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The Get-Started-Now Guide to Become A Financial Advisor

Avadhut |
June 12, 2020

Are you interested to become a financial advisor? Here is a complete resource to get you started...

You will get a complete overview of - how to become a financial advisor, the educational requirements, salary packages, training, certification, how to become independent financial advisor, job description, career path, how to study, CFP and what does a financial advisor do.

Who Is a Financial Advisor (FA)?

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 possess an excellent understanding of stock market performances, insurance sector, banking, and other related fields.

As a finance 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.

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According to the US Bureau of Labor Statistics, there is an 8% projected job growth for FAs between 2018 and 2028 with an average salary of 88,890 USD.

How to Become a Financial Advisor

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 a 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 the Series 7 licensing exam by the 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 Bachelor's degree and the license are enough to begin work as an FA. Experience isn’t required in entry-level positions but you need further Certifications for a 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 FAs conducted by the Certified Financial Planner Board of Standards.

If you have three years of working experience and completed a Bachelor’s degree from an accredited institution, you can take this exam. It will test you on various subject expertise.

After completing the exam, an ethics review is conducted 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 the FA work profile, consider taking an advanced degree such as an MBA or Masters in Finance. It will help to move towards higher managerial positions as some employers prefer to hire advisors with advanced degrees.

Salary

The salary of a financial advisor depends on certification and experience.

An FA in India earns an average salary of Rs. 361,095 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 bonuses, profit sharing, and commissions, a financial advisor earns between Rs. 195,000 and Rs. 10,00000 annually, according to PayScale.com.

Financial Advisor Salary India

Total PayIn the US, 55,451 USD is the annual average salary for FAs in 2020.

The minimum amount is 30,000 USD with the highest paid financial advisors earning more than 101,000 USD. Apart from salaries, many of the advisors earn bonuses and commissions.

Financial Advsior Salary in the US

In the UK, 43,069 GBP is the annual average salary for FAs in 2020.

The minimum amount is 18,000 GBP with the highest paid financial advisors earning more than 71,000 GBP. Apart from salaries, many of the advisors earn bonuses and commissions.

How to Become a Financial Advsior

All these data show that becoming an FA is a profitable profession.

Switching Career to Become a Financial Advisor(FA)

A lot of people switch to become an FA in their mid-career.

It is a great profession for someone who wants to help people manage their money better. Again, you can set up an individual consultancy or join an organization; the choice is yours.

A poll conducted by Financial Planning Association (FPA) found that 88% of current investment advisors work in different professions first and then switch to becoming an FA. An FA 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 FAs 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 Board Member of CFP Board.

In short, if you are switching to an FA profile mid-career, you need to possess mandatory certifications and qualifications.

Job Description

There are two types of advice:

  • Independent advice
  • Restricted advice

Independent advice comes from independent financial advisors (IFA’s) who provide unrestricted and unbiased advice to clients after researching and analyzing retail investment products.

On the other hand, restricted advice comes from these professionals who are restricted to offer advice only on limited products and investments.

It happens when you are hired by a specific financial organization and obviously, they won’t want you to recommend financial products from other organizations.

It is the duty of the investment advisor to inform the client of the capacity of their advice, that is, whether it is independent or restricted.

The role of an FA 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 the 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 an investment advisor
  • explain documentation to clients
  • explain the availability of financial assistance to various groups of people like students, through scholarships and grants
  • assist the 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, real estate planning, 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 the 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 the 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 make 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 is 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 the same.

The only difference is that you have to find clients and retain them for a better financial advisory business.

You have to set up a complete business model and be extremely good at marketing your financial advisory services.

Don’t forget to get listed on a state or national databases and get the necessary certifications. Even if you’re doing a job - whether as an FA or in some other capacity - and possess the necessary certifications, you can become a freelance FA/consultant easily.

Endnote

We hope that the guide to become a financial advisor proves useful to you. Ask your doubts and questions about careers in finance, if any, in the comments below.

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