our listeners. And I would love it if some people piped up and came back and gave us some thoughts in addition to what Ahmed’s been talking about because I think if we come together as a profession, we could maybe crack this nut at some level.

Yep, yep, I agree. Well, if we can commoditize the compensation, we can really make it about the value we provide as individuals. And then, and we can prove that alignment and get rid of this discussion. And I think that’s gonna be the challenge for all, for there’s a lot of people holding on to the old ways and there’s a lot of people holding onto the new and we need to find a way to basically stop making this a discussion already. Do you think it’ll be even possible though? Take it from this end, our episode with Covis Klein, I think that was what, 31. We talk about industry and profession and industry produces products, they manufacture things.

So they’re removed from the client interaction, right? Yeah. So they’re just looking to make money on their margin for said product. Right. Where the advisor is the person that’s like in the trenches and having to deal with all this stuff firsthand, I don’t know. Can there be a best interest on products? Well, okay, so here’s how I would answer that and then people will think about this and do what you said, which is hopefully you write in and you comment on this now. There is a difference between, as you already said and Covis commented, the manufacturing side, there’s always gonna be a distribution end of the product.

I just want the product, I don’t need advice. I don’t need holistic guidance. And then there’s times I need holistic guidance, but let’s not mince words. If you’re asking for holistic guidance, the assumption is you’re working in my best interest. That means you have to be cognizant of your own self-interest. And that’s why compensation for financial advice needs to migrate to an aligned best interest. Products charge whatever you want. If I’m gonna be a buyer myself, I’m gonna go out and I just wanna buy some insurance. I wanna buy some, I’m gonna do the price shopping on my own, but if you’re gonna have a professional advocate in there, they’re gonna have to basically be cognizant of the compensation.

And I think that that’s the key. The problem is everybody’s positioning as a financial advisor. No one wants to be a salesman anymore. Sales is a fantastic profession. We need salespeople. 100%, yeah, 100%. And so that’s the key. Maybe we have to just change the mindset of identity. Where’s my association, my identity? Stop pretending to be a financial advisor when you’re really a product salesperson. And then everything in between there is where it gets gray. I like the angle you’re on. I think that’s good. Listeners, please think this over and send us some thoughts on this so we can further digest it. Heck, maybe we’ll even do a follow-up episode on it.

Maybe we will. Thank you, Ahmed, for being part of this today. We know that we’re all super busy, made the time to speak to us. And of course, we love what you’re doing over at True, really interesting stuff. For those of you that are listening, remember to subscribe, like, share this with your friends, listen the second time because you can’t take all this in. We’re gonna have to listen to it a couple of times. And so we look forward to speaking to you next time. Derek, my friend. It was good seeing you, Adam. And as a quick side note, pay attention to the name of the podcast.

We just changed it a little bit. We did. Right, so take a look, folks. I’m not even gonna say it, just look. All right, very cool. Until the next time, my friend. Thank you for listening to Rethink, the financial advisor podcast with Holt and Notman. Be sure to subscribe now and join the ongoing conversation. The information covered and posted represents the views and opinions of the guest and does not necessarily represent the views or opinions of AssetMap or Connector. The content has been made available for informational and educational purposes only.