Not quite sure why, but yesterday I had a very vivid memory of a specific experience I had at Merrill Lynch.

See if it makes as big an impact on you as it does on me (years later).

I had been a broker with Merrill Lynch for 8 or 9 years, so this would be approximately 2001-2002 when this happened.  And during my 8-9 years, I’d been fortunate to develop some business relationships with some wealthy clients.  As a result, I was invited to participate in Merrill Lynch’s “high net worth” training program in Princeton, NJ.

This program, as I recall, was primarily about technical training and discussions of subject matter that were applicable to those with a net worth of $5 million or more.  We covered things like hedging strategies for concentrated stock positions, exchange funds, private equity, hedge funds, institutional separate account management, estate planning, asset protection and a ton of other topics.  It was a pretty intensive program.

And to make sure we didn’t just memorize without the ability to practically apply this information, we had role-playing sessions where we’d demonstrate our recently acquired knowledge and incorporate it into client conversations.  These role-playing sessions were conducted and “judged” by the trainers and other management level professionals from around the firm.

In one role-playing session, I was asked to “pitch” the benefits of separate account management to a fictional wealthy client, played by a then high-level Merrill Lynch regional manager.  She was a very nice woman and seemed engaged in our conversation.

So we’re past the pleasantries of “hello” and “how are you today?” and I start to talk about the benefits of separate account management.  And as expected, she’s asking questions and challenging my position.  At one point, she asked me, “Why wouldn’t you just manage a portfolio of stocks for me; why would I hire a company that I don’t even know?”

My response began with, “Well, to begin with, I’m not a very good stock picker.”  And though we continued the conversation and I went on to explain the merits of separate account management to her, I remember her seeming to cringe at my initial comment.

So now, jump ahead about 6 weeks. I’m called into my manager’s office and he tells me he has some feedback for me about my high net worth training program.  He asks me if I said something along the lines of “I’m not a very good stock picker”, and I told him that I had indeed said that.  He asked me why I would say something like that.  And I told him I said it because it was true.  He looked shocked and stared at me without saying a word for what seemed like an eternity.  Then he proceeded …

He told me that I should never say something like that to a client.  Why not, I asked?  He said that it was a mistake for me to say “I’m not a very good stock picker.” I argued that I was only telling the truth and that I was simply falling back on my typical self-deprecating mannerisms.  He said that I shouldn’t be self-deprecating in front of a client.  Why not I asked.  Am I expected to know everything, be the best at everything and convince the client of this?  Silence.  I went on … if I was a consistently good stock picker (I don’t believe these exist, by the way), why would I be pitching a separate account manager to begin with?

And here’s the money quote … “Because you weren’t trying to sell your ability to pick stocks. You were trying to sell separate account management.”  That’s what I was told.  Sure, this was a few years back, so the exact quote might be a bit off the mark, but the message was clear.  I was informed that I was there simply to sell something.

And while this is a more vivid memory of my days at Merrill Lynch, this type of situation is the rule more than the exception.

I look back on my days at Merrill Lynch as mostly positive. Despite the problems with the system, I worked for great managers who gave me the latitude to take care of my clients in the manner I thought best.  And I know many people who still work at Merrill Lynch that I would trust with my own money.  Yet, I think it’s important to understand the sales and marketing culture that permeates Wall Street and maybe the very advisor you’re working with.

In an industry where most advisors are referred to as “producers” and the revenue they generate for their firm is referred to as “production”, it’s easy for the client to get lost amidst the competing interests of employees, shareholders, and product manufacturers.

“Buyer Beware” comes to mind.  Because you have to remember that you’re being sold something.

“The financial services industry — including banks, brokerages, and insurance companies — is unique among all others. Through effective advertising and marketing, it’s been able to evade being painted with the brush other underperforming industries have, and in most cases, their well-designed sales pitch has allowed them to effectively prey on the emotional desires of investors”

The above quote is from the back cover of Dave Loeper’s book Stop The Investing Rip-Off.

I think it sums things up pretty well.  What do you think?

I’m a professional advisor.

I have strong opinions.

I love what I do.

But it wasn’t always this way …

I used to be in product sales.

It’s August, 1993, and I’ve just been hired as a “financial consultant” with Merrill Lynch in Atlanta, GA.  My first 3 months at Merrill Lynch were focused on 2 things:

• Studying to pass the necessary Securities licensing exams, and

• Sales training.

A quick note: the “necessary Securities licensing exams” I reference above are licenses to SELL investment products.  If I didn’t pass the exams, I couldn’t SELL financial products to people.

I passed the exams, got my insurance licenses and was ready to go. But that’s not what I want to talk about.

What I want to talk about is the sales training I received.

While I can’t speak from experience in other sales jobs, my guess is that I was trained in many of the classical sales strategies that have been passed down over the years.  I would record cold calls I made to people and would review what I did right (or more often, what I did wrong) with my Sales Manager.

I was schooled on how to overcome objections. “Oh, you’re not interested in the stock of company XYZ Mrs. Smith, well how about a tax-free bond? Oh, you already have all the tax-free bonds you need, well then how about something else?”

I was instructed to always give ‘em a firm handshake and say their name a lot when talking with them. Apparently, there was a psychological study somewhere that said people like to hear their name spoken by others. Yes, that’s right … I was told to play mind games with people.

If you’re not yet getting the picture, my job was to sell stuff.  In fact, my training revolved around selling stuff to people whether they wanted or needed it.

Now, certainly much has changed since 1993.  The financial advice industry has embraced “financial planning” and a more “consultative sales process”.  But when you peel back the onion, Wall Street is still fueled by the ability to sell stuff to people and they have HUGE marketing budgets and highly produced TV ads to convince you that you need what they’re selling.  I think there are some big problems with this approach, and whether or not you agree, I finally had enough of it.

It’s March, 2006, and I’ve just resigned from Merrill Lynch to start my own independent, fee-only, fiduciary, FINANCIAL ADVICE firm, Thornton Wealth Management.  Sure, there were plenty of opportunities for me to have become an independent FINANCIAL SALES firm, but that’s what I was wanting to leave behind at Merrill Lynch.

Today, I’m fortunate to do good work for nice people and make a positive impact in their lives.  I’m still a sales person — I want to be absolutely clear about that.  But I’m no longer in product sales.

These days, I sell my ongoing advice delivered via a long-term relationship. And I love what I do.

But many of you may have a difficult time deciphering who’s who in the crowded marketplace of those willing (and wanting) to be your financial advisor.

So here’s a simple test for you to use:

As you meet with and interview financial advisors, ask them if you can work with them and pay their fee, but not transfer your investment account(s) to them.  In other words, determine if their ability to work with you is dependent on your ability and willingness to turn over your investment accounts to them.

When I worked at Merrill Lynch, this was how it worked and this is still the case today. I couldn’t get paid unless you moved your accounts to Merrill Lynch so I could collect commissions and fees from your accounts.

Contrast this with many independent, fee-only, non-product-selling, fiduciary advisors (including yours truly): most are happy and willing to work with you whether or not you have investment assets to manage.  They’re selling advice — not products.

This, my friends, is the difference between being sold financial products and being sold financial advice.

I think the latter is better option for all involved, and I hope you do too.