A Little Money Business

The word fiduciary in a headline caught my eye the other day. New federal regulations and guidance on fiduciary duties in the investment services sector. My notice of—as in passing—was born of my brief 9 months as a registered representative for a Wall Street mutual fund company in Minneapolis in 1983-84.

At the time I was in my mind a high school English teacher, but jobs were nearly impossible to come by and I needed money. One district had over 200 English applications on file. At least the personnel secretary was kind enough to let me watch her put my paperwork in a file cabinet drawer.

My only interview chance imploded when I answered honestly about a school newspaper reporting alcohol being sold to minors. Apparently that had happened the year before, and since the local police chief, the mayor, and the district’s superintendent went ballistic on the principal, he was in no mood for hard-hitting journalistic endeavors.

The assistant principal had warned me the topic would come up, and so it did—first question, right out of the box. I went with “Yes”, as in a worthy story if all the i’s and t’s were handled. I could heard the assistant principal sigh. The interview was over in 5 minutes. Turned out the opening went to a new education grad, with a journalism emphasis in public relations.

No job, end of August, and I scoured the local newspapers. The ad was a small one about working in the investment sector, no experience required. Well I met that requirement.

After a short interview with the district manager, I signed on and attended training sessions for two weeks so that I could take the Series 6 exam to sell mutual funds and the state test to do the same, and I started studying for the state insurance exam on my own. I passed all the tests the first time around and two weeks later started teaching a prep class for the Series 6 because as my manager T— alertly noted,” Hey, you’re a teacher”.

The company was new to the Twin Cities, and so the home office set a modest goal of $1,000,000 worth of accounts for the first 12 months. We did that the first month and every month after and set the first-year-record for a new office with $14 million in accounts.

“Fantastic” New York said. “Incredible” they said. Except every Monday morning my manager was chewed out by the folks in New York for not selling more. So what did T— do? Chewed out all the reps every Tuesday morning for not selling more. The key word here might seem to be chewing, but selling is the one to pay attention to.

The salary for reps was 100% commission-based. My manager had a base salary and received a slice of the loaf based on our numbers, and so too the regional vice president, and on up the corporate ladder. Bring in more money, make more money. Win-win.

Disclaimer time: Just my experience in a short period of time in one office for one investment firm.

This business was a tough business. Consistently 70-80% of new reps were done within 3 months. They would have a big first month by hitting up family and friends, usually for IRAs and savings investment plans, and so take on an apartment lease, buy a new car, and think themselves to be living large. Then their business would drop off for lack of referrals and contacts, and month 2 bills were coming due, and so by month 3, they were gone. Generally, the reps quickest to fold were between 19 and 22.

The manager would call 2 or 3 of the senior reps—yep, that was me at 31—and divvy up the accounts to be serviced. T— doled them like baseball trading cards. Sometimes it would be just one, but usually 5 or 6. And more often than not, what a mess. The wrong kind of fund for the circumstances. Out we would go and try to explain how where their money was invested was not so appropriate and why we would recommend putting the money elsewhere. Rarely a fun moment at the kitchen table.

A lot of clients placed $2,000 in an IRA account and an overwhelming percentage were doing something they had never done before in their lives, putting money somewhere other than in a bank. A lot were working class, middle class, or retirees. The money was not an insignificant amount to them.

Soon, I was talking the talk. “Going out to get 10k” or “Just 2k but some hot referrals”. At some point taking in $20k was the same as taking in 2. The first time I went out to deal with $50k from a railroad retirement account I was flabbergasted at the prospect. But quickly it was all the same, products sold.

I handled a lot of IRA and SEP accounts. Some folks would ask a lot of questions, some hardly any. If it was a first call, we had a tight script to regurgitate to make the sale. I remember my manager tagging along when I called on an attorney via a referral. A few minutes into the spiel, the attorney said essentially that’s all great, but here’s a check for four thousand. Decide where it goes and give me the paperwork to sign.

Outside the building, the manager just shrugged and said, “You got the 4k”. I only made $112 but was referred to 6 other attorneys in the same building.

Sometimes before a lunch break several of us would sit at a table with one phone and, round-robin, cold call numbers from the phonebook. Just take a page and start calling. Might call an entire column, rarely got an appointment.

Sometimes we would fill out postcard mailers based on phonebook addresses. I liked sending out batches of 100 of our tax-exempt fund, which was well run and well regarded. I would get 1-3 return calls per mailing. Almost always closed an account from those appointments.

And then the fiduciary duty/sales conundrum reared it’s scaly, horned, fire-breathing head.

I got a call in response to a tax-exempt mailer. The woman, in her 60s, widowed, had $50,000 to invest. When I met with her at her apartment, I learned that her income comfortably covered her expenses, but the 50k was all she had beyond her possessions and car. And she was very nervous about anything other than her money market account at her bank.

I explained how the fund worked, talked with her about having enough on hand for six months of expenses, and funds for a car if needed. The prudent—and conservative—recommendation I made was 10k in the tax-exempt fund since that was her focus.

When I got back to the office, T— saw me in the meeting area and asked in his outdoor New York voice “Did you nail the $50k?” Nope, I wrote up 10k and the rest stays in her money market account. Next thing I know I was in his office with 2 other senior reps and I was being verbally flayed.

From that assault came the phrase that led me to declare myself part-time and therefore no longer subject to Tuesday chew-outs. “I expected better from you.” Better. Better? I dealt with my client like she was my mother—now that is all about a fiduciary duty, my friends.

There’s more, of course.

Disclaimer #2: A lot of the business was good business for the clients. I like to think that maybe a few of mine have large nest eggs that make financial decision-making at this stage in their lives easier for them.

Let me leap ahead. Four months after not being my better self I was living Charleston, SC, and in another four months, I accepted a teaching slot. That was nearly 31 years ago.