I have a surefire way for you to make money in 2015. It's disarmingly simple, and I'm not even going to keep you waiting. Here's what I want you to do: Get into the business of managing other people's money. Specifically, become a broker and tell your clients you can "beat the markets."
This career change could have many advantages. Here are some of the biggest:
Ease of entry
Let's say you sell used cars or copiers for a living. You never graduated from high school.
I have good news for you. You possess the basic qualifications to sit for the Series 7 exam, which is administered by the Financial Industry Regulatory Authority. You will have to be fingerprinted and pass a background check, but hopefully that won't be a problem. Don't worry. There's no way to determine if you are honest, have integrity or even a conscience.
You can make big bucks
According to the U.S. Bureau of Labor Statistics, a stockbroker's average annual income as of May 2011 was a whopping $100,910. Most of your earnings will come from commissions and bonuses, which will largely depend on the number of transactions you can convince your clients to make. Fortunately, this is not difficult.
In a bull market, you can position yourself as aggressive. In a bear market, you can extol your conservative virtues. In either market, you can contact your clients regularly, giving them advice about which stocks to buy or sell and which mutual fund is best situated to weather whatever turn you believe the future holds for the market. The great part is that you make money whether the market goes up or down. Only your client will suffer.
A collateral benefit of your new career is that you can sound really intelligent, all while spewing utter nonsense. As long as you project an air of supreme confidence, few clients will question your judgment. If they do, just tell them that you are relying on the views of your analysts, who are the "best in the business."
You can sell almost anything
Since your compensation will be largely based on commissions, it will be important for you to push high-commission products. Fortunately there's no shortage of them. According to The White Law Group, a representative list of the most lucrative financial instruments that brokers sell includes:
- Hedge Funds
- Private Placements
- Non-Traded REITs
- Variable Annuities
- Closed-End Funds
- Managed Futures
- Structured Products
- Unit Investment Trusts
You will want to avoid low-cost index funds, exchange-traded funds and passively managed funds. While owning these investments is frequently in the best interest of most investors, the commissions are puny compared to the highest commission products. Most of your clients won't know the difference until it is too late anyway.
You'll have free reign
You have nearly free reign to plunder your clients' investments and transfer their wealth from their pocket to your brokerage firm (and you).
As I'm sure your sales manager will tell you, as a broker, you are not legally obligated to act in the best interest of your client. You just have to be sure that the investments you recommend are "suitable." This loose standard gives you a lot of latitude. For example, if your firm has a proprietary mutual fund with an expense ratio twice that of a comparable index fund, you can recommend the proprietary mutual fund with impunity. The commission to you will be significantly greater, and there is absolutely nothing your clients can do, even if they figure out that they have been duped.
There's a lot of talk about requiring brokers to be held to the same fiduciary standard as Registered Investment Advisors. Don't be concerned about it. Your trade association is working tirelessly to lobby Congress and block any effort to require you to put the interests of your client ahead of your own interests and those of your brokerage firm.
You'll have powerful allies
As a member of the securities industry, you will benefit from the hundreds of millions of dollars in advertising spent to persuade investors that you add value. Even though, in many cases, you don't. In addition, the financial media often functions as a 24-hour infomercial, stoking anxiety, fear and greed, which will generate trading and commissions. When the markets are particularly volatile, your phone will ring off the hook.
I don't mean to suggest there aren't any in the financial media who are trying to do the right thing for investors by educating them on the merit of asset allocation, global diversification and a portfolio consisting of low management fee index funds. However, they are drowned out by the volume of "insights" from Jim Cramer, Art Cashin, Dennis Gartman and all the other financial pundits who appear on CNBC and similar venues.
A small downside
There's a small downside to your new career, but you need not dwell on it. You will likely be destroying the retirement dreams of your clients. Many of the products you recommend are expensive and risky. Your clients would generally be better off in a boring index-based portfolio with few transactions other than rebalancing once or twice a year and changing their asset allocation when necessary.
But the chance of them figuring this out is relatively small. If they do, just tell them that index-based investing is for people who are satisfied with "average" returns, even though this is untrue.
You will have to check your conscience at the door. Fortunately, as I mentioned, having a conscience or high ethical standards is not a job requirement.
And it sure beats selling copiers!
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Dan Solin is the director of investor advocacy for the BAM ALLIANCE and a wealth adviser with Buckingham. He is a New York Times best-selling author of the Smartest series of books. His latest book is The Smartest Sales Book You'll Ever Read.
The views of the author are his alone and may not represent the views of his affiliated firms. Any data, information and content on this blog is for information purposes only and should not be construed as an offer of advisory services.