Becoming a financial advisor is a big decision as there are many routes you can go. Luckily, you came to the right place. By the end of this article you’ll understand the role of different financial advisors as well as earning potential, barriers to entry, training resources, and what you need to do to get started or determine if it’s the right path for you.
Lets get started.
What Does a Financial Advisor Do?
A financial advisor can be different things to different people, but the term financial advisor is most commonly associated with financial planning and risk management (insurance)…helping people achieve and meet their financial goals and make sound financial decisions.
For example, the person that helps someone with their taxes could be classified as a financial advisor. Or, what about the person who is getting divorced and needs guidance and ideas on how to manage their money through that difficult process?
Generally speaking, as a financial advisor, you will help organize your client’s finances in both the short- and long-term, helping them to chart a course with a combination of investments and insurance to support your clients during their working years and into retirement.
This could include setting up a 401K or IRA, to designing an income strategy using variable, fixed, or indexed annuities.
It’s blend of investment, tax, and risk management advice that you’ll gain through years of consistent ongoing education and on the job training. The top financial advisors are the ones who have dedicated their careers to constant learning in order to best support their clientele.
Top financial advisors are relentless in their pursuit to support their clients and always stay up on regulations, trends, and opportunities.
And, there isn’t one perfect path for becoming a financial advisor.
We’ll dive into the details of becoming a financial advisor and help you better understand the ins and outs of one of the most stable and profitable career paths in financial services and insurance.
Table of Contents
- Goals of a financial advisor
- A day in the life of a financial advisor
- Structured fees
- Types of financial advisors
- Financial advisor degrees
- Pros and Cons
- Income potential
- How long does it take to get started?
- FINRA licenses
- Getting started
- Robo advisors
- Career stats
Goals of a Financial Advisor
One of the best attributes of top financial advisors is being a master at listening!
They listen to the needs and goals of a client and then work to develop and implement a strategic plan that will provide the most efficient path to meet those goals.
A good friend once told me, “you have two ears and one mouth, you should listen twice as much as you speak.” That could be the best advice for a new financial advisor as they get started building a wealth management practice.
The level of education, training, experience and ongoing commitment to staying abreast of important investment news and changes will make a big difference in the quality of the financial advice that an advisor provides. How much you commit to education has a direct correlation to your success as a financial advisor. You have to do the work if you want to succeed, if you’re not willing to commit at the highest level, you should consider a completely different career! 🙂
How do you stay up to speed with all of the updates?
By spending time every day reading industry news and networking with your peers. This is something you need expect from day one through your retirement.
Tip: I personally love using “google alerts”, it’s a great way to stay up to speed on industry topics that are important to your practice. Just access google alerts through your google account and you can set alerts in your inbox as frequently as daily. Simply type in alert keywords and the frequency in which you want to receive updates directly to your inbox.
Some people opt out of working with a financial advisor and instead choose to do financial planning on their own, but for those who decide to use an advisor, it’s critical for you to set yourself apart from your competitors that may just be a salesperson peddling certain investment vehicles.
Top performing financial advisors offer fiduciary financial planning and can back it up with a valid financial pedigree. That is how you want your prospects and clients to see you, as a trusted resource. This is what is required to be one of the best.
Because of this level of responsibility, financial advisors have a critical role in the ability to protect their clients and change their lives. You’re as important to them as their attorney and CPA. They expect you to provide them with the good, the bad, and the ugly.
It takes an initial investment of both time and knowledge to become a skilled financial advisor, but for those of you who put in the work, the rewards can be considerable both in terms of job satisfaction and recurring income potential.
Tip: Surround yourself with top financial advisors who will push you and share their success stories. Creating a circle of successful advisors and advocates will propel your success as well as provide you the necessary criticism needed to continue to push you out of your comfort zone.
What is a typical day for a financial advisor look like?
This is the tricky part, because it can vary based on where you are in your career. But, a typical day for a financial advisor will be a combination of the following:
- Self-education: Google alerts, networking with your peers, reading, professional networking, etc.
- Client prospecting. Follow up calls, emails, texts, and social media outreach.
- Client meetings: If you’re new, this will likely be a lot of new clients. As you continue to grow, you’ll see a significant percentage of your client meetings shift to client reviews. Over time, your client reviews will be the primary source of growth in your financial planning practice. You just have to get through the first couple of years of building a wealth management practice to get there, but that’s where you really want to strive to be.
- Networking: My absolute favorite. Advisors who can master professional networking and blend it with consistent and strategic follow up will always be top performing financial advisors. If you have open blocks of time in your calendar, you should fill them with networking meetings or calls. Every hour you’re not in front of a prospect, you’re unemployed.
- Client education: Keeping your clients up to speed with the industry. This could be client review meetings, seminars, writing email newsletters, etc.
- Managing existing accounts and relationships: Nurturing your clients is key. This could simply be a phone call or text. It doesn’t always have to be related to their portfolio, it could be as simple as a reference to last nights top 10 plays on ESPN. Whatever touch point resonates with your clients and gives you a reason to reach out is what will make you memorable to your clients and build lasting relationships.
- Leveraging resources: Absolutely one of the most critical items. Top advisors are masters at leveraging time and resources. You only have so many hours in your work day, use it wisely. One of the best ways new advisors do this is by splitting the cost of a sales assistant with other new advisors. This way you can delegate some work to them a few hours a week to keep your schedule open for client appointments. Doing it this way makes it easier than trying to afford a full time employee when you’re book of business is not currently able to support them. Be smart about it.
Every day is different, and when done correctly, jam-packed with revenue generating (fees and commissions) activity.
To better manage their time, many financial advisors have client-focused days and non-client focused days that allow them to remain more organized in their professional lives. They are extremely intentional with their time!
You need to understand economics on a micro and a macro level, have outstanding people skills, analytical skills, integrity, a high degree of ethics and an outstanding work ethic. This may seem overwhelming if you’re new, but when you’re surrounded by the right people, you’ll be amazed at how much you’ll learn when you focus on being successful one day at a time.
Although the approaches may be different, a financial advisor must understand the issues involved with the following:
- Retirement and estate planning
- Pension plans
- Long-term care insurance
- Short and long term investment strategies
- Indexed Universal Life insurance
- Whole Life
- Term Life
- How taxes impact investments
- Risk levels
- Mortgage protection
- and how to blend a variety of investment vehicles to produce the strongest possible portfolio.
I’m not saying you need to be an expert on all of these topics, but you need to understand the basic roles they play in your prospects and client’s overall financial plan. This is a perfect example of how you can leverage relationships with other advisors who have complimentary and non-competing skill sets.
For example, you might be focused on pension maximization or debt elimination and have a client that has recently inherited a large sum of money and needs estate planning advice. You don’t have to be the estate planning expert to provide value to your client, you’re providing them value by knowing someone they can talk to that you trust. Providing that level of service is priceless to your relationship.
How do financial advisors structure their fees?
Very common question that will come up through out your career and especially with technology biting at the heels of the financial planning customer experience.
Financial advisors have varying fee structures. Clients will want to know about how fees are charged as part of their due diligence. Typically, fees are charged in the following ways:
- Financial Planning Fee.
- An hourly rate
- A flat fee
- A plan update fee
- Percentage of assets under management (a typical range is from .50% to 2.0% a year). The more assets a client has, the lower the fee usually is.
- Commissions from financial or insurance products.
- A combination of fees and commissions when disclosed properly.
If a financial advisor works as a registered investment advisor, they must provide clients with a disclosure document called an ADV Part Two. This provides details on all fees and any potential conflicts of interest.
You should never hesitate disclosing your fees to your clients. If a client expects you to work for free, then you’re targeting the wrong type of client.
Types of Financial Advisor Careers
There are many types of financial advisors, many of which have overlapping and complimentary skills:
Retirement Advisor
A retirement advisor will take a detailed look at a client’s financial scenario and help put together a plan that will give various scenarios of how their retirement finances will play out based on investment decisions going forward. This will also include monthly income flows in retirement as well as tax considerations and rebalancing the portfolio as needed.
This is a very dynamic role and will have a strong blend of investment advice and insurance for risk management.
Certified Financial Planner (CFP)
To become a CFP you must pass rigorous standards by the CFP Board which is considered the gold standard for financial planners.
- CFPs meet stringent education and experience requirements
- Complete a board-registered education program
- Required to take continuing education once certified.
CFPs are always fiduciaries, meaning they are legally required to put their clients’ best interests ahead of their own at all times.
This type of advisor typically has one or two of the following licenses:
- Series 6
- Series 7
- Series 63
- Series 65
- Series 66
- Life Insurance License for commission based insurance solutions.
CFPs most commonly work a combination of commission, fee based planning and/or a financial planning fee.
Certified Divorce Financial Planner (CDFP)
With a divorce rate approaching 50%, there is a real need for financial planners who deal specifically with finances as they relate to divorce issues. They can be especially valuable in high net worth situations and can craft plans that will ensure the long-term financial stability of a divorced person as they start a new chapter in their lives.
Tax Advisor
This is a professional with specific expertise in income taxes. They may be an accountant, certified public accountant (CPA) or even a tax attorney. While their involvement in your finances will center on taxes, they must have a general knowledge of finances as well since income taxes impact such a wide range of financial issues.
Personal Banker
As the name implies, personal bankers work at banks and trust companies. They’re trained to sell investments such as GICs and savings bonds and they may be registered to also sell mutual funds. They are generally salaried employees so there is no direct cost to an investor, other than service fees associated with making an investment. This person works on Salary from the bank plus bonus, sometimes commission.
Registered Representative
These advisors are registered to buy and sell mutual funds and they typically work for a Broker Dealer or a company registered as mutual fund dealers. Registered Representatives are usually paid by the companies whose products they sell. These representatives typically hold a Series 6 and Series 63 Licensing plus their life insurance license. This type of representative typically works on commission
Stock Broker/Investment Representative
They are registered to buy and sell a variety of investments including stocks, bonds, mutual funds, ETFs and other similar vehicles. They work for brokerage firms who are registered as investment dealers.
Financial Advisor
This professional works with clients to create financial plans to reach investment goals.
They may advise clients on planning, risk management, investment planning, tax planning, retirement planning and estate planning. This type of advisor will typically hold a Series 6, 7, 63,65, or 66 plus their life insurance license. This advisor can work on commission, fee-based planning and/or a financial planning fee.
Insurance Agent*
First let’s talk about something extremely important.
If you only hold an insurance license, you are NOT a financial advisor and cannot market yourself as such. Financial Advisors who also sell insurance carry both the financial advisor certifications as well as maintain an active insurance license.
These advisors are trained and licensed to give advice about and sell insurance.
Some specialize only in certain products such as life insurance while others may sell a wide range of insurance type products. Insurance advisors are paid by the companies whose products they sell and earn commissions every time they sell a policy. This type of advisor has a Life & Health Insurance License.
This type of advisor works on commission for insurance products and likely discusses the commissions with their clients upfront.
Common types of insurance financial advisors sell:
- Indexed universal life insurance
- Burial insurance
- Term life insurance
- Whole life insurance
As with most licenses, insurance licensing requires continuing education to maintain your resident producer license.
For those of you interested, here is a resource that many insurance agents and financial advisors use to design their own life insurance cases.
Outside Business Activities
Outside business activity is inevitably going to come up during your career as an FA and is something you must strictly follow.
What does outside business activity (OBA) mean?
As you serve your clients, there will be scenarios where they need something you may not be setup to do, this is where disclosing your OBA comes into play.
Examples of outside business activities (OBA)
Selling life insurance: You’re a fee based advisor and a business owner you have been working with for a number of years wants to put a buy sell agreement in place. Your firm doesn’t currently offer insurance products which forces you to work with a life insurance wholesaler.
In this instance, you would file an OBA form with your broker dealer to disclose what the outside business activity is going to be, selling life insurance to satisfy the funding needs for your client’s buy sell agreement.
What if the company you work for can’t offer services to your client, but another company can?
A good example of this would be if you’re working for a company that offers both investment management and insurance and your client cannot pass the underwriting or suitability requirements.
If the company you work for allows it, you can shop the case with outside life insurance wholesalers. This is where you would need to file an outside business activity.
Many advisors aren’t aware that writing outside business is a common occurrence and a great way to add supplemental income to their practice.
Companies that allow outside business to be written:
- Northwestern Mutual
- Mass Mutual
- New York Life
- Prudential
Representatives at these companies often write outside life insurance business because it’s the only way to get their clients the coverage they need.
Tax preparation: This happens a lot as new advisors will help their clients with preparing their taxes for a fee.
Holding a board position: While this may not be a compensated position, it’s an activity that you’re heavily involved with and your firm will need to know about it.
Make sure you compile all your outside business activities and disclose them ahead of time to ensure you’re well within your compliance. If you’re doing something and not sure whether it’s considered an OBA, always default to disclosing it ahead of time.
Education requirements: Do I need a bachelor’s degree?
There are many different finance degrees and courses that you can pursue that will help you, but there isn’t one path of education requirements needed.
These can range from a two-year Associates degree to a Doctoral degree than can take many years to complete. Many students also choose to pursue a finance degree after completing a program in another field, such as economics, computer science, or mathematics.
These courses can certainly help, but may not be required at every company you apply with.
My suggestion would be to get a bachelors degree in finance and then dedicate your ongoing education mastering your area of focus.
Associate Degree
This introduces students to the basic concepts of finance and financial planning. It can establish a foundation that can be used to secure an entry-level insurance sales job or as a springboard for further education. Students are also expected to complete courses in general education in areas such as English composition, math, humanities, and social and behavioral sciences. Course names may vary from school to school, but typical courses will include:
- Principles of Finance
- Money, Banking and Financial Management
- Investments
- Key Financial Concepts
Bachelor’s Degree
This is a more in-depth look at finances and financial planning. Students will learn how to manage money and make investment decisions, as well as gaining a well-rounded finance education. Graduates are prepared to take the Chartered Financial Analyst (CFA) or Certified Financial Planner (CFP) exams. Students learn how to use computerized financial programs, and work on projects that hone their investment skills. Typical coursework may include:
- Survey of Finance
- Principles of Investment
- Financial Institutions Management
- Computer Modeling of Financial Applications
Master’s Degree
Students are exposed to more theory and decision-making course work that helps to prepare them for management positions in the financial services industry. This is often a minimum requirement for students who want to manage larger portfolios or oversee teams of other finance employees. Students learn to critically evaluate information using financial models and methodologies. Classwork may include:
- Derivatives and Risk Management
- Financial Math Programming
- Qualitative Finance
- Corporate Finance
Doctoral Degree
Students receive highly advanced education for teaching, research, and executive roles. They learn high level communication, research, and leadership skills, as well as continuing to build on their financial knowledge base.
A doctoral degree may be offered as a PhD in Finance or as a PhD in Business Administration with a concentration in Finance.
Depending on the program, students may be required to participate in numerous seminars to gain exposure to developing research. Students will also be required to conduct their own independent research in the form of a dissertation.
Students pursuing coursework online or on a campus must be sure that the finance program is accredited. This means the program has been approved by an overseeing organization that has verified the integrity of the program.
Programs should be accredited by such organizations as the Association to Advance Collegiate Schools of Business (AACSB) or the Distance Education Accrediting Commission (DEAC).
It’s also important to make sure that credit hours can transfer to other institutions to ensure education can be continued seamlessly elsewhere.
As part of a student’s due diligence, they should also research the quality of the faculty teaching the coursework. Students should look for faculty who have experience as financial analysts, financial managers, bank executives, and insurance underwriters. They should also have experience in corporate finance, mergers and acquisitions, insider trading, and other related fields. Publication in respected journals such as the Journal of Portfolio Management, Journal of Risk and Assessment, Journal of Financial Management, and Journal of Banking and Finances are indicators of notable experience and success.
The finance program should also have an active and relevant component for students to gain real world experience through internships, entry level jobs and networking.
Financial Advisor Career Pros and Cons
Like most other professions, working as a financial advisor has its share of pros and cons:
The Pros
- Unlimited earning potential with ability to grow a client base through recurring revenue you create each year.
- Flexible work schedule. This will allow you to plan and schedule meetings in such a way that you have much more control over your personal calendar. And once established, you may work a lot less than 40 hours a week.
- Control over your practice. If you want to work longer hours, you have the chance for a bigger payoff.
- The growth rate for financial advisors is much higher than the outlook for the average job through 2024. The financial advisor field has a projected growth rate of 15% from 2016-2024.
- You can be creative, flexible and targeted in your work efforts. Financial advisors can zero in on specific segments or specialized earners when building their client base. Some may focus on serving the baby boomer generation, others market to millennials and so forth. Advisors can also decide to specialize in a particular type of type of client, such as doctors, lawyers, or entrepreneurs.
- A less common but equally rewarding aspect is that financial advisors can help overwhelmed clients make sense of their futures by educating and guiding them appropriate financial and insurance vehicles.
The Cons
- You work in a high stress environment more often than not.
- You get a lot of rejection.
- It takes time to build a solid client base.
- Continuing Education. There is a continuous need to meet regulatory requirements. Those requirements can be difficult and lengthy. You will also need to complete a certain amount of continuing education courses each year to keep licenses in good standing.
- You will need to carry errors and omissions insurance which will be an added cost of doing business.
- You always run the risk that you will be accused of malpractice and have to defend yourself against those types of allegations, whether they are true or not.
- Working evenings and weekends.
- If you plan to go into business for yourself, income is either fee-based or commission-based, or a combination of both. Salaries are uncommon for new financial advisors.
- Building a business will take continuous and RELENTLESS prospecting.
- Many firms will have quotas that will need to be met each month, and that means if you are just starting out, you will be particularly needy when it comes to finding new prospects.
How much does a financial advisor make?
We get asked every day, “how much money can you make as a financial advisor?”
Here are several statistics to consider:
According to 2018 data from the Bureau of Labor Statistics, the top 10% of U.S. financial advisors earned north of $88,890.
The top 10% of financial advisors earn more than $208,000 annually.
Financial advisors earn the highest wages in the following states:
- New York
- Connecticut
- Massachusetts
- Maine
- Kansas
When you are first starting out, some firms may pay you a base salary for 12 to 18 months until you get established. This may be somewhere in the neighborhood of $50,000. But you will have the opportunity to earn six figures based on fees, bonuses, and commissions.
Other financial advisors work on a fee-only basis, meaning they earn a single fee for all services provided. This is more common among independent advisors.
We have found the most successful financial advisors earning the most have put significant time into training and shadowing a mentor.
How long does it take to become a financial advisor?
Like most other things in life, the length of time it takes to become a financial advisor will depend on how hard you work and various decisions you make about how you invest and pursue your career.
At a minimum, it will take you at least five years to become a financial advisor, however it could take seven years or longer depending on how you approach things.
The quickest path to becoming an advisor is to just obtain your Series licenses with the Financial Industry Regulatory Authority (FINRA). It is the independent regulator for securities firms doing business in the United States.
FINRA acts as the licensor for companies looking to enter the securities markets, and as the legislator of the functions of those admitted bodies. It also has the authority granted by the U.S. Securities and Exchange Commission (SEC) to discipline non-compliant members.
After completing a bachelor’s degree, an aspiring financial advisor can study and pass FINRA exams in several months. While this is a good start, it does not fully equip you to work as a financial advisor. The additional information you’ll need to be successful can only be learned through time spent on the job.
As such, to become a Certified Financial Planner (CFP) you need a minimum of three years of work experience. Combined with a securing a four-year degree, there’s your minimum seven years.
What FINRA licenses will you need?
If you are going to sell investment products which is common at broker-dealers and banks, you will need to pass some or all of the following FINRA exams:
- Securities Industry Essentials (SIE) exam
- Series 6: Investment Company and Variable Contracts Products Representative Qualification Examination (IR)
- Series 7: General Securities Representative Qualification Examination (GS)
- Series 63: Uniform Securities State Law Examination
- Series 65: Uniform Investment Adviser Law Examination
- Series 66: Uniform Combined State Law Examination
A complete list of FINRA exams with links for more information, duration (in minutes), number of question, and costs are as follows:
| Name | Duration | Questions | Cost |
|---|---|---|---|
Securities Industry Essentials (SIE) Exam | 105 | 75 | $60 |
Series 3 - National Commodities Futures Exam | 150 | 120 | $130 |
Series 4 - Registered Options Principal Exam | 195 | 125 | $105 |
Series 6 - Investment Company and Variable Contracts Products Representative Exam | 90 | 50 | $40 |
Series 7 - General Securities Representative Exam | 225 | 125 | $245 |
Series 9 and 10 - General Securities Sales Supervisor Exam | S9: 90 S10: 240 | S9: 55 S10:145 | S9: $80 S10: $125 |
Series 14 - Compliance Officer Exam | 180 | 110 | $350 |
Series 16 - Supervisory Analysts Exam | Part 1: 90 Part 2: 120 | Part 1: 50 Part 2: 50 | $240 |
Series 22 - Direct Participation Programs Representative Exam | 90 | 50 | $40 |
Series 23 - General Securities Principal Exam - Sales Supervisor | 150 | 100 | $100 |
Series 24 - General Securities Principal Exam | 225 | 150 | $120 |
Series 26 - Investment Company and Variable Contracts Products Principal Exam | 165 | 110 | $100 |
Series 27 - Financial and Operations Principal Exam | 225 | 145 | $120 |
Series 28 - Introducing Broker-Dealer Financial and Operations Principal Exam | 120 | 95 | $100 |
Series 30 - NFA Branch Manager Exam (formerly, Branch Managers Exam – Futures) | 60 | 50 | $85 |
Series 31 - Futures Managed Funds Exam | 60 | 45 | $85 |
Series 32 - Limited Futures Exam - Regulations | 45 | 35 | $85 |
Series 34 - Retail Off-Exchange Forex Exam | 60 | 40 | $85 |
Series 39 - Direct Participation Programs Principal Exam | 135 | 100 | $95 |
Series 50 - Municipal Advisor Representative Exam | 180 | 100 | $265 |
Series 51 - Municipal Fund Securities Limited Principal Exam | 90 | 60 | $255 |
Series 52 - Municipal Securities Representative Exam | 150 | 75 | $260 |
Series 53 - Municipal Securities Principal Exam | 180 | 100 | $265 |
Series 54 - Municipal Advisor Principal Exam | 180 | 50 | $60 |
Series 57 - Securities Trader Representative Exam | 105 | 50 | $60 |
Series 63 - Uniform Securities Agent State Law Exam | 75 | 60 | $135 |
Series 65 - Uniform Investment Adviser Law Exam | 180 | 130 | $175 |
Series 66 - Uniform Combined State Law Exam | 150 | 100 | $165 |
Series 79 - Investment Banking Representative Exam | 150 | 75 | $245 |
Series 82 - Private Securities Offerings Representative Exam | 90 | 50 | $40 |
Series 86 and 87 - Research Analyst Exam | S86: 270 S87: 105 | S86: 100 S87: 50 | S86: $185 S87: $130 |
Getting started as a financial advisor
Here are the steps you would typically follow starting out to pursue a career as a financial advisor:
Earn a bachelor’s degree
Most major in finance, economics, business, statistics or a similar field. You can decide to be a generalist or you can specialize in one of a number of areas including retirement, taxes, estate planning, insurance or risk management.
Depending on the firm where you go to work, you may be required to complete post graduate work toward an MBA.
A graduate degree in finance, typically offered as a master’s in finance (MSF) or an MBA with a concentration in finance, can also provide a competitive edge, even if they are not required.
Work as an intern
Learning in the classroom is only part of what you’ll need to be a financial advisor. You will also need real world experience and starting out that means you will probably need and want to become an intern. The college or university you attend should have good solid relationships with financial firms and banks who can assist you with an internship.
This should be one of the questions you ask when deciding on what school to attend. This will give you the best possible chance of learning from mentors who are actively working and successful in the field.
Start as a financial representative
Work with your school’s career planning and placement office to help you identify opportunities for places that will bring on entry level financial advisors. Many of the entry level jobs will start out as financial representatives which is another term for insurance agent. Once you receive your appropriate securities license, your title will change to financial advisor.
Another way to find these jobs is by attending networking events with other students and those put on by the industry in your area. Talk with instructors and guest speakers to track down potential leads. Also consider working social media such as Linked In to post your resume and search for open positions.
If you think you want to go the financial planning route, then a small- to mid-sized firm that focuses on full-service is a great place to start.
Also, no matter where you hunt for financial advisor jobs, look for an employer that provides in-depth training, both in the classroom and on the job.
A strong mentor can make all the difference!
Get your certifications and licenses
We have already covered licenses above, put you will also need to consider getting certification in one or more areas as well. This usually requires at least three years of work experience. Actual certification typically requires specialized training or coursework, an exam, and continuing education.
At least one of the following certifications is recommended by the National Association of Personal Financial Advisors (NAPFA):
- Certified Financial Planner (CFP)
- Personal Financial Specialist (PFS)
- Chartered Financial Consultant (ChFC)
- Chartered Financial Analyst (CFA)
Also be aware that some specialty areas require licensing. For example, financial advisors who want to sell insurance must be licensed in their state as an accredited adviser in insurance. Advisors who focus on investments must register with their state or with the Securities and Exchange Commission (SEC) as a Registered Investment Advisor.
If you choose to become a CFP, you’ll need to complete a CFP Board of Standards-approved, college-level program in personal financial planning or an accepted equivalent. Many universities, including online ones, now offer qualifying programs. You can find a full list of accepted programs on the CFP Board website.
The CFP exam is a six-hour, one-day test where you’re grilled on the components of financial planning. Like the FINRA exams, it is computer-based and multiple choice.
With an average pass rate around 58 percent, it requires a high level of preparation if you hope to be successful when you take it.
In addition to the exam, you need 6,000 hours of professional experience or 4,000 hours of apprenticeship experience in financial planning to become a CFP. This amounts to between two and three years of full-time work experience.
Becoming a financial advisor after a different career
Another common question we hear is, “what are the hurdles of becoming a financial advisor at 40”?
Regardless if you’re 30, 40, or 50, becoming a financial advisor after you’ve had significant time in another field is very realistic and it happens all the time.
- Yes, you can build a strong residual book of business and clients.
- Yes, you can earn commissions to help you cover your expenses during the first couple years.
- No, it’s not going to be easy
Career changers are some of the best candidates to become financial advisors because they already have a level of experience that will help them. Having previous experience in the work force will give you an edge over someone brand new because you’ve likely already been through some struggles that taught you valuable lessons.
It’s tough career and if you have a background of success in another field, you have a much better chance at succeeding as a financial advisor.
Is Becoming a Financial Advisor the Right Career Path for Me?
Successful financial advisors share several traits. Even though you may be a whiz with numbers and analysis, there are several other qualities you should possess.
Keep in mind that financial advisors are also in sales.
You always need to keep your pipeline filled with new clients, and as such you need to have an extroverted component to your personality. You need to like talking to people, or you need to like talking to people about something your passionate about. Either one will work.
Because building a successful practice takes time, you also need to have patience, both before you secure a client and after when you are actually dealing with them.
You must possess a strong interpersonal component as well as a strong analytical component because you will often need to shift gears throughout the course of a day. This goes hand in hand with having a strong attention to detail and being able to clearly communicate and simplify complex ideas and products.
From a practical point of view, you’ll need to master several tools and types of technology to be successful as well. There are a number of specialized software programs made exclusively for financial advisors. In addition to having a thorough understanding of Microsoft Excel and spreadsheets, a financial advisor will also need to become familiar with:
- Finance Logix Retirement Planner, financial analysis
- Financeware Finance File Manager, a document management program
- Web Information Solutions Pocket Informant, customer relationship management
The Effects of Robo-Advisors
Robo-advisors have become a disruptive and popular option for investors who prefer to have their accounts managed but without the same level of fees that go with a human advisor.
What is a robo advisor?
Robo advisors provide online services that can take your risk tolerance and automate the portfolio management.
Robo-advisors are digital account management services that use trading algorithms to buy and sell securities. This takes the guesswork out of normally difficult or complex investing decisions and bases them on changing market conditions instead.
Robo-software also provides comprehensive account maintenance and reporting services, including things such as re-balancing portfolios or reinvesting dividends.
Many human financial advisors actually like robo-advisors as a way to augment the investing community, bringing in new investors who might otherwise be too intimidated to get started.
As their net worth increases and their life becomes more complex, investors can transition to a more traditional advisor relationship.
Experts also believe that robo-advisors are challenging financial advisors and planners to show their value outside of investments. Investment management can be commoditized, but comprehensive financial planning cannot.
Some of the key benefits that robo-advisors provide include:
- They are less expensive than human advisors.
- They can help minimize tax losses, proactively engaging in tax-loss harvesting that involves selling losing stocks and replacing them with similar stocks in a portfolio. This strategy allows investors to benefit from writing off investing losses while remaining fully invested in the same long-term strategy.
- They have limited flexibility and will follow the parameters an investor sets up faithfully, eliminating a certain amount of feeling overwhelmed by choices.
- As opposed to human financial advisors who often require a minimum of $100,000 to begin work, investors can typically qualify for robo-advising services with $5,000 or less.
- Algorithms are based on Nobel Prize-winning theories. Although each has unique trading algorithms that deliver varying results, most algorithms are derived from generally accepted investment theories focused on minimizing risk and maximizing return.
- Robo-investing is expected to grow by 47.5 percent annually and exceed $1 trillion by 2021. There are currently more than 200 different robo-advisors in the U.S. and that number is steadily growing.
Related Careers to Financial Advisors
There and a number of related career choices if you do not want to become a financial advisor.
Financial Analyst
Growth rate: 16%
Median Salary: $76,620
Salary (10th Percentile): $48,170
Salary (90th Percentile): $154,680
Education and Training: Bachelor’s degree
Sales Agents for Securities and Commodities (Stock Brokers)
Growth rate: 11%
Median Salary: $72,070
Salary (10th Percentile): $32,170
Salary (90th Percentile): >$187,199
Education and Training: Bachelor’s degree
Finance Managers
Growth rate: 9%
Median Salary: $155,320
Salary (10th Percentile): $62,480
Salary (90th Percentile): >$187,199
Education and Training: Bachelor’s degree
Financial Examiners
Growth rate: 6%
Median Salary: $76,310
Salary (10th Percentile): $44,660
Salary (90th Percentile): $146,190
Education and Training: Bachelor’s degree
Accountants, CPAs and Auditors
Growth rate: 13%
Median Salary: $65,940
Salary (10th Percentile): $40,850
Salary (90th Percentile): $115,950
Education and Training: Bachelor’s degree
Actuaries
Growth rate: 26%
Median Salary: $86,700
Salary (10th Percentile): $58,080
Salary (90th Percentile): $180,680
Education and Training: Bachelor’s degree
Economists
Growth rate: 4%
Median Salary: $95,710
Salary (10th Percentile): $50,440
Salary (90th Percentile): $170,780
Education and Training: Master’s degree
Business Management Analysts and Consultants
Growth rate: 19%
Median Salary: $80,880
Salary (10th Percentile): $45,360
Salary (90th Percentile): $148,110
Education and Training: Bachelor’s degree
