Financial Planning can be a very attractive field for student internships, often because of the relative ease of securing opportunities as early as freshman or sophomore year. As with any opportunity, though, it is important for students to fully understand what they are getting themselves into. The financial planning industry as a whole is almost entirely sales based. Individual financial planners operate much like small businesses, owning their own practices and personally putting in the leg work to secure new ones. Sales can be a daunting yet incredibly attractive field, especially for the more ambitious of Hampden-Sydney students. “Eat what you kill” fields of business such as commission-heavy Financial Planning or bonus-reliant Big Finance have been mainstays in the aspirations of Hampden-Sydney men for years, but there are still pitfalls to be aware of when securing the early leg up.
Internships in financial planning can teach young students invaluable skills such as sales techniques, interpersonal dialogue, and a wide range of financial insight. Since the industry is heavily based on individual financial planners essentially running their own business, internships and early opportunities can often be secured through simple networking rather than formal application processes. Each firm and individual financial planner runs their practice differently, though, it is very important to ask the right questions when applying for these positions.
The two most vital questions hopeful interns should be asking are about the infamous “P150”, and the program’s compensation structure. The P150 refers to a “Personal 150” – a list of personal contacts the intern will need to bring into the position as a prospecting tool. Financial Planning is entirely dependent on prospecting for new clients, which is usually done through cold calling a list of leads to hopefully set meetings and offer products. As an intern, certain firms require you to bring your own prospect list in the form of 150 names and numbers that you personally know. Often, for a college student, this means calling your friends’ parents and extended relatives to try to sell them financial products. It is important to remember that for some this is an exciting opportunity to build your clientele base early, but for others it is certainly a daunting exercise in overstepping boundaries. When in the early stages of finding these internship opportunities, remember to ask about the P150 and whether you’ll be required to bring one to the table.
Past the P150 pitfall, aspiring interns should always be curious about the program’s compensation structure. Just as each experience and financial planner’s practice will differ greatly, the compensation structure for each program will differ as well. Some will be simple hourly wages, but others base their intern compensation on stipends, bonuses, and commission payments. Commission-based compensation can be a Financial Planner’s best friend, but as an intern it is important to know that individuals in this field (interns included) can only receive compensation on products they are certified to sell. For example, if you as the intern get certified to sell life insurance, but not annuities, and the prospects you pass on to your employer only buy annuities, you will miss out on that commission. On the bright side, should you go on to secure full-time employment, typically those clients you referred during your internship will become in-part your clients, and receiving the necessary certifications will open the door for you to receive those commissions.
Internships in the financial planning field are a painfully underutilized opportunity for younger students who need only prospect through LinkedIn to find early internships. Perhaps one reason why is that students are afraid to ask the right questions when searching for them. Know how your firm expects you to prospect, and know how your compensation is structured. P150s and commission-based compensation structures are not inherently “bad”, but they’re a piece of the puzzle you need to understand and navigate before committing to an opportunity. Take every opportunity you can get, get your foot in the door as early as possible, but do so with the knowledge of what they entail.