Executive Summary
In the past, learning to be a financial planner was something that you only did after spending years successfully selling financial services products. If you couldn't "pay your dues" by doing the marketing and business development to get enough clients in the first place, you didn't get to go take CFP classes and become a financial planner. You lost your job by failing to validate your (sales) contract.
In today's environment, the tables have turned. Now, increasingly, new financial advisors arrive having already completed their financial planning education and passed the CFP exam. And not surprisingly, they're looking for jobs where they can implement that financial planning knowledge with clients. Only to be told that they, too, must still spend time "paying their dues" in a back-office job before they get the opportunity to work directly with clients.
In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we dig into the whole concept of "paying your dues", and why it actually is still relevant for financial planners today, even for those who studying financial planning before seeking out their first job.
Because the reality is that doing financial planning well is more than just having the technical financial planning knowledge. It's also about having the skills to communicate with and interact clients - to show empathy - and find and bring on new clients as well. And if you don't understand the inner operations of how the advisory firm works in the first place, you will also struggle to be successful as an advisor, as the reality is that a successful advisory career still means successfully working within, or creating, a business that serves clients, not just sitting across from the clients in meetings.
And in this context, "paying your dues" is no longer just about doing busy work for the sake of busy work, but actually learning what it takes to be a successful financial advisor, and practicing those skills (which takes time, even for the best of us). Just as Michael Phelps trained 6 hours a day for 6 days a week throughout his career - not to pay his dues but because that's what training is - so too should new financial advisors be prepared to put in the time. Not because they're paying dues, but because that's how you really practice and develop and ultimately master your skills as a professional!
Accordingly, new financial advisors should embrace the opportunity for any kind of real job in an advisory firm, even if it's not client-facing. Because anything, from helping with trading to doing operations paperwork, is relevant knowledge when you're getting started and have so much to learn and experience.
Of course, once a skill is mastered, it's time to find a new opportunity - which means moving up in the current firm, or finding a new job at a new firm if necessary. Failing to do so can turn a learning experience into a dead-end career track. But ultimately, that still doesn't mean it's bad to "pay your dues" - it's simply an acknowledge that once you've taken a few years to learn the tasks, do what it takes to move forward and continue to advance your career to the next stage!
(Michael’s Note: The video below was recorded using Periscope, and announced via Twitter. If you want to participate in the next #OfficeHours live, please download the Periscope app on your mobile device, and follow @MichaelKitces on Twitter, so you get the announcement when the broadcast is starting, at/around 1PM EST every Tuesday! You can also submit your question in advance through our Contact page!)
#OfficeHours with @MichaelKitces Video Transcript
Welcome, everyone! Welcome to Office Hours with Michael Kitces!
As you can see, I've got an unusual setup this week. I'm actually hanging out here in Des Moines, Iowa. You can see the State Capitol of Iowa right in the background. I will be presenting the keynote session tomorrow for the FPA Iowa Annual Symposium.
I wanted to talk today about the whole phenomenon of "paying your dues". You'll find in the financial planning world in particular, we have lots of these discussions, on whether a new financial advisor should "pay their dues", and I want to address this issue.
The particular question that kicked off this week was from Charlie, who asked:
"I graduated in May with a degree in financial planning, passed my CFP exam this summer, now I'm searching for a financial planning job. I got an offer from what I thought was a great firm in the area, but they're requiring me to start out in operations doing paperwork, and I want to do financial planning. Why is it so hard to find a firm that doesn't have this "pay your dues" mentality?"
I think this is a good question, Charlie, because the whole "pay your dues" mentality is definitely a challenge. This is the infamous: "When I was young I walked uphill, in the snow, both ways, so you should have to as well."
But while I'm not really a fan of a "pay your dues for the sake of paying your dues" approach, I think sometimes the value of "paying your dues" actually gets short shrift.
What Does It Really Mean To “Pay Your Dues”? [Time - 2:02]
Let's step away a moment from the financial planning context, and I'm going to take you on another road. We're going to talk about sports instead.
When it comes to sports, some people out there are just natural athletes. They're pretty good at any sport they try. Others, including me, are not so naturally inclined.
For everyone, though, getting really good at a sport is really hard work. It's something that you train for. Even Michael Phelps trains 6 hours a day, 6 days a week.
From my perspective, as someone that really grew up not an athlete, I was really proud that when I was in college, I actually played varsity squash for my last two years. It was a sport I had never played seriously or even tried playing until my sophomore year.
For me, getting to play squash competitively was not one of those, "Hey, I decided I'm going to do this and it worked out" situations. I worked my ass off. Our team did a lot of practice drills for the stuff you have to be good at to succeed in the sport - lunges, volley shots, recoveries off the back wall, and so forth. So I did my drills. Not because I was paying my dues, but because I was learning to play the game.
As I got better, I started doing pick-up games with other people on the team so I could practice more. They beat me over and over again, because I wasn't very good and I didn't know how to play the game well yet. But I kept doing it over and over again. It might have felt like I was paying my dues while they beat me. But in truth I was learning to play the game.
Eventually, I was good enough that I earned the right to actually practice with the team. I got close to being on the competitive ladder, which meant I got more on-court time doing drills, playing scrimmages. And mostly still losing, because I was still training. But again, this still wasn't simply an exercise of me paying my dues – this was learning to play the game.
Throughout the season, our team would practice a little over an hour a day. So I practiced three hours a day. I'd do an hour of drills beforehand, then I practiced with the team, then I'd find pick-up games or scrimmage matches afterwards. Anything I could do to put in my time. And I can't emphasize enough that while I was putting in the time it takes to "pay your dues", I don't view it as trying to pay my dues.
I did it because that's how you train. That's how you develop a skill. That's how you get better at something. You put in the time.
Paying Your Dues Is Really About Training And Practicing Your Skills [Time - 4:21]
When it comes to financial planning, I think there's very much of a direct parallel here. If you want to be a professional, you have to put in the time. It's not really because you're "paying your dues" – it's because financial planning is a series of skills that you have to learn and hone over time. And you learn them by doing them over, and over, and over again.
That's why we have, as Jay is saying [from Periscope], apprenticeship-style financial advisory jobs. That's why the CFP Board built the apprenticeship version of the experience requirement.
As Gary is saying [from Periscope], this is essentially a version of the 10,000-hour rule, that you have to put in 10,000 hours of focused training, doing something over and over again, to really learn it. Not because you're paying your dues, but because that's how you learn and train and master a skill!
I think this is what we're seeing evolve for the entire financial advisor career track now. It's about learning the knowledge and the skills and then practicing them so that you can move up. The progression looks something like this:
1) Paraplanners learn technical competency.
2) Once you master that, as an associate advisor you learn empathy and client relationships.
3) If you do well with that, then you move up and you learn sales and business development as a senior advisor.
4) And then some people move up further and learn management skills and take on other management roles in the firm.
But this isn't a situation where you're simply paying your dues at each stage – you are learning skills and putting in the hours to master your professional skills! That's how you get it done.
And in the context of Charlie's question, I really see it as the exact same thing. So, Charlie, when you asked this question:
"Should I take a job that's in an operations role even though [I've] completed the CFP educational requirement?"
My answer is yes, you should do it!
In point of fact, I did the same thing. There was a period of time where I worked in an operations role, even though I was done with my CFP education. I had passed the CFP exam, and I was actually done with my CLU and most of my ChFC at that point as well. But I still worked in an operations job for an advisory firm for a while.
I'm not saying you should work in operations after you pass your CFP exam just because I did. My point is that this is a normal career progression. This is how it's supposed to work. You have to practice and learn skills before you can move up to the next level. And if you don't know how the basic operations of an advisory firm work, you're not going to be a very good advisor.
Pay Your Dues To Learn Your Skills, But Move On When It’s Time [Time - 6:33]
Now, it's worth noting that even when I was in this operations role, I only did it for a period of time before I moved on. For me, it was a little under two years.
When I started in the role, everything was fascinating and new. I didn't know the difference between ACAT transfers and non-ACAT transfers. I didn't know what it means when paperwork comes back NIGO. I had never gone through a life insurance application or an annuity application before. I had to learn all of that. By doing it. Hands-on. I had to experience it, to really know how it all worked.
Eventually, I outgrew that position though. I guess you could say I finished paying my dues. As I view it, I had learned the role, mastered what I needed to learn to grow my career as a financial advisor, and so I was ready to move on.
Ironically, for me, this actually turned out to be a problem for the company I was in. It was a firm that was really focused on doing financial planning. It was a great opportunity to learn hands-on financial planning. But the firm wasn't actually growing. It was a financially successful firm – a very profitable firm – but it was not a growing business. As a result, once I paid my dues and I learned the role, I had to leave, because there was nowhere else to go. There was nowhere to move up.
But that's not about a problem of paying your dues or this particular path – it's simply an acknowledgement that sometimes in the process of learning your skills, you will outgrow the position, and may outgrow the entire firm that you're at. From there, you may need to go somewhere else to keep your career moving forward.
In fact, when I hear discussions of people paying their dues and having a bad outcome, the version of that that worries me is not actually that you have to put in the time to learn your job and become a better professional – it's when you get stuck in the dead-end job that doesn't leave you any path to move forward. But that's a problem with the firm. Not a problem of "paying your dues".
The Bad Version Of Paying Your Dues [Time - 8:13]
While I've said you should pay your dues because it's really about learning how to be a professional, it's worth recognizing that there is a bad version of paying your dues.
The bad version of paying your dues is when you're stuck doing tasks that are really not relevant for your future career at all. If you're stuck in a firm where you're just doing paperwork, filing and scanning documents, and so on – then you're not even learning about how operations and transfers work. If you're just moving paper around in the office, then you aren't learning the skills you need.
In this case, we're a little too close to simply paying your dues, and doing busy work for the sake of busy work. Doing nothing but this work isn't within the constructive realm of learning to become a professional, because these are not skills-training tasks on a professional track towards becoming a financial planner. If you have a boss that gives you tasks that are just utterly and completely irrelevant to learning anything about the execution of a financial advisory firm, then I think that's a problem.
But that's a narrower situation. And even then, you do have to recognize that even a great job isn't just doing "the fun stuff" all the time. There are things that you have to do to get the job done. That happens at any job, no matter how amazing and awesome it otherwise feels. There will always be things you just have to do because they need to get done, not because they're fun or challenging or educational. After all, remember that when a firm owner starts a business, he or she is doing all of that paperwork, filing, copying, scheduling of appointments, planning, and everything else that goes on in between. But they still became a professional and built a firm. So some of those may be your tasks for a period of time as well. Again, that's not a paying your dues thing. That's a matter of pitching in to do what needs to get done in a successful business.
The real issue is when you get stuck in a position, where you're not learning and not having any opportunity to learn and grow. To me, that is the moment when there is cause for concern. And even then, it's less about being stuck in a pay your dues role, and it's more being stuck in a job that's simply not growing in a firm that isn't providing opportunities in the first place.
So getting back to Charlie's original question and wrapping up here: Charlie, my advice to you is if you've already recognized that this is a good advisory firm, then I'd encourage you to take this job. Because if you're at a good firm that's planning focused, it's a great opportunity to get the experience and learn. Later, you can decide what comes next in your career. Don't view it as "paying your dues" just because you have to go and do operations work for a year or two even though you are training to be a financial planner. You will learn skills that are relevant, because frankly, when you're new and you're coming in fresh, there's a lot to learn. Recognize that a part of what it means to be a good financial planner is that you have to actually know how the paperwork works and how accounts transfer and how the operations of a firm are done.
If you go into that role, and you've mastered it after a few years, and you can't figure out where to go next – then that's a problem. But that's a bridge you can cross when you get to it. Maybe you'll get there and find out the firm has grown to the point where there are other opportunities. Maybe you'll get to that point and decide that it's time to leave because you got the job, you learned the tasks, and you're ready to move on to the next thing. But that's why my number one recommendation for any financial planner coming into the industry is to just "get A job!" - because anything you do that's attached to the advisory industry is going to start that learning process. And from there, you can figure out what you like, what you don't like, and what you want to move on and do next.
The bottom line is this: I really want you to think differently about the whole concept of paying your dues. When you're a professional and you're training for an advanced skill set, "paying your dues" is not just a thing you do to put in your time – paying your dues is how you learn and develop the skills that make you a real financial planner. It's how you get to the infamous 10,000 hours for mastery. It's how any expert trains. It's how athletes train. It's how professionals train.
And if you get to a point where you're moving along and you hit a wall and can no longer advance, then that becomes a problem. But that's not a "pay your dues" problem. It's just a sign that maybe it's time to find a new job, or go to a new firm where you have more opportunities to grow.
So I hope that's helpful food for thought. Thanks for hanging out with me here at the Iowa State Capitol. This is Office Hours with Michael Kitces, Tuesdays, 1 p.m. East Coast time. Thanks for joining us, even at this late hour. Have a great day, everyone. Take care!
So what do you think? Did you have to "pay your dues" in the early stages of your career as a financial advisor? Do you think it was a waste of time? Or did you learn skills that are still relevant for you today? Please share your thoughts in the comments below!
