How to Become a Financial Advisor

Would you like to know how to become a financial advisor? The information below is meant to guide you through the education and licensing necessary to become a financial advisor.

As a financial advisor, you'll work with people a lot. So you'll need to be confident in approaching and talking to people. In most cases, it takes many years to build up a customer base to provide you with a high paying income. To begin, you'll want to carefully consider your education. During that time, you may participate in internships at a variety of financial companies to give you an idea of the type of business you want to work for.

Upon graduation, many people consider finding a personal mentor who can help you take your formal education and transform it into practical business know-how within the finance world. In order to be successful, and progress along the career path of a financial advisor, you must understand how to prospect for new business/customers, and focus on growing your book of business.

Financial Advisor Roadmap

VIDEO: So You Want To be a Personal Financial Advisor

This video discusses some of the general aspects of being a personal financial advisor.

Types of Financial Advisors

There are many types of financial advisors.

  • Certified Financial Planner™ (CFP®) - for general financial advising, from insurance, to estate planning, to retirement, taxes, to investing;
  • Chartered Financial Analyst (CFA) - investment expert
  • Chartered Life Underwriter (CLU) - specialize in life insurance
  • Chartered Financial Consultant (ChFC) - focus on estate planning
  • Certified Employee Benefit Specialist (CEBS) - work with employee benefit plans, including company’s 401(k) and health insurance
  • Certified Fund Specialist (CFS) and Chartered Mutual Fund Counselor (CMFC) - mutual fund experts
  • Certified Public Accountant (CPA) or Accountant - CPAs and accountants focus on tax preparation, tax strategies, and investment organization
  • Stock Broker - deal in the buying and selling of stock
  • Insurance Agent - work in a variety of insurance sales, including home, auto, and health
  • Private Banker - help bank customers handle personal finances

Financial Advisor Job Description

Have you ever wondered what financial advisors do? As a financial advisor, you may assist individuals and families with their cash flow, savings, tax strategies, investments for children's education, and retirement planning. Duties of a financial advisor include:

  • Attain business for your broker-dealer through customers
  • Evaluate customers’ security holdings, financial situation and needs, financial status, tax status, and investment objectives
  • Open accounts, transfer assets, and maintain appropriate account records
  • Provide customers with information on investments and make suitable recommendations
  • Obtain and verify customer’s purchase and sales instructions, enter orders, and follow up with customer

As a stock broker, you'll give advise on investing in stocks, bonds, mutual funds, or exchange traded funds. You may also manage security and investment portfolios.

As a financial planner, you'll be responsible for putting together comprehensive financial plans for individuals and families. This might include areas like insurance, investments, taxes, retirement, and estate planning. When putting together a financial plan, you'll utilize research skills to determine how much income is required annually for a person to retire. This includes information on sources of income including earned income, retirement accounts, social security, and investment income. You'll take an assessment of all the asset accounts the individual or family has and calculate the rate of return on those accounts. You'll also determine the personal living expenses needed to maintain a certain standard of living, taking into account things like inflation, life expectancy, and cost of living increases.

Based on your research and analysis, financial advisors are able to create and provide clients with:

  • Cashflow charts
  • Cash flow projections
  • Income projections
  • Expense projections
  • Capital gains worksheets
  • Taxable income analysis
  • Tax chart
  • Alternative minimum tax worksheet
  • FICA worksheet
  • Federal income tax worksheet
  • Net worth report
  • Monte Carlo retirement projection simulation

As an insurance agent, you'll perform analysis to determine the amount of life insurance needed to assure the financial security for a family if one spouse were to pass away, both in terms of immediate cash needs and projected capital needs for long-term stability. You may also work with disability insurance and help individuals create sound financial plans to assure they have adequate income in the event of disability due to an accident or illness. Long term care insurance policies are another area where you'll help provide insurance offering benefits in the event that long-term care is needed for an individual. In addition, you may work with property and casualty insurance to provide customers with protection from loss of assets including personal property, automobiles, jewelry, electronics, and more.

Investment Adviser VS Financial Planner

Most financial planners are investment advisers, but not all investment advisers are financial planners. Some financial planners assess every aspect of your financial life—including saving, investments, insurance, taxes, retirement, and estate planning—and help you develop a detailed strategy or financial plan for meeting all your financial goals. Others call themselves financial planners, but they may only be able to recommend that you invest in a narrow range of products, and sometimes products that aren't securities.

Education Requirements

Most entry level positions as a financial advisor will require an associates degree in finance. Although this is a great place to start, you will definitely want to continue your education, as most positions require a bachelors. Popular choices are a degree in finance or an accounting degree. In order to become a financial manager, you'll want to attain your MBA, along with many of the common certifications, including FINRA, CPA, CFA, IFRS, and CIPM (see information on these credentials below).

Becoming a Registered Investment Advisor

As an investment advisor, you'll be required to register with either the Securities and Exchange Commission (SEC) or the state securities agency where you have your principle place of business. In most cases, the firm or brokerage where you go to work will guide you through the process of becoming certified and/or registered. The SEC offers a guide entitled: How To Register as an Investment Adviser. Generally, if you manage $100 million or more in client assets, you'll register with the SEC, otherwise you'll register with your state securities agency.

List of State Securities Divisions

Each state has its own department responsible for regulating securities. As a financial advisor, you will be required to meet state regulations and register with the securities department. The links below offer the department and division for each state securities commission along with a link to their website. In addition, this list of state securities regulators also offers contact information for each department and securities division.

Becoming a Certified Investment Advisor

There are many types of certifications available for financial advisors. In most cases, your employer or mentor will guide you through the exact certifications you need based on the work you'll be doing and the career path you're planning. Here are the most common certifications available.

Financial Industry Regulatory Authority

The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for all securities firms doing business in the United States. FINRA provides qualification examinations for brokerage firms, financial branch offices, and registered securities representatives. The most common FINRA qualifications are Series 7 General Securities Representative Qualification, Series 63 Uniform Securities Agent State Law Examination, and Series 65 & 66 Uniform Investment Adviser Law and State Law Examinations. Most positions as a financial advisor require you to have these qualifications, in addition to education and experience requirements.

In addition, the FINRA Investor Education Foundation provides underserved Americans with the knowledge, skills and tools necessary for financial success throughout life. They offer information on grants, including financial education programs for secondary students, military families, and older investors. They also offer learning materials, research findings and tools for investors, educators, libraries and grantees.

International Financial Reporting Standards Certificate Program

The American Institute of CPAs (AICPA) offers an IFRS Certificate Program that covers international financial reporting standards needed to succeed as a financial analyst in the global business world.

Certified Financial Planner

Certified Financial Planner Board (CFP) offers a CFP certification. In order to participate, you must meet the following requirements:

  • Hold a bachelors degree
  • Have at least three years of qualifying full-time work experience
  • Complete a CFP Board-Registered Education Program
  • Pass the CFP Certification Examination
  • Pass Fitness Standards for personal conduct
  • Pass a background check
  • Pay Certification Fees (about $425)

Chartered Financial Consultant (ChFC)

The American College offers a certification course to become a Chartered Financial Consultant (ChFC), where you'll learn financial planning disciplines, including insurance, income taxation, retirement planning, investments, and estate planning. Coursework includes:

  • Financial Planning: Process and Environment
  • Fundamentals of Insurance Planning
  • Income Taxation
  • Planning for Retirement Needs
  • Investments
  • Fundamentals of Estate Planning
  • Financial Planning Applications
  • The Financial System in the Economy
  • Estate Planning Applications
  • Executive Compensation
  • Financial Decisions for Retirement

Chartered Life Underwriter Program

The American college also offers a certification course to become a Chartered Life Underwriter (CLU), where you'll learn how to assess and provide the insurance needs for individuals and businesses. Courses include:

  • Fundamentals of Insurance Planning
  • Individual Life Insurance
  • Life Insurance Law
  • Fundamentals of Estate Planning
  • Planning for Business Owners and Professionals
  • Financial Planning: Process and Environment
  • Individual Health Insurance
  • Income Taxation
  • Group Benefits
  • Planning for Retirement Needs
  • Investments
  • Estate Planning Applications

CFA Institute

The CFA Institute is a non-profit organization offering two distinct financial credentials widely recognized in the financial world. The first is the Chartered Financial Analyst (CFA) credential and the second is the Certificate in Investment Performance Measurement (CIPM).

Chartered Financial Analyst

The CFA is globally recognized by employers, investment professionals, and investors. In order to take the course and sit for the CFA exam, you must have bachelor's degree. The course offers a wide financial curriculum on economics, financial reporting and analysis, corporate finance, equity investment, fixed income, derivatives, alternative investments, portfolio management and wealth planning.

Certificate in Investment Performance Measurement

The CIPM offers a course of study in ethical and professional Standards, performance measurement, attribution, appraisal and global investment performance standards. There are no prerequisites to enroll in the CIPM program. Upon taking the exam, you'll be awarded a certificate in investment performance measurement.

Occupations of Professionals Holding the CFA and CIPM Credential

As you can see from the chart below, a majority of finance professionals are employed as financial portfolio managers, financial research analysts, and investment analysts.
Chart Showing Occupations of CFA and CIPM holders in U.S.

Experience Requirements

Most high level positions will ask for previous financial planning and financial reporting analysis experience. Many people choose to start their careers working for smaller firms in order to get the experience necessary to move up to a larger brokerage firm.

Another way to meet experience requirements needed for a job as a financial advisor is to start as an assistant to a financial advisor and work within the industry as you get the various certifications needed to work independently as a financial advisor. This will also give you an understanding of the industry so you know what kind of work you'd like to be doing in the financial industry.

Another way to garner experience is to start with a job at a bank or credit union. The education and experience qualifications for these jobs is usually less than what is required with brokerage firms. In addition, you may qualify to receive other benefits from these companies, including paid education and paid certification training.

Additional Skills Needed

As a financial advisor, you'll be called upon to use a variety of skills in the course of your work. In addition to your financial skills, personality traits are very important. Smiling, being courteous, and the ability to listen all play a part in your success. Understanding how to speak with a wide variety of people from various backgrounds, and making them feel at ease and comfortable with you is definitely a plus in this industry.

In addition, technology plays an important role in managing financial accounts and performing financial research. Being able to use Microsoft Office, including Microsoft Word, Excel, and PowerPoint will be an essential skill for your success as a financial advisor. Many businesses use SAP BusinessObjects Planning and Consolidation Software, so learning how to use this program, or others like it will also be a valuable asset.

Financial Advisor Organizations

Joining organizations allows you the opportunity to make personal connections, list associations on your resume,and lends credibility to your job application as a financial advisor. Here are a few organizations for financial advisors you may consider joining.

  • National Associations of Personal Financial Advisors (NAPFA) - an organization dedicated to supporting financial professionals who meet the requirements of professional competency, client-focused financial planning, and Fee-Only compensation.
  • National Association of Insurance and Financial Advisors (NAIFA)- offers professional programs and products to enhance financial advisor's knowledge and skills, provide value-added business services, and create critical networking and mentoring opportunities. Also advocates for favorable legislation and regulation.
  • Financial Planning Association - a professional organization dedicated to the advancement of knowledge in financial planning and the support of programs and projects that help the public learn the benefits of financial planning.
  • International Association of Registered Financial Consultants (IARFC) - offers professional programs and courses to support financial consultants, including the designation of Registered Financial Consultant and Registered Financial Associate.
  • National Association of Independent Public Finance Advisors - a professional organization of independent financial advisory firms located throughout the U.S. that specialize in providing financial advice to public agencies related to financing of public projects and issuance of bonds

Although it does not offer individual membership, you may also want to be aware of the North American Securities Administrators Association (NASAA), an organization dedicated to investor protection through an association of state securities agencies that license finance professionals and provide financial training and education.

Financial Advisor Jobs

There are a number of places to attain a job as a financial advisor. You might consider searching the Registered Investment Advisors database to find a variety of RIAs, Registered Reps, Broker/Dealers, and Bank/Trust Institutions to begin your search for employment. Forbes also put out a list of the top 50 fee-only Registered Investment Advisors and the Barron's offers their Top 100 Financial Advisors for 2014.

Financial services firms to consider starting your career as a financial advisor might include:

The key to attaining a job as a financial advisor will be to have a personal relationship with someone within the firm where you wish to work. Therefore, you may wish to begin cultivating such a relationship early on in your education. One of the best ways to do this is to pursue an internship with one or multiple of the companies you wish to work for. Another key to attaining a position as a financial adivisor is to start with a small firm, bank or credit union and work your way up in knowledge and experience to make a switch over to starting your own business as a financial consultant or going to work for a larger financial firm.

Financial Advisor Salary

One of the first questions asked by anyone who's ever thought of becoming a financial advisor is: "How much do financial advisors make?" As a financial advisor, you may be paid a percentage of the value of the assets you manage, an hourly fee for your time, a fixed fee, a commission on the securities you sell (for broker-dealers), or a combination of these. You are likely to be salaried as a financial advisor, but you may also expect to receive performance bonuses, which may represent a significant part of your total earnings.

According to the Bureau of Labor Statistics Occupational Outlook Handbook, median annual wages, excluding bonuses, of financial analysts were $73,150 in May 2008. The middle 50 percent of financial analysts earned between $54,930 and $99,100. The lowest 10 percent earned less than $43,440, and the highest 10 percent earned more than $141,070.

In addition, as a manager, you can expect to make more money. Median annual wages of financial managers were $138,091 in 2008.

In addition to the money you'll make as a financial advisor, you may also want to consider the total salary package. This includes not only your salary, but also health insurance, retirement, disability insurance, and company write-offs such as client dinners and travel expenses. Although they may not seem like a lot, these added perks can account for a considerable amount of added value on top of your salary.

Chart Showing Financial Professionals Salaries

Here is a chart showing the visual representation of the salary range for financial brokerage clerks, financial sales agents, financial advisors, and financial managers based on Bureau of Labor Statistics data.
Chart showing financial advisor salaries

Other Resources for Becoming a Financial Advisor

The National Association of Personal Financial Advisors put out a field guide on how to select a financial advisor. As an aspiring financial advisor, you may wish to read through this guide so you understand how to best position yourself to appeal to clients and present yourself as a reputable financial expert.