Working as a Financial Advisor
I’d been working with clients at various banks for over fifteen years and was two and a half years into my debt free journey, when I took a telephone appointment (during COVID), one day from a twenty-four-year-old single guy. He was living at home, not paying rent, and had an excellent job in construction making eighty-thousand dollars a year. He was living in overdraft constantly utilizing the entire twelve-hundred-dollar limit and had zero saved in any of his accounts. He had made an appointment which said he wanted to talk about buying a house. As I did with all of my appointments, I prepared prior, trying to get a sense of this person’s profile. I reviewed his account activity noticing he ate out every day for lunch spending twenty to thirty dollars, and also frequented bars and restaurants in the evenings. He was young and having fun and took out a lot of cash from his account on a regular basis. He had a car payment, was making credit card payments and had cell phone, insurance, and gas as his regular expenses. With average house prices in our area at four hundred thousand at the time, I was hoping he would disclose he had a large pot of money sitting somewhere else for his down payment, if he was contacting me to buy a house.
After speaking with him for a minute about general pleasantries I mentioned that I had an appointment with him about buying a house and asked if he had anything else he wanted me to add to the agenda for our phone meeting that day. He said that yes, in two years he wanted to buy a house and was looking in the region of four hundred and fifty thousand dollars, but for right now he wanted to apply for a line of credit to consolidate his debt. Now financial institutions as a general rule do not offer a line of credit to consolidate debt, as it would be anti-productive to what debt consolidation is supposed to accomplish. As a general policy at the bank, I was working for at the time, to apply for an unsecured line of credit the bank would be looking for savings of approximately the same amount as the line of credit limit you were seeking. As an example, if you had ten thousand dollars in a savings account, the bank would look at an unsecured line of credit for ten thousand dollars, providing you could afford to make the minimum payments on your existing debt and you satisfied their minimum credit requirements for that product. These requirements would include having a strong credit score, employment history and income and whereby extending additional revolving credit would make sense. When I inquired if this young man had any savings, including a Tax-Free Savings account or RSP started elsewhere, my intuition of him having nothing saved was confirmed. He verbally listed his debts, and I explained that we couldn’t offer him a line of credit at this time as he did not meet the minimum criteria for this product, nor did the bank provide a line of credit for debt consolidation purposes. I suggested we look at applying for a debt consolidation loan and creating a budget and a savings plan simultaneously so that in a few years when he was ready to buy a house he would have enough of a down payment, all of his debts would be paid off and he could achieve his goals. In going through his income, debt, and costs to buy a house I had determined that unless he paid down a substantial amount of his fifty-four-thousand-dollar debt prior, he would not be able to afford a home in that price range. I suggested he might want to start bringing his lunch and coffee to work and save the money he would have spent towards debt repayment. He commented that he needed to hear what I was saying and appreciated my honesty and advice. I got his approval to proceed with a loan application and I asked him to email me or drop off his last years T4 and his last paystub, and I would get started. He said he would email me the employment income within the next day. I left the appointment feeling great about our initial conversation and excited for him and his future.
A couple of days later I followed up with him and left a voicemail to say I still had not received his income verification, but he did not call me or email me back. A day after that I received a phone call from my manager saying this young man had been surveyed by the bank and had made a complaint about me. This young man had put in a scathing survey and was furious and deeply offended that I had suggested to him that he bring a lunch to work. His feedback included that all I wanted to accomplish was to sell him an expensive debt consolidation loan and make more money for the bank. Nothing could have been further from the truth. I was stunned and confused. How could my experience of our meeting have been so differently perceived from the clients?
My manager asked, “Did I actually suggest to him that he bring his lunch to work”? I replied, “Well you bring your lunch and I bring a lunch, what is wrong with suggesting he pack a lunch”? Over 60% of his pay cheque was being spent on eating out and entertainment, how could that possibly be bad advice to suggest he start to cut back and save to pay off debt when he told me he wanted to pay down his debt and buy a house within two years? Even if he had been very disciplined it would take him three years at best to pay down the debt, let alone save for a down payment for a house! My manager asked if I had used any of the bank’s financial calculators during our conversation and I was stunned. You didn’t have to be a rocket scientist to see that this guy was living way beyond his means, paying no rent, making eighty thousand dollars a year and living in overdraft. He was living pay cheque to pay cheque and spending every penny (and more) going into debt until it had been maxed out. He was living lavishly and beyond his means and his goals would not be met within a short period of time unless he started to cut back on his expenses and pay off debt. It was immensely easy math that I calculated while on the phone with him. He had a large car payment and credit card debt, no savings and negative net worth. With some sacrifice and adjustments to his lifestyle and spending, his situation could have been turned around within three years, but the truth was, he wasn’t ready to sacrifice anything quite yet for a house. He wanted a line of credit, and he wanted one NOW! A line of credit certainly was not going to solve his overspending, nor was it a useful tool to paying off debt, especially with someone who had already maximized all of his available credit.
Instead of my Manager contacting him to explain my reasoning for my advice he reassigned him to my co-worker to redo the appointment. By him doing that it suggested to the client that another person would be able to provide him with what he wanted, as I had failed so miserably in my attempt to meet his demand. Whatever was said, he was interested enough to partake in a second appointment with another advisor. My co-worker ended up applying for a line of credit for him and submitted it for adjudication. The application was declined, and a debt consolidation loan was suggested as an alternate option just as I had done. He became verbally abusive about the banks with her over the phone and wasn’t interested in hearing the same explanation of why he didn’t qualify again. My co-worker came to me shaken up about the way he had spoken to her, and I felt an incredible amount of relief that the advice I had given him matched. Of course, it did, as it was logical advice. I had lost sleep over this young man having a tantrum and being a tyrant. I was trained to be the expert in bank policy, and yet when I tried to implement it, was given a negative survey and confronted in a way that caused me to become defensive of upholding the policies I was hired to instill. This young man had tried to bully his way to getting a product he simply did not qualify for. He told my coworker he was going to go somewhere else to get a line of credit, and a debt consolidation loan was not going to be an option for him. I use this incident as an example of one client interaction, however over the years there were countless similar exchanges with other clients.
I had a bit of an epiphany over this particular experience probably because of the way it was handled internally, and I began to doubt my entire career as a financial advisor. I questioned for many months how the company I worked for was calling me a financial advisor, yet my advice was called into question when it was not what that client wanted to hear. I think over time I had been subconsciously trained to please the client and meet their demands due to the subtle yet constant fear of either receiving a negative survey, having a client make a complaint, or having them leave altogether and walk across the street to another bank. That threat loomed everywhere. The positive surveys were read every week out loud in multi branch meetings by the community manager, and it was a badge of honor to get one whilst the negative ones were dealt with quietly on a one-on-one basis as mine had been. Getting a negative survey had absolutely nothing to do with whether or not you delivered exceptional advice. Clients were well aware of surveys and knowing they had a voice as the powerful almighty customer. The fees they paid, and the profits of the banks correlated, and those fees helped pay for our salaries! Clients hold the power to complain, threaten, and leave as customers, if they were in any way dissatisfied or felt disrespected in the form of a declined application. The customer is always right and delivering exceptional customer service by giving them everything they desire whilst meeting your sales targets was the ultimate wish for all.
As a client it is very shameful to be declined by your bank and it’s hard not to take rejection personally, but there has to be a limit to how much debt someone can take on and when is it enough? That said one had to be very careful and well-crafted about how to deliver both advice and rejection to a valued client and keep them satisfied. How do you do that? How dare I tell someone to bring their lunch to work to save money! How do you keep clients satisfied with their credit wants whilst ensuring they are going to achieve their goals and be comfortable in retirement when there is so much pressure coming from both sides? As a result, the balance becomes off kilter with trying to meet client demands NOW, as the emphasis for client’s future needs in retirement is diminished if not completely eradicated.
There was the famous quote by Sam Walton of Walmart taped on the bathroom wall at one of the banks I worked at that read, “There is only one boss: the customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” The role of financial advisor is tricky because in addition to giving financial advice I was primarily a salesperson for a publicly traded company. I was in a sales role in the retail banking business, and my job, like all sales jobs, was about turning opportunities into selling financial products, and meeting sales targets so the company would be profitable, and shareholders satisfied.
A budget was not considered a product, or a sales activity, so spending time creating budgets when you have six appointments a day was not considered time well spent in terms of sales activities. The budget calculator that we did use was not easily found on the website and was a general, simple one-page template with no real focus on how to use and complete it effectively. The expenses were bunched into general categories and completing a budget in branch involved inputting estimated income and expense numbers that clients would pull out of thin air. Those numbers would be inputted into a spread sheet to show how much extra they could either use to pay down debt or invest. The question would be, “How much a month do you think you spend on food?” Of course, no one was ever over budget in their estimates of ballparking expenses off the top of their heads, and they always had hundreds of dollars left over each month despite owing tens of thousands of dollars on their credit cards and lines of credit. There was no problem with cashflow! It was a garbage in, garbage out type spreadsheet and entailed a process that needed to be completed within the one hour allotted appointment time, in addition to satisfying the initial need for why the client had originally made the appointment in the first place. Some financial institutions provided pie charts attached to their clients online banking activity, breaking down clients’ debit card usage into spending categories. Using the income that was deposited into their account and the expenses going out and what establishment that money had been spent in, a cute little pie chart would appear showing what percentage of their money was being spent in various categories. The only trouble with this, is activities on the credit cards and lines of credit were not included in these calculations, so in no way does this depict an overall accurate picture of that person’s spending habits. It’s a very nice try though.
When a mortgage refinance or debt consolidation loan was completed, I would present many clients with a proposed budget as a starting point to show them how setting aside some money in savings and paying down the refinance in a shorter amount of time could be achieved. I would book a follow up appointment to take that next step but ninety-five percent of the time they would either cancel or be no shows for that meeting. For the five percent that did show up and start a savings plan with a pre-authorized contribution, the soon to be cash-strapped client would usually withdraw funds as soon as it reached a couple of hundred dollars and cancel the plan. It was a vicious cycle as the primary emphasis was to offer a solution of refinancing to free up cash flow which only seemed to enable the client to go out and spend more money. Committing to paying off debt and saving money was not top of mind now their cashflow problem had been solved, because in their minds, their cash flow problem had been solved and their debts were paid off when in actuality they had simply been moved onto their mortgage. As an advisor I felt like I was contributing to their further financial decline, and not helping them the way I had hoped to, as the refinance only seemed to encourage them to go out and continue to spend now their cash flow problem had been magically solved.
There is an obvious dilemma between giving financial advice and selling financial products. On the advice side you couldn’t say “Stop spending, save your money and pay off the debt you currently have already before buying something else!” or “How are you going to buy a house or a car with no money?” I’d be walked out of my job immediately if I said any of those things, after all just telling someone to bring lunch to work was offensive enough. When I finally started to incorporate these methods of trying to both satisfy the immediate wants of the client whilst showing them how to pay the debt off faster and put a little bit aside for a rainy day, they weren’t having it and simply would not show up for these saving appointments. Today, people are very used to getting what they want, and satisfying clients’ demands for things they desire is propelling a lot of financial hardship on people in their later years. The sales process does not want you to say NO to the client, and the bank and their employees are all trying desperately to keep the client happy and give them what they want or else they will take their profitable business somewhere else! We were at the clients’ mercy, to provide them with access to their immediate wants and desires. It is a whatever you want Mr. or Mrs. Customer mentality just like any other profitable business.
I have seen firsthand and experienced for myself, clients in their 50’s, 60’s and 70’s banking with the same financial institution for many decades with absolutely nothing saved for retirement and no financial plan in place. Whose fault is this? Is it the financial institution’s fault? Is it the client’s fault? Is it both their fault?
The two most important rules in financial planning are ‘pay yourself first’ and ‘live within your means’, but they are immensely difficult to implement without a budget or any self-control or discipline. If I try to describe the struggle of financial planning in this marketplace it’s akin to standing in front of a magnificent buffet with a big white empty plate and telling people, they are only allowed to take one serving that is the size of your fist, as per the Canada food guidelines. How do you hold people back from all of the things that they desire to consume when they are standing in front of the lights and the hot steaming delectables, just waiting to be put on a plate? If you have a client not backing down and making complaints and demands about what they want, they will simply go somewhere else as they are not seeking advice, they just want to borrow more money. I’ve done the same myself. Financial advisors do not hold that kind of power to influence or override what a client desires. “It’s my hard-earned money, don’t tell me what to do with it”, but the problem with that is you can’t say, “Well actually Mr. Customer you don’t have any money, which is why you are here wanting to borrow more money”. Many days I felt the banking business is really about the clients bullying the advisors and the banks, and dictating the business terms, and not the other way around. Even with sky-high interest rates of 20% plus, that doesn’t stop someone from spending money they don’t have. It certainly didn’t stop me. The hard truth is the client have only themselves to blame for being unable to restrain themselves from all they want and desire. So many of us have been living beyond our means for most of our lives buying our dream homes, dream vehicles, taking dream vacations and buying fancy clothes and spending on home décor, renovating, installing pools and hot tubs, piling our plates sky high and going back multiple times, paying for it all with borrowed money. This has all been achieved primarily through mortgage refinances and increased amortizations. Our debt levels are being pushed to maximum ratios and beyond, based on gross (before tax) income and not take-home (net) incomes, and we calculate debt ratios that do not include all of our actual expenses in life like food, gas, home and car insurance, childcare, maintenance, savings, vacations and clothing. We have allowed the addition of co-signors and guarantors to our credit applications to accommodate our consumer appetites and have introduced B lenders and private equity lenders for those that don’t approve within already very generous ratios. Payday loans and cash money stores are located on nearly every downtown street corner and enable clients in the most desperate situations. Everyone can get whatever they want and self-constraint and applying financial advice for many of us is nonexistent in our culture and worlds. Banks have done their very best to accommodate client demand, while maximizing profit and keeping clientele satisfied and less likely to walk across the street to the competition. The one who ultimately pays for this is the client who has lived well with all they desire, but ultimately ends up retiring with next to nothing.
The days working retail in a bank were continuously filled with emotional highs and lows, dealing with death and estates, divorce, marriage, illness, births, bankruptcy, inheritance, retiring, getting laid off, getting a new job, buying, or selling a new property, and anything and everything in between. Advisors are not psychologists and counsellors, and we were not given training to handle people’s verbal outbursts and insults, nor were we given ways to cope with their emotional, mental, and financial stresses. Advisors do their utmost to get to YES for every credit application, meet client demand and make the client happy just like any other business does. There can be some very emotionally taxing days and as more and more institutions go digital and self-serve, people generally come to the bank only when there is a major life change or crisis. When emotions are generally very high this can create volatility, verbal, and emotional abuse, and could be the primary reason why there is so much staff turnover within financial institutions.
The advice portion as I said earlier is essentially 1% of the solution with 99% of the work weighing on your shoulders. One can only do so much for someone else where their finances are concerned. Creating financial goals of paying off debt, being mortgage free or having adequate savings in retirement were easy goals to suggest, but they are ones that take a great deal of daily discipline over a long period of time to achieve. One must save a percentage of their income all of the time, and live on a budget all of the time, and live within their means all of the time. This is slow and steady, not getting rich quickly! You are the CEO of your own life. The mind set of living within or below your means must be with you all of the time, especially when you go to the mall or online shop, or go out to dinner, or look for a vehicle, or book a vacation and without daily discipline and sacrifice it all falls apart. You control you and only you.
