All It Took Was A Brain Transplant To Get Started In Financial Services

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Includes: AMTD, BLK, SCHW
by: Kevin Wilson

Summary

At the request of a reader, I am following up on my article about my "brilliant" career as a geologist to explain how I made the transition to financial services.

It wasn't pretty, and a brain transplant was involved; in fact, I've always described the process to my prospective clients in exactly this way.

For a long time, it appeared that my skill set seemed all wrong, but eventually I found a middle path that was less daunting than one might expect.

I made the relentless pursuit of knowledge in my field a major commitment, and used it to increase both my and my clients' confidence in my advice.

I also learned that some of my skills were transferable, so maybe my brain transplant was just a mind-meld; I favor firms that educate their clients, like AMTD, BLK, and SCHW.

Source: Thenakedscientists.com

At the request of reader "random itinerant," I am taking this opportunity to follow up on a previous article about my "brilliant" career as a geologist to explain how I got started in the financial services industry. As one might expect, the transition was a little bumpy. The photo above sums it up pretty well: it wasn't pretty, and a brain transplant was involved. In fact, I've always described the process to my prospective clients in exactly this way. Initially, I believed that the skill set and mental habits of a scientist and practicing geologist are about as different from those of a financial advisor as they could possibly be. The only reasons I even considered the career were that first, my dad had been very successful with it, and second, I liked the investing process.

For a long time, the idea that my skill set seemed all wrong appeared to be devastatingly true, but eventually I found a middle path that involved a blending of old and new skill sets; this made the process less daunting than one might expect. Anyway, an obvious difference recognized by many people I've spoken with is the idea of left brain dominance (typical in a scientist) vs. right brain dominance (typical, one might think, in an advisor). This was where the primary need for a brain transplant originated (Chart 1), and why I eventually got one, in a way. However, aside from the lateralization of brain function, there were many other factors to consider.

Chart 1: Brain Lateralization

Source: ucmas.ca

My skill set as a scientist included a relatively immense body of knowledge about nature, but not so much knowledge of human behavior; it wasn't considered relevant or necessary. I've written elsewhere about how wrong that is in actual practice, because people are people, and people skills are always and everywhere a good thing to have. Scientists, because they are human, are not really logical at the end of the day, because as neurological and psychological research has shown, all of humanity is alarmingly irrational most of the time. However, scientists (and likewise physicians, engineers, and attorneys, etc.) are trained to use logic and evidence (Chart 2) to test ideas, and to accept their own general ignorance about the universe as a given, no matter how much they know about some parts of it. So let's just say that scientists can frequently rise to the level of thinking and acting logically.

Chart 2: A Logical System for Making Decisions

Source: slideshare.net

Now, when I look back on my 23 years as a financial advisor, the number of generally logical clients I've met is somewhat limited. I know there have been a few, but usually they did something at some point that made them subsequently appear profoundly irrational and very human to me. Naturally this is simply because none of us are rational for very long at a stretch. I must add that I am at least as irrational as others, or only occasionally more rational than others. So when say I've observed others behaving irrationally, it is correct to assume that this observation occurred during one of my more lucid moments, interwoven between irrational episodes of my own. In any case, no one gets to resign from the human race, and it is the human condition I am talking about here.

I have always struggled then, and right from the start of my second career, with the question of how one should approach people with one's presumably sophisticated ideas about deeply complex subjects in investing or financial planning. After all, the average client (or human), whatever their net worth, is often profoundly irrational when it comes to the way they think about money and risk (Chart 3). Indeed, I have met very few people in my life who understand risk, and that includes people in all of the professions. This is of course the traditional challenge for everyone in financial services.

Chart 3: The Phases of Investor Emotions

Click to enlarge

Source: blog.quantesys.com

I might add that this is also a challenge for physicians and other medical professionals, because their patients commonly don't listen to their advice, even when it is a life or death situation. So the constant need in my new career for people skills and persuasion (based at least in part on appeals to other people's emotions) was for me a somewhat shocking and disconcerting aspect of financial services work, one for which I initially felt manifestly unqualified. I soon learned that appeals to logic were only partially successful, and then only in the best of circumstances. However, there is a way to get people to slow down and think about things, giving more logical arguments or concepts more time to become accepted.

I also suffered for a time from grief at the loss of my beloved first career as a geologist, and that kept me from fully focusing on obtaining the proper sales and people skills, at least for a while. It also took years to gather enough knowledge to be useful; this was the hardest thing to bear, as I had been a recognized expert in my little field of endeavor in my previous career, but now I was almost like a child again. The failures and humiliations during that time were quite daunting. Many a night did I lay awake and ask myself, "What the hell happened?" Only when I got to the "acceptance" stage of grief did I put that behind me. Luckily my wife of many years was appropriately sympathetic, meaning not really very much. That helped me move on and accept the challenge before me.

However, on the positive side, the act of selling was not entirely new to me. First, there was the fact that my father had been a nationally ranked financial advisor who was a natural salesman. He retired long before I faced my career transition, but I grew up in a family where the dinner table talk was often about the trials and tribulations of a sales career. My two favorite uncles were also in sales careers, so I was immersed in the family side of that culture. Unfortunately, that is exactly why I went into science: I loved science, and I wanted to get away from any possibility of ever having to sell something for a living; I didn't think that it fits me.

My dad had even suggested when I was 20 that I should go into his line of work. He may have seen something that I didn't; in any case, I told him in no uncertain terms that I would never do such a thing. Twenty years later, I did do it after all, with an enormously ironic sense of timing. So you might say, for many reasons, that I had a predisposition that made me the opposite of a natural in sales. Yet, when the chips were down, I was eventually able to cobble together an approach that became less humiliating and more productive than I ever would have guessed when I started out.

The second thing that made selling possible for me (in spite of my partially unfortunate skill set and temperament) was the fact that as a petroleum geologist, I was selling all of the time (Chart 4). If you wanted funding for a project or the money to buy oil and gas leases or the money to drill a well, you had to sell the people who controlled the money. After years of doing this, I had learned a few things. For example, the worst thing a guy could say in a meeting was "Great science! Wonderful technical presentation!" The deal was already dead whenever that happened. People who spend big money and take big risk are the same everywhere, but maybe a little more so in the oil and gas business.

In other words, if there was no "romance" in the deal, it wasn't going to fly. They wanted to hear about how they were going to get even richer, or about how every one of their competitors or buddies was going to feel huge envy about their new hydrocarbon discoveries. The science part, which was absolutely critical to success, was of little interest compared to the economics and the romance. Eventually it dawned on me that geologists were considered just "technical help," and even a pain in the neck sometimes, by the decision-makers. Only towards the end of my time as a geologist did I figure out that being an owner was much more fun than being the "technical help."

Chart 4: Selling an Oil Deal

Click to enlarge

Source: plsx.com

The third advantage I had in making the transition to an advisory career was the fact that I had been a teacher and a junior professor. I was pretty good at teaching because I loved to do it. I especially loved the real intellectual mysteries of nature, and how rewarding it could be to show these things to students. Much of the job in financial services also involves one aspect or another of teaching (Chart 5), and for me, this was the easiest part of my new career. The initial problem though was the discouraging fact that since I was starting out with no formal business background, I was at least as ignorant as the average client, and far more so than many people with high net worth. To combat this, I took the advice of my first manager and started taking classes in financial planning within nine months of my starting day. Eventually I gathered so many courses under my belt that I had four times the coursework of a Certified Financial Planner (CFP™) behind me. This eventually gave me the confidence and knowledge base to dispense advice to high net worth families.

Chart 5: Clients Need Financial Education

Click to enlarge

Source: blogs.wsj.com

The brain transplant I've referred to came when I figured out that I really liked the financial services career, and I knew that I would be taking the financial advisor path through it (as opposed to a more traditional insurance or brokerage path). I was no longer in mourning for my lost career, no longer reading want ads, and no longer plotting a comeback. I recognized that what I needed was to become so useful that clients recommended me and valued my advice. I realized I had much to learn in order to make that happen, and so I set out to do it. My old scientist brain was set aside to some extent (not fully removed), and a new advisor brain mostly took its place over time. My people skills improved greatly after that, my sales skills improved enough to make me effective, and because I was fully engaged, I really started to do well. I had a specific goal in mind, which was to become so good at investments that I could attract the bigger investment clients. My secondary goal was to become so knowledgeable about financial planning that I could attract the very wealthiest clients to my practice, and keep them long term.

One key decision I made was to do what I had done in my previous career in order to become expert in my chosen field: I decided to use the "Paper Tiger" approach. This is a discipline I had been taught by one of my geology professors. It involves reading something new in one's chosen field every single day, with volume and complexity increasing gradually over time. Using the "Paper Tiger" discipline meant that my knowledge increased a little every day, relentlessly, as I read paper after paper, and book after book; after a few years I would inevitably know far more than others who were a bit more complacent about advising (Chart 6). This isn't for everyone, but the result after a few years was that an employer saw enough potential in me to undertake cross-training me as a trust officer. From that point on, my career really took off. I still practice the "Paper Tiger" discipline, and it has made my knowledge base broad and deep compared to where I started. I have also been able to write useful client newsletters and contribute articles to Seeking Alpha and elsewhere because of this long-term accumulation of learning.

Chart 6: A Wise Advisor Increases Their Knowledge Over Time

Click to enlarge

Source: financialmentor.com

There were some surprising carryovers from my career as a geologist that I also found useful in my financial advisory career. For example, picking stocks is a very similar process to drilling oil wells. There's always far too much data, and most of it is chaff. Sorting that out gets you the prize, not every time, but often. But taking calculated risks and understanding what risk really is involves the same kind of thought process in either field. Another example is that in science I learned how to solve problems, and many aspects of financial planning involve the same kind of thing. I also learned that I had the ability to slog through any subject, to read anything and eventually make sense of it. Not right away mind you, but someday. So that meant I wasn't so intimidated by the huge mound of legal, insurance, accounting, finance, and economics literature and their associated knowledge bases, that I froze. I knew I had to master these at some level, and eventually I just did it (at some level).

In conclusion, I think that although my transition was very tough at first, once I became engaged, and in fact really wanted to become the guy with the new skill set, I found that I could do it. That involved a brain transplant of sorts, because I didn't start out with the right tools or attitude. But I also learned eventually that some of my skills were transferable, so maybe my so-called brain transplant was just a mind-meld. Anyway, I think it worked. I would invest in major advisory firms that do their own research and provide great educational resources to their clients. I would include TD Ameritrade Holding Corp. (NASDAQ:AMTD), Charles Schwab Corp. (NYSE:SCHW), and BlackRock Inc. (NYSE:BLK).

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article is intended to provide information to interested parties. As I have no knowledge of individual investor circumstances, goals, and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any stocks or other securities mentioned or recommended. This post is illustrative and educational and is not a specific recommendation or an offer of products or services. Past performance is not an indicator of future performance.