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> There is a shortage of talent in the financial advisory space Isn’t it self-evident that in general if you are good at this you would not be selling your adv

• technofiend 3y ago
  Because you can risk other people's money instead of your own while learning. If you're successful then great, you'll get a huge bonus. If you fail, you may get fired but still you didn't lose your own nest egg. And if you succeed consistently, it's enough to build a track record and leave to start your own fund.
• roenxi 3y ago
  The equilibrium position is you can invest your own money, then take money off others, invest that too and take a %. The danger zone is for small investors, where it doesn't make sense to advertise to them because the regulations are too demanding, margins too small and people tend to be flighty or need lots of hand-holding. That is basically why it there aren't "invest in stock!" signs on every ad stand. And good financial advice tends to be boring and doesn't change much. The same strategy tends to work in all weather - invest a little bit in everything, invest a bit more in things that do well and try not to take on unnecessary tax burdens.
• imachine1980_ 3y ago
  Even if you are great 2 millones fortune isn't happens over nigrh whit salary of 12k, being good financiar advisor means you give good financial analysis not that you, can afford the mortgage of house, because you get layoff for year, you or neer family don't get sick out of coverage, are alcoholic,why aren't already Rich too have already enough money so your own income isn't important in in your revenue at 45, you are bad financial advice if at 70 you can't afford retirement whiout having catastrophic circumstances
• testval123 3y ago
  Financial advisors generally charge a flat management fee (for example 1% of AUM). Hedge funds generally charge a management fee plus a performance fee. This is why hedge funds and other similar structures are much more lucrative and acquire more talent.
• deleted 3y ago
  [deleted]
• mlhpdx 3y ago
  No, it's a job. Sound investment management is just a lot of work, and takes education, training and experience. It isn't about "get rich quick" after some point; it's about staying rich. Right?
• jrockway 3y ago
  Isn't this true of everything? If you were good at writing, you wouldn't work for the Wall Street Journal. If you were good at programming, you wouldn't work for Google. If you were good at cooking, you wouldn't make stuff at home for your family. All of that value you create could be captured and only used for yourself, and you're letting other people have it FOR FREE!!! The fact of the matter is that a bound on theoretical returns is not what dictates people's choice of career. You have to consider the lower personal risk that you take on investing someone else's money and only getting a percentage of it versus investing your own money and getting 100% of it. You have to consider the aspect of being able to learn from others as you work, versus having no mentors when you lone-wolf it. You have to consider that being a financial advisor is not just looking at investments and making trades. Maybe they look forward to their 45 minute call with Jeff Bezos or whatever, and that's what driving them to that career option. Finally, I think people are hiring financial advisors for prudence, not because they expect to beat the market. For example, how much of your money should be available in 1 day versus how much of it might be stuck in the market for 10 years because some politician made a dumb decision? How much of your stock should you sell this year in order to replace your roof, or should you get a loan? Nobody is expecting to beat the market; they just want to avoid doing dumb stuff that can be avoided.
  • bemusedthrow75 3y ago
    > Isn't this true of everything? If you were good at writing, you wouldn't work for the Wall Street Journal. They indeed do not have good writers.
  • fmajid 3y ago
    Yup, Jessica Lessin left the WSJ to star The Information.
• chadash 3y ago
  I think this is a misunderstanding of what wealth management is. I have friends in private banking who have told me that some of their clients are hedge fund managers and they aren’t looking for stock advice, but more for things like tax help and succession planning. And a banker who will see to it that they can get their yacht financed using their Rembrandt as collateral, since even billionaires don’t necessarily have much liquidity.
• quickthrower2 3y ago
  Probability distributions. Liquidity. You don’t invest $100 and make $120 after a year for sure . You invest $100 and maybe an all knowing “god” knows the outcome but there is a probability distribution (a model which can vary based on opinion) for us mere mortals. Depending on your investment goals you might trade to have more risk and more expected upside. You may diversify away from US to mitigate US specific risk but maybe such a portfolio wont perform as well long term. Liquidity. Investing a million vs. investing billions needs different approaches. Someone doing something sophisticated may only be able to invest so much without revealing their hand. Someone investing a million people’s pension will act differently and probably more prosaic and predictable. No one will fire you for turning 100k into a million over someones lifetime but they will be angry if you turned it into nothing.
  • mooreds 3y ago
    I don't understand your answer at all. I read it twice and still find it confusing.
    • quickthrower2 3y ago
      I can rephrase. A typical scenario for say a pension (aka superannuation, aka 401k) is that when you are young you go for higher short term risk and higher potential growth mix of investments and as you get closer to retirement you derisk. The idea is that a crash when young is no issue as the market will recover and probably you’ll get some bargain stock soon after. When you are older you don’t want to lose 20% of your savings to a crash so more money gets diverted into lower risk stuff. The point is that there is not one investment strategy that suits all. Therefore there is a place for fund managers to provide different risk profiles. They aren’t really getting alpha but they are useful nonetheless. They won’t be picking stocks based on trading ideas. To compound this, these large funds deal with billions of dollars. If you place a market order for a billion dollars people notice. Just like if you had to spend a million dollars on ebay on used apple watches you are going to affect the price of those watches because of your bids. Therefore they will find it hard to seek alpha anyway. The point is there is a place for funds that might seem like “dumb money” but just broadly follow indices and there is a place for traders with a model and a theory to try and beat the markets.
• dgacmu 3y ago
  No. I'm pretty good at financial planning. But what that means is that I'm good at getting standard market returns with acceptable risk. I don't beat the market or try to - that's not what most financial planning is about. It's about identifying a plan that will help you meet savings and income and retirement goals in a way that is realistic and works for you. Financial planning is much more about seemingly-boring things like tax-advantaged retirement contributions into low-overhead index funds than it is about flashy stock trades. What to hold in your tax-deferred accounts vs taxable. Tax loss harvesting. Roth conversations. Asset allocation. Estate planning. It's really fun, but it's an optimization game, not a gambling game. There are basically a lot of known "right answers" and the trick of financial planning is applying and adapting them to the particulars of someone's situation.
  • MichaelZuo 3y ago
    Why wouldn't folks instead hire the market beating super-genius who could do all of the above, and deliver above market returns yoy, with acceptable risk, if given the choice? I think that's the point the parent was trying to get at, it's an industry where all the best talent never become hireable in the first place.
    • dgacmu 3y ago
      Because those people mostly don't exist and you're not given the choice. RenTech exists but has to cap the size of their internal market-beatung fund, because their strategies only scale to a certain extent. They're a hedge fund, not a financial advisor - and they do indeed do what the GP said and just invest for themselves. Almost all other folks out there revert to the mean after a while. But that doesn't mean there aren't good financial advisors. They're not helping you best the market, they're helping you ensure a good financial future within the scope of your existing wealth and income. They do apply their skills to themselves, but you need a job and a big base of money before s&p returns will make you rich. :)
      • MichaelZuo 3y ago
        Right, so the best talent don't ever become available to be hired. Because they would all be occupied working for themselves, or at very select firms, earning way more.
• basil-rash 3y ago
  Because when you make really rich people a lot of money, you get returns of types money can’t buy. See Epstein.
• wisty 3y ago
  Let's say I have $100k to invest, and can beat the market by 10% a year which is unrealistically good. I could make $10,000 a year extra with a decent amount of savings. I suppose leverage can increase this, but you see the point, right? If you lack serious capital then even a strong edge is not worth as much as a part time job at a fast food restaurant.
  • AstralStorm 3y ago
    Depends on what counts as worth. Ultimately you cannot finance yourself out of the system without enormous wattage. So, this job thing you're talking about, at some point it will happen you, if even by taking your time, your children and family time. There's likely a level where is really not worth any money to have one of those traditional contracts taking your time and energy for cash. That threshold is probably not as high as it seems to be, if not for land and housing prices.
• al_borland 3y ago
  If a person has skills, but isn’t already wealthy themselves, taking that 1% of a large fund is how they can generate wealth. Building wealth takes money and time. The money needs to come from somewhere. For those who are good, who have been doing it for a long time, and are wealthy, it gives them something to do and a reason to get up in the morning. There is a lot to be said for that.
• timeagain 3y ago
  People who are good at finance also tend to be risk averse and long-term planners. The great part about charging a fee is that you get to charge it even when the market dips.
  • zeroCalories 3y ago
    The best financial advisors are going to help you diversify your assets, and, more importantly, minimize taxes. They're not telling you to YOLO on crypto. There's only so much buying the S&P 500 can do for your returns with limited money. Best to advise someone rich on how to do it.
• Spark_Ed 3y ago
  Access to 10x or 100x the capital you would otherwise have access to?
• function_seven 3y ago
  Taking a thin slice of other people’s money is more profitable than playing with only your own money if you (a) have lots of clients or a few really rich ones and (b) if you participate in the upside but not the downside.
  • mooreds 3y ago
    This makes sense. A bit disturbing but tracks with the advisors I know (especially point b).