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How to Become a Financial Advisor in 2021

October 4, 2021 | Staff Writers

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Financial advisors are professionals who offer advice to clients about state planning, income tax, investment management, and other finance-related topics. Personal financial advisors are often used by high-income or high net-worth individuals who want to make the most of their finances.

A personal financial advisor helps people make decisions about how to save and invest money to try to maximize gains in the long term. Financial planning can be a demanding and difficult job, and there are some strict requirements that anyone entering into the profession must meet.

These financial experts are tasked with managing other people’s money and helping them achieve their long-term financial goals. To work in this kind of role, they’ll have to earn a qualification such as Certified Financial Planner (CFP), or Chartered Financial Consultant (ChFC) before they can work in the profession.

In terms of education, the minimum requirement for a financial advisor is a bachelor’s degree in a field such as business or economics. Some advisors pursue a master’s degree to make themselves more appealing to employers.

According to the Bureau of Labor Statistics, the median pay for financial advisors in 2020 was $89,330 per year, and demand for these professionals was expected to increase by 4% between 2019 and 2029, which is in line with the predictions for the broader economy. This means the job prospects for anyone who pursues a career in the field are reasonably robust.

Questions to ask yourself about becoming a financial adviser

If you’re interested in becoming a financial advisor, you should, first of all, learn as much as you can about the job, and think about whether the responsibilities really appeal to you. Financial advisors have a serious job and one that can make a huge difference to the lives of the clients they serve.

You’ll need to be responsible, well-informed, impartial, and have good attention to detail if you’re going to offer investment advice to clients. You’ll also need good communication skills so that you can assess the needs, wishes, and level of risk-aversion of clients and give them advice that makes sense for their circumstances.

What does it mean to be a financial adviser?

A financial advisor can fill many roles, depending on their specialization and the type of client they’re working with. For example, they may offer advice on tax planning, serve as an investment advisor, or help someone with their retirement planning.

US News and World Report considers the job of Financial Advisor to be one of the top five best business jobs in 2020, because of the pay, job stability, and growth potential in the field.

Financial advisers help people decide which kinds of investments make sense for their long-term goals. For example, a young person with a reasonably high income may be guided towards investments that have a lot of volatility, knowing that they have a long time to build up the funds they’ll need for their retirement.

Someone who is closer to retirement age may get steered towards less volatile investment products, because they need to protect the value of their investments. Bonds and stocks that are historically low in volatility may make more sense than an emerging markets tracker for someone who is simply looking for modest, steady returns on their investment.

It’s up to a financial advisor to help people understand the differences between various financial products, and suggest reasonable strategies based on their needs.

What are the responsibilities of a financial adviser?

A financial adviser provides investment management and advice, tax and retirement planning services, and helps people manage their money wisely.

Financial advisers can work with people from all walks of life, but they’re more commonly used by people who are reasonably wealthy, and in particular by those who have either just come into money (such as through an inheritance) or those who have recently had a significant boost to their earnings.

When someone has a change in circumstances or is planning for a large life event, they might turn to a financial advisor to help them make their money work harder for them and to build a robust foundation for the future.

Wealth management is a huge industry. There were $89 trillion in assets under management worldwide in 2019, and that figure is expected to increase steadily over time.

The role of a financial advisor is to:

  • Interview clients and determine their financial goals
  • Understand their current circumstances and levels of risk aversion
  • Recommend a financial plan best suited to the client’s circumstances
  • Manage funds or investments long-term
  • Advise on the tax implications and risks associated with different strategies
  • Review plans regularly to ensure they’re still appropriate

The level of involvement a financial advisor might have in a person’s affairs depends on the client’s own interests, as well as the type of service they’ve purchased. Some advisors offer short consultations and will provide one-off recommendations, as well as offering ongoing investment management services for a regular fee.

How can you tell if you will be happy and successful as a financial adviser?

Working as a financial advisor can be rewarding both in terms of income, and job satisfaction. However, it can also be stressful.

Financial advisors spend a lot of time prospecting for clients and focused on administrative work. They’re expected to keep detailed records of the work they do and must document the decisions they make and what they do with their client’s money, so they can prove they’re complying with state and federal regulations.

Financial advisors must engage in continuing education and stay up to date with the latest regulations, tax rules, financial vehicles, and ethics requirements in their industry. They’re expected to earn new certifications, maintain the ones they currently have and work hard to keep their skills current.

Some people truly enjoy financial planning and find the job of being a certified financial planner fascinating. If you’re passionate about the world of finance and are naturally well-organized and a good communicator, you could be a successful financial advisor.

If, however, you find the world of stocks, bonds, commodities, mutual funds and taxation dull and boring, it’s likely you’d burn out working in the financial services sector.

Some people are comfortable managing their own funds, but find the thought of being responsible for other people’s money stressful. When you work for a financial institution, you need to document the decisions you make, and show that you have made an effort to make good decisions for your clients, and to keep the correct records for them, for tax purposes.

Of course, nobody can predict the future and even financial advisors who are highly trained and spend their working days following the performance of different investment vehicles can get things wrong. Clients, generally, accept that risk when they make the decision to invest via a financial advisor. However, if the advisor is found to have been negligent when giving advice, there is the risk they can be held liable for that.

Ethics, professional responsibilities, and liabilities are things a would-be financial advisor will learn about when they study to become a certified financial planner. Board-certified financial planners agree to adhere to a code of ethics and follow best practices that protect both their interests and those of their clients.

Skills needed for a successful financial planner

A good financial planner needs several skills:

  • Record keeping
  • Attention to detail
  • Time management
  • Communication skills
  • An understanding of the financial markets
  • Knowledge of tax regulations
  • Long-term planning skills
  • Risk assessment skills

Clients come to a financial planner because they want advice from an expert. If wealth management, retirement planning and investing were easy, people would handle their financial affairs themselves.

While there’s a lot of advice out there about what middle-income individuals should be doing with their money, those whose financial circumstances deviate from the norm may find it more difficult to plan. The standard advice about building an emergency fund and then putting extra income into retirement funds and a diverse portfolio may not be adequate for someone who has an above-average income.

Financial planners exist to advise people whose circumstances are outside of the norm. They understand that there’s no single “correct” investment plan and they offer individualized advice.

What does it mean to be a successful financial planner?

A successful financial planner is one that manages to build up a large database of clients and retain those clients long-term.

The nature of the industry means a financial planner who markets aggressively may be able to get a lot of clients in the short term, but what really makes the good financial planners stand out from the ones who are less effective at their work is the advisor’s ability to retain those clients over a period of several years.

Most financial planners charge an ongoing management fee to take care of a client’s portfolio. That fee could be a fixed amount or a percentage of the money the client is putting in. Either way, for a client to be willing to continue using the financial advisor, the advisor must be able to convince the client that they’re doing something that makes the fee worthwhile.

Successful financial planners charge fair management fees and understand that the funds or other vehicles they sell must match the needs of the client. They know that selling a product that a client doesn’t need, or a product that’s excessive for the client’s circumstances, is harmful.

Good financial planners combine attention to detail and knowledge of financial services and legislation with a caring and curious nature. They take the time to get to know their clients and to truly understand what it is their clients need. They understand that a layperson may come to them wanting a specific product or vehicle, but that person may not actually be a good fit for it. The job of a financial planning consultant is to work out what really will serve their client best.

How does networking help with being a financial planner?

The idea of Customer Acquisition Cost (CAC) is something that’s important in any industry. Whether a person sells curtains or retirement plans, there’s a cost associated with marketing, lead generation, sales, and the initial investment in customer service that turns a curious passer-by into a customer.

In financial advice and planning, the customer acquisition cost can be significant, because these experts often give prospective clients a free consultation, and spend a lot of time working on verifying leads and vetting prospects.

The value of each client a financial planner acquires can be significant, especially if they’re working with high net-worth clients and their fees are based on the total worth of the funds under management.

Acquiring those clients, however, takes time and effort. From a customer’s point of view, making the decision to use a specific certified financial planner is a big step, and there’s a lot more at risk for that customer than they would be if they purchased a new kitchen or a phone that they didn’t like.

This means the financial planner needs to build trust with each client. Many planners work in a specific geographic area, relying on a combination of word of mouth, their reputation, and a presence within the community to build their customer base.

Some planners are attached to a financial institution and may have clients referred to them from the wealth management arms of that institution. Even those financial advisors still need to make an effort to build their personal brands, however.

A happy client is a strong addition to any financial advisor resume, and a successful financial advisor will spend a lot of time talking to clients, prospects, and other people who work in related financial services, so that when a new prospect is looking for help with their savings and investments, their name is the first one that comes to mind.

Most useful degrees or certifications as a financial adviser

Around three-quarters of all financial advisors work for a company, rather than being self-employed. If you want to work in the industry, you’ll need a degree in a finance-related subject.

Not all financial advisors require licenses, it depends on the nature of the advice they give and the types of products they sell through their day-to-day work. If you’re considering working as an independent financial advisor it’s vital that you take the time to understand the rules relating to your desired specialty and the products you work with.

What are the most useful degrees to earn as a financial adviser?

Some people study business or mathematics at university then decide they’d like to become a financial advisor later in life. Others have a clear idea that they’d like to become a financial advisor from early on in their post-secondary education, so they pursue a degree in finance, accounting, or economics.

It’s possible to get a job in financial services with a bachelor’s degree, but it’s common for financial advisers to pursue a master’s degree, often an MBA, in order to make themselves more appealing to major employers. It’s possible to earn an MBA while working in financial services, giving early-career financial planners the chance to earn money and get invaluable work experience while they earn a new qualification.

What are the most useful certifications to earn as a financial adviser?

Financial advisors have several certification options available for them. Not all certifications are mandatory, and which ones you choose to pursue will depend on the type of work you wish to do for your clients. Some of the more common certifications that financial advisors earn include:

Chartered Financial Analyst (CFA)

The CFA Institute runs a certification program called Chartered Financial Analyst, which certifies that the financial advisor has an understanding of portfolio management and securities analysis. To become a CFA charter member, a financial analyst or advisor must have at least four years of related work experience, comply with certain ethics requirements, and pass three demanding examinations.

Certified Public Accountant (CPA)

Certified Public Accountants are accountants who have earned a license that allows them to prepare tax filings and offer advice on such matters. CPAs are permitted to represent their clients before the Internal Revenue Service, and they often offer advice relating to business planning and other financial issues. CPAs fill a role slightly distinct from that of a pure financial advisor, but many experts who work in financial services earn both types of certifications so they can have a broader client base.

Certified Financial Planner (CFP)

Certified Financial Planners are financial planners who have an understanding of money management, taxes, estate planning, asset management, insurance, and other related issues. They can take a holistic approach to wealth management and provide services to high net worth individuals.

To become a certified financial planner, a person must have three years of work experience in the field, comply with professional conduct requirements, and pass a six-hour-long examination. The CFP examination is primarily aimed at those who wish to offer services in the United States, but the certification is available in other countries as well, with tax-related issues being focused on the rules in the country where the examination is administered.

Chartered Life Underwriter (CLU)

The Chartered Life Underwriter designation is aimed at those who focus on life insurance planning. To earn the certification, a person needs to pass several multiple-choice examinations on the subject of estate planning, taxation, and investment management.

Individuals must have three years of experience in the field, and engage in ongoing continuing education as a part of maintaining the certification.

Chartered Financial Consultant (ChFC)

The Chartered Financial Consultant designation is awarded by the same body as the Chartered Life Underwriter designation, and many financial planners choose to obtain both designations, due to the overlap in the work that they do, and the examinations required.

As with the CLU designation, applicants must have at least three years of work experience before they can take the exams, and must engage in continuing education to retain the certification. Chartered Financial Consultants have a broader scope of practice than insurance specialists and can engage in a wider variety of financial planning activities.

Certified Alternative Investment Analysts (CAIA)

Chartered Alternative Investment Analysts are specialists that engage in investments on a more institutional scale. These experts focus on hedge funds, managed futures, credit derivatives and other complex products.

A would-be CAIA is expected to show a knowledge of the broader investment world, at a general level, then pass more detailed examinations in their specialist topics of study.

What other options for continuing education should you be aware of if you are planning on going into financial advising?

Continuing education is required by many certifying bodies, and also for those who hold Series 6 and Series 7 licenses. Many forms of learning and research count for continuing education, including online courses, conferences, and training events.

Some financial advisors attend refresher courses to make sure they are still up-to-date on the latest tax policies, ethics requirements, and codes of practice. In addition to these refresher courses, specialists can attend lectures and complete coursework relating to the markets and investment vehicles they sell.

Many online learning platforms allow CPAs and CFAs to complete continuing education online, and the platforms themselves will then report to the designating board or licensing state to confirm that the planner has successfully completed that course. This makes staying up-to-date with your licensing much easier than it was in the pre-internet days.

Traditional path toward becoming a financial adviser

It’s difficult to get started as a self-employed financial advisor because of the experience requirements for licensing. The most common route is for a recent graduate to take an entry-level job in financial services, and spend three or four years earning the experience required to become a certified financial planner.

How do you get started as a financial adviser?

Most universities that offer undergraduate programs in business, finance and economics will have links to employers that hire recent graduates for financial services jobs.  Take the time to attend career fairs and network with the experts that come to give talks at your university. This will help you stand out when graduation time comes, and make it easier to get that first job.

There are some non-traditional routes into financial planning too. For example, you can use your financial qualifications in real estate to help people plan for mortgages and make investment decisions.

If you’re planning on studying for an MBA or a master’s in finance, then it’s worth looking at gaining as much work experience as you can in related fields such as real estate and insurance, as well as looking at traditional investment vehicles. All of that experience will help in the long term.

What is a certified financial planning certificate program?

Financial planning certificate programs will cover a variety of topics relating to savings and investment, to help you give investment advice to people who are looking to attain financial independence.

They’ll also include a lot of information about taxation, investment, ethics, and best practices. The financial world is strictly regulated and with good reason. If there were no regulations, financial planners would be free to give bad advice, recommending the products that give them the highest commission, regardless of whether those products make good sense for the client.

When you work towards a financial planning certification, you’ll learn about the ethical requirements of the field, and how to best serve people and help them reach their individual financial goals. You’ll also learn about the record-keeping requirements you need to comply with to prove that you’ve been serving each client properly.

What should you expect as a salary range for a beginning financial advisor?

According to the Bureau of Labor Statistics, the median salary of a personal financial advisor in 2020 was $89,330 per year or around $42.95 per hour.

The lowest ten percent earned $44,100 or less, while the top ten percent of earners in the profession had salaries of over $208,000.

These salaries compare favorably to the average earnings across all occupations, of $41,950 per year.

Most financial advisors work full-time, and it’s not uncommon for people in this profession to work evenings or weekends, due to the need to network and meet with new or existing clients, who are most likely working-age professionals themselves. Self-employed personal financial advisors have more freedom to choose when they work and who they work with and can take advantage of that freedom to enjoy a good work/life balance.

Building a client base and establishing a reputation in the industry can be challenging, however, and financial advisors should expect to invest a lot of time and money into certifications and continuing education so they can differentiate themselves from their competitors.

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