Last week somebody asked me if I knew of any movies that featured investment advisors. After thinking about it for a long time, I could not come up with any. Sure there are plenty of movies about brokers like Wall Street, Wolf of Wall Street, Boiler Room, Pursuit of Happyness or Trading Places. But I could not think of one that depicted an investment advisor.
After having this realization, quickly I realized why this was the case. A movie about brokers is exciting and funny. I spent about 9 years working at broker dealers. While I never experienced the excesses that made those movies great, I understood the mentality of the people who worked there. Brokers make money on commissions, so there is huge incentive to sell product to make money. This can cause people to do things that they might not ordinarily do.
I cannot imagine what a movie about an investment advisor would look like or how they could even get more than 10 people in the seats. Unless of course the advisor was a secret agent or alien from Mars. Then maybe you could get 30 people in the seats.
The bottom line is that being a wealth manager is not exciting. Sure it may be an interesting, intellectually stimulating and fulfilling profession, it does not make for a good movie. The reason is that wealth management is about financial planning, investment management, risk management, and working with people. Before I go on I it is important to discuss the difference between being a broker and being an advisor.
What is a Broker or Registered Representative?
A Registered Representative is a person who works at a broker dealer who has passed the licensing requirements for the series 7 test. This title, registered representative, allows the person to sell investment products and earn a commission for that sale. These investment products can be stocks, mutual funds, bonds, variable annuities, managed futures hedge funds and more.
The registered representative, or broker as they are also called, has to provide “suitable” investments to his clients. However they are not required to follow up with the client after the sale. Many of the brokers provide other services to their clients as well, but it is not required by their license.
What is an Investment Advisor?
An Investment Advisor or Investment Advisor Representative is a person who has passed the series 65 or 66 test and has met the requirements of the state or SEC regulators. This person may not earn commissions from investments. They may only earn a fee, paid directly from the clients. This is why they frequently are referred to as fee-only advisors.
Investment advisors do not receive compensation from anyone but the clients. Since there is no incentive to sell certain products, the advisory relationship with the client tends to be more holistic. This includes investment management, financial planning, risk management or other related services. Because fee-only advisors don’t get paid commissions on products they sell, frequently they charge for a financial plan.
Investment Advisors are also considered a fiduciary. This is a high standard of care that is required for each client. The standard of care carries through the entire relationship with the client from buying, holding and selling the investments. This is a significant difference between brokers and advisors.
Next time you are browsing the movie selection looking for movies related to the financial field, consider the ones I have listed above. They are well made movies about the industry with some poetic license and top actors to make things interesting. Whether the movie is about insider trading, drug fueled penny stock swindles, or how people go from nothing to greatness, pick the movie for what it is rather than an insight into the world of investment advisors. If you want that, you might be searching for a while.