Financial advisors are trusted by people to help them with their finances. They have the responsibility of making sure that no one is taking advantage of their clients and not giving them what they deserve for the money that they’ve entrusted to them. As a financial advisor, it is your job to know about taxes, trusts, retirement plans, investments, and more. This article will teach you how to be a financial advisor in just three easy steps.
Learn About Being a Financial Advisor
Financial advisors are experts in investments, insurance, retirement planning and more. They help people make the best choices for their financial future and often build strong relationships with clients over time. This profession is self-employed, though it’s possible to work with a team at a company that provides financial services. Financial advisors typically need a bachelor’s degree in economics or finance; certification as a Certified Financial Planner (CFP); and experience working within the field. It takes many years of education to be eligible to take the CFP exam.
What is a financial advisor?
A financial advisor is a certified financial professional who helps individuals create short-term and long-term financial plans. These plans include a variety of financial strategies involving investments, insurance, taxes and retirement planning, and their intent is to help prepare individuals for a comfortable retirement and/or unforeseen financial emergencies. Financial advisors help their clients meet financial goals by reviewing areas of budgeting, savings, investments and more.
The responsibilities of a financial advisor may include:
Reviewing budgets, short-term and long-term savings plans and investment goals
Researching investment opportunities
Managing tax and estate planning
Providing tax strategies and insurance products that help clients meet their financial goals
Educating clients about insurance and investment options, and the associated benefits and risks involved
Helping clients plan financially for education, retirement or legacy goals
Offering financial advice for major life changes, such as marriage or having children
Monitoring client accounts for potential investment strategy updates to improve financial performance or accommodate anticipated life changes
What does a financial advisor do?
The duty of a financial advisor is to help guide financial decisions for short-term and long-term goals. They help their clients accomplish this by following these steps:
Ascertain current financial health
Either via a questionnaire or a one-on-one consultation, a financial advisor gives their clients a full understanding of their current financial situation, including assets, liabilities, sources of income and spending. Some of this may be covered in an initial budget plan that is created, but it is also important to understand all income sources that will be available during retirement, such as pensions, retirement plans and social security benefits. The full financial picture will also help determine a client’s risk tolerance and bandwidth to increase investments. Clients are also advised on how increased investments or insurance contributions affect their tax liabilities.
Establish a financial blueprint
Once all of the client’s financial information has been received, a financial advisor forms a comprehensive blueprint that serves as a roadmap for the client’s retirement goals. This blueprint will not only summarize the current financial status—including net worth, current debt obligations, current liquid assets, existing investments and discretionary income—but will also encompass a step-by-step plan to achieving the goals addressed in the initial questionnaire or consultation.
The blueprint will take into account risk tolerance, family details, health needs and other potential areas of concern leading up to retirement. The advisor helps the client choose the strategies that make the most sense for them and will help them avoid a situation where they outlive their money.
A financial advisor not only helps create a robust financial plan or blueprint but also helps manage a client’s retirement and insurance portfolios and adjusts investments as needed. The advisor recommends investment strategies and asset allocations for the overall portfolio based on the client’s level or risk and age.
Young investors are generally willing to take greater risks than an investor heading into retirement, as the younger investor may have more years to endure market volatility. Thus, the advisor helps the client determine asset allocation, which is made up of bonds, stocks, target-date funds, ETFs, REITs—Real Estate Investment Trusts—money market accounts and cash.
Regular account administration
Once the investment plan is put into action, a financial advisor monitors the plan and updates the client with regular account statements. This may also mean regular client meetings to discuss investment strategy changes or new financial information, such as asset sales, major lifestyle changes, life events or buying a home.
How are financial advisors paid?
There are various payment structures for financial advisors, but the two most common are fee-based and commission-based models. Most advisors work based on commission, where the income earned is directly correlated to the total amount of assets managed or financial products sold to the client.
An advisor can make a significant amount of money through this payment structure but must remember the client’s financial interest in mind as a financial fiduciary. Other advisors work on a fee-based structure where the income earned is based on an agreed-upon percentage of total assets—typically 1% or an hourly fee that may range from $100-$300 per hour—based on the advisor’s experience or the business location. It’s typical that an advisor will offer the client a complimentary initial consultation to build rapport and understand the client’s needs to see if the relationship is a good fit for both parties. According to Indeed Salary, the common salary for financial advisors in the U.S. is $69,608 per year.
Qualifications for becoming a financial advisor
Most public or private financial services firms hire financial advisors or associates right out of college. The following areas are important for a person considering a career as a financial advisor:
Education, skills and training
Most employers typically ask that a new financial advisor hold a bachelor’s degree, but it is not required to have completed a specific course of study. Most financial advisors have a degree in finance, accounting, economics, business or mathematics, but can sometimes enter the industry with a non-finance degree if they’re willing to learn on the job.
A Master’s Degree in Finance or Business Administration, or courses in insurance, investments, retirement or financial planning, taxes or risk management are all nice to have but are not required. These degrees can certainly accelerate career growth or attract more clients.
While there are skills that could be beneficial for anyone interested in a career as a financial advisor, they can be learned on-the-job over time. Experience and knowledge gained by helping a multitude of clients will develop the skills needed in this line of work. To become a great financial advisor, the following skills are beneficial: analytical, interpersonal, communication, problem-solving and sales acumen.
Financial advisors get most of their training while on the job. Most employers require an advisor to complete an initial training period before they can manage clients on their own. The training period limits the number of commissions earned, and requires new financial advisors to work under the supervision of experienced advisors while learning administrative duties, custom financial plan structuring and managing/building a book of business or network of clients.
Each financial services firm may have different requirements of their advisors, but most require that their financial advisors attain any necessary certifications within 60 days of employment. These requirements can vary based on the desired career path or niche an advisor wants to pursue.
Series 6 and 7 certifications (Financial Industry Regulatory Authority licenses)
The Series 6 license allows an advisor to sell variable life insurance and annuities, and mutual funds, while a Series 7 license authorizes them to sell all securities products, including corporate and municipal fund securities, and options. To earn these licenses, candidates must pass an exam for each and renew their credentials based on current guidelines.
Series 63, 65, and 66 certifications (North American Securities Administration Association licenses)
The Series 63 license allows you to sell securities similar to Series 7 but is specific for each state. A Series 65 license enables a financial professional to give investment advice or financial analysis, while a Series 66 license qualifies individuals as investment advisor representatives (IAR) or securities agents.
Certified Financial Planner (CFP)
A CFP specializes in areas such as taxes, estate planning, financial planning and retirement planning. To earn the CFP designation, applicants need to hold at least a bachelor’s degree from an accredited institution, at least three years of relevant experience and earn a passing grade on the examination. They also need to undergo a background check to ensure they can meet the standards of conduct. Those who have a CFP need to undergo continuing education to renew their certification.
Financial advisor job description example
Wilson Advisors, an established wealth management company, is hiring financial advisors to help clients manage their wealth while planning for their financial future. We are looking for highly motivated self-starters who have great people skills, a strong work ethic and an entrepreneurial spirit. No previous finance experience is necessary as we offer a comprehensive training program that will provide you with the tools, resources and support to grow your client base and provide quality financial planning and investment services.
Our financial advisors are responsible for meeting with clients to assess their financial needs and develop customized financial plans based on their goals, circumstances and risk tolerance. This position requires professionals to maintain strong relationships with clients and provide ongoing consultation and support.