Are you interested to become a financial advisor? Here is a complete resource to get you started...
You will get a complete overview on - becoming a financial advisor, the educational requirements, salary packages, training, certification, how to become independent financial advisor, jobs description, career path, how to study, CFP and what does financial advisor do.
Who Is a Financial Advisor?
The purpose of a financial advisor is to ‘advice’ clients to handle their money better, that is, to channelize money for higher returns and monetary growth. These channels could be retirement planning, insurance options and various investment strategies.
A financial advisor needs to posses excellent understanding of stock market performances, insurance sector, banking and other related fields.
As a financial advisor, you can either work with a company or become a private consultant. In either case, a bachelor’s degree in any finance field and relevant certification is mandatory.
According to the US Bureau of Labor Statistics, there is a 27% projected job growth for financial advisors between 2012 and 2022 with an average salary of 99,920 USD.
Financial Advisor Educational Requirements
The first step is to complete a Bachelor’s Degree program in business administration or in specialized fields like financial management and accounting.
Joining a business administration program will cover subjects like operations management, marketing, finance and accounting.
Joining a finance-focused program will cover specific subjects like investments, financial planning and risk management.
While pursuing the Bachelor’s Degree, take advantage of support resources made available to students through the university. These resources include job assistance, resume writing guidance, writing cover letters and getting interview leads. Sometimes universities recommend their own students based on performance.
Moreover, if you intend to become a self-employed financial planner, develop marketing skills too while you are studying because it will be your responsibility to connect with clients by marketing your own financial advising services in workshops, seminars and networking avenues. Begin to form a marketing strategy in the early stages of studying. It will benefit you a lot once you complete the course.
Depending on the state and country of residence, you are required to get a certification and licenses. The licensing requirement varies based on the kind of asset an advisor is willing to handle. For instance, if you want to sell securities like corporate bonds, you need to pass Series 7 licensing exam by Financial Industry Regulatory Authority (FINRA).
If you are in the US, you need to be registered with the US Securities and Exchange Commission (SEC) which will enable anyone seeking your service to verify license and education before conducting business with you.
The Bachelors degree and license is enough to begin work as a financial advisor. Experience isn’t required in entry-level positions but you need further Certifications for future career.
Whether you want to be self-employed later or work in better financial companies, consider obtaining certification. There is a voluntary certification exam for financial advisors conducted by Certified Financial Planner Board of Standards.
If you have three years of working experience and completed Bachelor’s degree from an accredited institution, you can take this exam. It will test you on various subject expertises. After completing the exam, an ethics review is conduced upon whose successful completion; the designation of Certified Financial Planner (CFP) is given to the student.
To maintain CFP status, you have to complete 30 units of continued education and submit all annual dues. The continued education assesses knowledge of financial planning and improves professional conduct.
To further improve financial advisor work profile, consider taking an advanced degree such as MBA or Master’s in Finance. It will help to move towards higher managerial positions as some employers prefer to hire advisors with advanced degrees.
Financial Advisor Salary
The salary of financial advisor depends on certification and experience.
A financial advisor in India earns an average salary of Rs. 362,193 per year and advisors usually don’t have more than 10 years of experience. Years in experience are a strong influencer to getting an attractive salary package. Including bonus, profit sharing and commissions, a financial advisor earns between Rs. 175,916 and Rs. 1,414,769 annually, according to PayScale.com.
In the US, 75,320 USD is the annual median salary for financial advisors in 2013. The minimum amount is 33,190 USD with the highest paid financial advisors earning more than 180,000 USD. Apart from salaries, many of the advisors earn bonuses and commissions.
Compared to other jobs, financial advisors earn a good living. They earn less than marketing managers (133,700 USD) but more than compliance officers (66,770 USD), insurance agents (63,610) and financial analysts (91,620 USD).
In the UK, trainee financial advisors earn typically between £20,000 and £30,000 annually and qualified financial advisors earn between £30,000 and £45,000 annually. Senior financial advisors earn more than £60,000. Wealth managers who handle high-end clients earn in excess of £100,000. Any of these figures doesn’t include commissions and bonuses.
All these data show that becoming a financial advisor is a profitable profession.
Switching Career to Become a Financial Advisor
A lot of people switch to become a financial advisor in their mid-career. It is a great profession for someone who wants to help people manage their money better. Again, you can setup an individual consultancy or join an organisation; the choice is yours.
A poll conducted by Financial Planning Association (FPA) in 2009 found that 88% of current financial advisors work in different professions first and then switch to becoming a financial advisor. A financial advisor is often also known as a “financial planner”.
It is not easy to make the career switch because you need extra educational qualifications. You need to have Certified Financial Planner certification, for which a mandatory three years of working in a financial planning business is mandatory.
Big financial firms like Merrill Lynch and Wells Fargo Advisors prefer to hire a certified CFP professional. New financial advisors at Wells Fargo Advisors go through a 31-week program to help them get necessary licenses like Series 66 which enables them to sell annuities and mutual funds.
Sometimes a degree in psychology is helpful because “this business is much as financial counseling as it is financial advising. There are more emotional dysfunctions around money in people’s lives than around any other issue. It doesn’t matter how much money you have, the dysfunctions are still there”, says Richard Salmen, the senior vice-president of GTrust and FPA.
In short, if you are switching to a financial advisor profile mid-career, you need to possess mandatory certifications and qualifications.
Financial Advisor Job Description
There are two types of financial advisor advice:
- Independent advice
- Restricted advice
Independent advice comes from independent financial advisors (IFA’s) who provides unrestricted and unbiased advice to clients after researching and analyzing retail investment products. On the other hand, restricted advice comes from financial advisors who are restricted to offer advice only on limited products and investments. It happens when you are hired by a specific financial organisation and obviously, they won’t want you to recommend financial products from other organisations. It is the duty of the financial advisor to inform the client of the capacity of their advice, that is, whether it is independent or restricted.
The role of a financial advisor differs on many levels and some of them are mentioned below.
- contact, network and build a client base
- keep track of current client and keep them up-to-date with latest developments
- keep in touch with all clients regularly to enquire about their financial growth
- form debt liquidation plans in relation to priority timelines
- understand the responsibilities of a financial advisor
- explain documentation to clients
- explain the availability of financial assistance to various groups of people like students, through scholarships and grants
- assist client in the gathering of information like income tax records, insurance records, bank account records, wills and pension plans
- keep track of financial market trends and update client portfolio accordingly
- develop and implement financial growth plans for clients
- talk to clients to assess their current incomes, insurance coverage, financial objectives, risk tolerance and other expenses
- prepare finance growth projections for clients like performance reports and financial documents, and explain them to clients
- recommend strategies and way to clients for achieving financial goals and objectives in areas like investment planning and insurance coverage
- assess current investment opportunities and find whether the current options are suitable for client goals
- assess financial information of clients to develop plans for meeting client objectives
- explain financial strategies and plans to clients
- regularly review client accounts and record changes
- determine whether client plan needs reassessment and rearrangement
- sell financial products to clients like mutual funds, bonds and stocks, that is, follow a sales target
- conduct workshops and seminars for clients with the purpose to inform them better about their financial goals and objectives
- get in touch with client creditors to adjust payments, if necessary
- determine the financial needs of clients and solicit ways to fulfill the needs
- meet with trust officers, investment bankers, attorneys and other advisors of client to get a complete picture of clients’ financial situation
- create and disburse funds from client accounts to creditors
- participate in the process of selecting financial aid winners
- performing risk analysis and defining strategies to mitigate them
- assisting clients to understand and take informed decisions
- remaining abreast of financial legislations and product changes
- contacting clients to let them know about new financial growth instruments
- developing financial reports
- knowledge of financial advisory regulatory aspects like cost of service and disclosure requirements are essential
- researching the source of new financial products and their viability for clients
- handle client complaints and redress them soonest
…and many more!
In short, the financial advisor has to fulfill the financial objectives of the clients, remain abreast of financial market trends, monitor new / old financial instruments and prepare reports for clients.
Personal Financial Advisor
There is nothing additional you need to know about becoming a personal financial advisor. The educational requirements, certification and job responsibilities are nearly same. The only difference is that you have to find clients and retain them for a better financial advisory business. You have to setup a complete business model and be extremely good in marketing your financial advisory services.
Don’t forget to get listed on state or national databases and get necessary certifications. Even if you’re doing a job - whether as a financial advisor or in some other capacity - and possess the necessary certifications, you can become a freelance financial advisor / consultant easily.
We hope that the guide to become a financial advisor proves useful to you. Ask your doubts and questions, if any, in the comments below.