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How to Become a Financial Advisor – Career Challenges & Rewards


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In generations past, the financial marketplace consisted of insurance agents who sold whole and term life insurance, stockbrokers who pitched individual stocks and bonds, accountants who prepared income tax returns and did corporate accounting, and bankers who offered customers security with FDIC insurance and safe-deposit boxes.

Today’s modern financial marketplace has substantially blurred the distinctions between these traditional professions, and financial advisors today are required to wear numerous hats in order to effectively do their jobs. But for those who can meet the many challenges it presents, the financial advisor career path promises substantial rewards.

What Is a Financial Advisor?

The term “financial advisor” is used loosely in modern vernacular. “Advisor” could refer to a licensed stockbroker, insurance agent, CPA or other tax professional, registered investment advisor, financial analyst, estate planner, banker, trust officer, or fee-based certified financial planner.

There is also no one clearly defined path that leads to this profession, as many advisors possess advanced degrees in finance and economics, while others hold professional credentials, such as the Certified Financial Planner (CFP) or Chartered Life Underwriter (CLU). There are also advisors who never finished high school but have built up successful practices with persistence and sales skills.

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Those who call themselves financial advisors generally fall into one of two categories: registered representatives, commonly known as “stockbrokers,” and registered investment advisors (RIAs). Stockbrokers are usually paid by commission for performing financial transactions, while RIAs have passed the Series 65 exam and generally charge other types of fees for providing advice or investment management. RIAs cannot charge a commission for their services unless they are either securities licensed and registered with a broker-dealer, or licensed to sell other products, such as insurance or mortgages.

The Series 65 Exam

RIAs typically must obtain the Series 65 license by passing the Series 65 exam in order to charge a fee for their services. Unlike registered representatives, however, those who wish to become an RIA do not have to be sponsored by a broker-dealer in order to take the exam. Moreover, prospective advisors who carry certain professional credentials and are in good standing are allowed to register with the SEC as advisors and charge for their services without taking the Series 65 exam.

These designations include:

The exam consists of 130 questions that must be answered within a three-hour period, and the cost to register is $120. A passing grade is given if 72% of the questions are answered correctly, and those who pass are authorized to dispense advice and services for a fee once they register with either the SEC or the home state in which they do business. Where they register will depend upon the scope of their business and the amount of assets they have under management.

Additional Licensure and Credentials

Completion of the Series 65 exam alone will not begin to qualify an advisor to competently dispense advice or manage assets. For this reason, most RIAs carry credentials like those listed above, or earn them once they are registered. Many advisors also become licensed to sell securities and insurance so they can offer products (such as stocks, annuities, and long-term care) for which they may get compensated by commissions, in addition to the fees they charge.

Additional Licensure Credential

Educational Options

High school graduates who are interested in becoming financial advisors have considerably more and better educational options available to them now than in times past. A generation ago, college financial planning courses were virtually unheard of, but many colleges and universities now offer curricula that teach all aspects of this profession.

These include the courses that are required to earn the various credentials that many planners use, such as the CFP, CLU, and ChFC. Graduate level programs are even available from institutions like the College of Financial Planning in Denver, Colorado, where students can earn a master’s degree in financial planning.

These courses cover key financial planning topics, such as:

  • Investment planning
  • Insurance planning
  • Retirement planning
  • Estate planning
  • College planning
  • Divorce planning
  • Income tax preparation and planning
  • Ethics and the financial planning process
  • Advanced financial planning concepts

Those who earn credentials, such as the CFP, also gain credibility in the eyes of potential clients and are typically more qualified to provide certain types of products and services, such as comprehensive financial plans.

The amount of time and effort it takes to earn these degrees and credentials will vary substantially from one person to another. Those with a background in finance may complete the credentialing coursework in a year or less, while busy advisors with many obligations may require a few years to complete their studies.

Working as an Advisor

There are three key decisions that new advisors face when starting out:

  1. The nature and scope of the service they provide
  2. The amount and types of fees they charge
  3. The methods they use to generate business

RIAs have considerably more freedom in how they structure their compensation and business model than their securities-licensed counterparts because they do not require the approval of a broker-dealer in this matter. Of course, this does not necessarily mean that RIAs have an easier time building their business.

However, the number of consumers that are seeking and willing to pay for less biased financial advice is growing rapidly. This, in turn, creates opportunity for RIAs because they can charge a flat or hourly fee for their services and choose not to accept commissions.

Advisor Services

Advisors can offer a veritable menu of services to individuals, businesses, or both. Alternatively, they may choose to specialize in a particular area of interest and primarily work with clients who require such specialization. Moreover, while some advisors are content to dispense simple advice for a modest fee, others will be inclined to take a more thorough and expensive approach. Essentially, as an advisor, you have the freedom to decide what services you’ll offer and to whom you’ll offer them.

1. General Practitioner
This is perhaps the most well-known type of financial advisor or planner. A general practitioner provides broad-based planning to individuals and businesses, which generally covers investments, a range of insurances, budgeting, and cash flow analysis, as well as retirement, college, and estate planning. This type of advisor may also offer comprehensive financial plans designed with all the client’s financial information in order to project future financial scenarios and help the client reach their goals.

2. Specialization
Some advisors choose to specialize in one area, such as financial derivatives trading, stock options, or non-qualified plans. Where they specialize will also affect their client base. For example, an advisor who specializes in non-qualified plans will primarily work with businesses with an interest in keeping and rewarding top employees.

3. In-House Financial Advisor
Some companies seek in-house advisors or ones who will work on an on-call type basis to provide regular financial advice and planning services. Typically, these advisors are compensated by an annual retainer. However, it’s not necessary to exclusively work on a retainer basis as most advisors can layer this type of arrangement on top of taking regular fee-based clients.

4. Employment and Teaching
There are also some corporate jobs available for advisors, such as bank trust officers or in-house financial planners. Many advisors also teach securities or insurance licensing courses, write books and articles, or speak to schools and other groups in addition to running their independent advisory businesses.

Forms of Compensation

Advisors also have a considerable variety of choices when it comes to the type and amount of fees they charge. There are four general categories that all advisor compensation falls into, each with its own unique advantages.

1. Fee-Based Planning
Some advisors will charge clients an hourly fee for advice, while others charge a flat fee for advice or a comprehensive plan. Hourly fees can range anywhere from $100 to $250 an hour, depending upon the type of advice being given, and financial plans can cost as little as $250 and as much as $5,000.

Some plans are comprehensive in nature, while others cover only a segment of the client’s finances, such as retirement or college planning. But many planners also carry additional licenses, such as real estate or insurance licenses, in order to facilitate additional transactions, such as annuities or 1031 exchanges.

For facilitating such transactions, planners may be paid a commission in addition to their fees. However, as with any commission-based model, this can bring up a conflict of interest, especially since some insurance products will pay commissions equal to 100% of the first year’s premium.

2. Percentage of Assets
Advisors who actively manage money for clients often charge them a percentage of their assets under management each year (typically about 1% to 2.5%). In fact, this practice has become popular with both advisors and clients because it directly aligns the financial interests of both parties. If the advisor doubles the client’s money, then the percentage of assets that is charged will be doubled as well. However, because the advisor’s profit rises with the client’s assets, this model can incline some advisors to recommend more portfolio risk than is appropriate for a risk-averse client.

3. Fee-Only Advisors
Unlike a fee-based planner, fee-only advisors charge hourly or flat rates, but do not receive any commissions from any products whatsoever as a way to maintain strict objectivity in their recommendations.

4. Commission-Based Planners
Just as there are fee-based planners who will accept commissions while charging a fee, there are also commission-based planners who work exclusively off the commissions they earn from the products they sell. These planners will typically have their securities licenses in addition to the Series 65 (or other qualifying professional designation) in order to offer, for example, stocks, bonds, and variable annuities.

However, because these advisors are paid exclusively from commissions, some may be inclined to sell a product when it’s not in the best interest of the client, or to sell a product with a higher commission when it’s not necessarily the best option.

Generating Business

There are several key avenues that advisors can use to build their businesses:

  • Traditional Prospecting Avenues. These include cold calling, networking, referrals, and seminars.
  • Complimentary Businesses. In order to bring in additional financial planning customers, many RIAs also own or run other businesses, such as tax and accounting practices, banks, mortgage companies, insurance brokerages, or estate planning services. Advisors who use this type of business to mine for prospects have a huge advantage over those who don’t because they have a ready-made market of clients for their services. Offering financial planning services is merely a logical extension of their current activities.
  • Internet Marketing. As in other areas, advisors have considerable freedom in designing and using their websites as opposed to registered representatives, who are restricted by rigid corporate compliance requirements. Clients and prospects can now find advisors at the touch of a button and learn about their planning and investment philosophies, backgrounds, and experience (as well as any disciplinary history they may have with the SEC or other regulatory authorities).
Financial Advisor Reward Benefits

Rewards and Benefits

Despite the obstacles that new advisors face, the rewards that come with the business can be substantial.

  1. High Compensation. Many successful advisors with established practices earn anywhere from $100,000 to more than $1,000,000 a year.
  2. Freedom. Although they are still subject to regulation by the SEC, advisors do not have to contend with the myriad of rules imposed upon registered representatives by FINRA and the compliance departments of broker-dealers. The freedom that advisors have in how they charge for their services can also generate additional clients for them, as this allows them to cater to those who wish to pay flat or hourly fees or with a percentage of their assets.
  3. Job Satisfaction. Advisors have the joy of being able to make a difference in their clients’ lives by showing them how to achieve their long-term financial goals and objectives.
  4. Prestige. Financial advisors are often perceived as being in the same category as doctors, lawyers, and other highly educated professionals. And while becoming an advisor is certainly not an easy task, it requires far less formal education than many other professions with similar levels of stress and compensation.
High Compensation Advisors


Although there are many perks that come with being an advisor, there are also disadvantages:

  1. Difficulty of Starting Out. Those who must build their businesses through cold prospecting can expect to spend long hours and endure a good deal of frustration and rejection when they begin. Working evenings and weekends is pretty much the norm for most new advisors, and compensation during the first five years can be pretty low. An annual income of $30,000 after expenses is realistic until a solid client base is established.
  2. Stress. Dealing with customers can be a difficult proposition at times, as their perceptions and expectations do not always correlate with reality. Advisors must also cope with the same issues that come from running their business, such as finding and keeping a competent staff, maintaining a good cash flow regardless of market conditions, and bureaucratic and administrative red tape.
  3. Liability. As with other professional occupations, advisors can easily find themselves liable for things that are beyond their control if they are not careful. For example, a family that is forced to bear the long-term care expense of an elderly relative could sue an advisor for a financial plan created for the relative if that plan didn’t include long-term care insurance. Depending on the circumstances, the advisor could indeed end up on the losing end of that lawsuit.
  4. Market Volatility. RIAs face the same issues as stockbrokers when it comes to stock market performance; they can make investment recommendations and pursue portfolio management strategies that don’t perform according to expectations, causing them to lose both clients and revenue.
  5. Uncertain Revenue. Poor market conditions often translate into declining revenue for RIAs, which can be harder for advisors to bear than stockbrokers, who may be able to receive an advance or draw on commission from their broker-dealer. Advisors have no such support organization backing them, so they are left to deal with declining revenue on their own.
  6. Business Overhead and Expenses. RIAs who own their own firms must pay many of the same expenses as any other business, including rent and utilities, employee salaries, and marketing expenses.

Final Word

Although building a client base is never easy, established advisors are usually rewarded with a well-paying and satisfying career that will help clients achieve their financial goals and dreams. There are several personality traits that most successful advisors share, such as sales and people skills, basic math and business acumen, and the desire to control their own destiny.

For more information on becoming a financial advisor, visit the Financial Planning Association website.

What tips can you offer prospective financial advisors? Are there any specific career paths you would suggest? What would you avoid?


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Mark Cussen, CFP, CMFC has 17 years of experience in the financial industry and has worked as a stock broker, financial planner, income tax preparer, insurance agent and loan officer. He is now a full-time financial author when he is not on rotation doing financial planning for the military. He has written numerous articles for several financial websites such as Investopedia and Bankaholic, and is one of the featured authors for the Money and Personal Finance section of eHow. In his spare time, Mark enjoys surfing the net, cooking, movies and tv, church activities and playing ultimate frisbee with friends. He is also an avid KU basketball fan and model train enthusiast, and is now taking classes to learn how to trade stocks and derivatives effectively.