While thinking about the importance of growing your income, I wanted to take some time to outline my work and career history. In a later post, I may do a more comprehensive work history like J Money over at BudgetsareSexy.com, but for the next couple of posts I wanted to focus on the income and jobs I consider to part of my career, and not all the different jobs I have done before. The hope is that this will illustrate not only how I have grown my income, but when income is managed properly instead of living beyond your means or succumbing to lifestyle inflation you can truly begin to build wealth (see evidence in my recent post on net worth).
My first foray into the financial services industry was during my senior year of college, and was where I learned an important lesson that has helped me significantly since then. I was hired as a financial advisor by a company that resonated with me in the way they talked about doing the right thing for the customer and helping people reach their dreams, and was told that once I was licensed, I would be given clients to work with that the office didn't have the bandwidth to properly support. I would be working 100% on commission, but the average rep made $40,000 in the first year, and to not let the 100% commission part worry me. Over the course of a month or two, I got all of my study materials and studied my brains out and passed all the necessary exams. The next day I went to the office, excited to get started helping people reach their goals. I still remember my heart sink when my boss said something like "All right! Now that you're licensed and ready to sell, let's make a list of all your friends and family and start calling them and selling them crap you wouldn't buy if you actually had any money of your own!" At least, that's what I heard. Wait a second, what about all the clients they had told me about who simply needed a rep assigned to their account that I could call to set up an annual review? Anything besides trying to pitch a variable annuity to my grandma! Sadly, my experience isn't all that uncommon but could have been avoided had I done better research on the industry or had someone I trusted teach me what to look for.
The next carrot that was dangled in front of me was that I would be given some existing clients to work with once I had generated $3,000 in gross commissions, and I was given 90 days to do so or be let go. On the surface this didn't sound very difficult since I had been told that 'average' new hires made $40,000 in their first year. When I started to dig into what I would have to do to get to that number, I wasn't quite as optimistic. The products that paid the most commission were the ones that I didn't want to be selling to ANYONE (whole life insurance, variable annuities, etc). In the end, I did meet with several people that I was able to help get started investing for retirement, and I didn't sell any investments that I felt betrayed what was right. I ended up working for about a month and had a mutual parting of the ways with the company.
I learned a lot of things while working for this company, but the main takeaway for me was that I will never feel comfortable with anyone I know investing through a company where the reps are paid solely on a commission basis. I have yet to hear an argument for the commission model that makes any sense and isn't from someone who has some type of vested interest in the model. The vast majority of people who join this type of company don't make it through their first year, and because of this, these companies will often have low entry requirements to be hired (which perpetuates the turnover problem).
This may not be the best example of 'growing your income', but was a very helpful step in getting me to my next job that I'll be talking about in my next post. It also was useful down the road when I actively helped people to avoid investing in companies like the one I was with for a short time.