Personal Reputation

I talk about hockey a lot in my blog posts, because it has taken up a majority of my childhood/lifetime and i believe that these topics can in some way be related to my experience. In this case I thought of roller hockey in particular. I have competed in national tournaments every summer for the past 6 years where the best 10 players from each state make up a team. It is a very competitive tournament and many players go on to be sponsored or play some sort of professional level.

I started playing in this tournament a few years after all my competition did, but I was able to establish a reputation with my performance. There was one player in particular that everyone knew. He's sponsored, currently playing professionally, and stood out in every game he played compared to others. Then 3 years ago we had our awards ceremony. It was announced that in the tournament I had outplayed him and was the leading scorer which awarded me some free equipment. Days later i received a call from a scout that wanted to sponsor me. He referred to me as "the kid who outscored John Schiavo" and told me that a lot of people had been surprised at this outcome. After this, I realized I had established a reputation for my age level in roller hockey and from then on I felt the pressure of needing to be at the top of the podium. Every summer after that I compared myself to John and wasn't satisfied unless i came out on top.

At times, this reputation did go to my head and I became cocky with my performances before I had even accomplished anything. I started to care more about how many goals I, personally, scored instead of how many goals my team had to earn us a collective win. As a teammate I believe I would've been better off not knowing/having this reputation because it made me care too much about my individual performance.

At the time I received the call i was very surprised and excited to experience all that comes with a sponsorship. Instead, I "cashed it in" and decided that my college education and future career were more important than my roller hockey reputation. Since I came to college I haven't devoted time to roller hockey because of my time spent at school and playing ice hockey for the university's division 1 club team. The immediate gain I earned from this decision was the college experience. It also came with long-term gains of graduating with a reputable degree and starting a career that I can hopefully become successful in.

Principal-agent Model

An example of a principal-agent triangle that I have witnessed is the occupation of a financial advisor. This came to mind because of my aspirations of becoming a financial planner and the experiences i've had in interviewing for an intern position. 

The firm hires a financial planner, which is the agent for them. The planner then acquires clients who now look at him/her as their agent. The agent has to lookout for the best interest of his clients financial lives, the firm being successful, and the planner's own personal interests. One conflicting aspect that i discovered when interviewing and looking into financial planning is whether or not the agent earns a salary or commission. Clients will be hesitant of going with an agent that earns commission because he/she will have more incentive of self interest when giving financial advice. 

Essentially, if the agent is managing enough clients, regardless of the extent of their investments, then the firm will be content with the performance. In this case, then the agent just needs to make sure he/she does their job and puts their clients in the best financial situation they can be in. A way to resolve any issues would be to have the agents on salary, but that brings up an opposition that commission is an incentive for the agent. Some could argue that the agent would work harder and compete in the market on commission as opposed to logging hours of work and doing the bare minimum. This was heavily implied in one of my interviews. I was asked how I felt about being on commission and how I felt about competing in the open market of potential clients (principals).

I don’t exactly think that the agent could fail by satisfying one master because in either view, the agent is doing his or her job. If he/she satisfies the firm, then they are doing their job correctly and will continue to perform. If they satisfy their clients, then they are also performing well. Perhaps there is a situation where a financial planner is satisfying all his/her clients and isn’t bringing in enough revenue for the firm. In the manager’s perspective, they might be upset with the agent’s performance. To call this failing seems extreme though. In my opinion, this would call for a performance evaluation and urging the agent to reach out to either wealthier clients or to expand the agent’s clients.

Aside from the differences of salary vs commission agents and a performance review of quality vs quantity of clients, I haven’t witnessed any other issues in the occupation. It is a relevant career in todays society of teaching everyone about financial literacy while also being an example of a bilateral principal-agent model.