How to Become a Financial Advisor
Careers Giving Financial Advice
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A financial advisor is a finance professional who provides financial services to people, corporations, and other entities. The kind of advice a financial advisor provides ranges from basic investment advice, pension planning, life insurance and other insurance investment, advice on mortgages, creation of wills and trusts, and even income tax support.
The job of financial advisor arose from a need for people to balance their investments with their taxable income, capital gains, and other assets including real estate and insurance. Financial advisors teach people how to use stock investments, bonds, real estate investment trusts (REITs), other financial products to meet their financial goals. Some financial advisors simply teach their clients to build a budget or balance their checkbooks.
Most financial advisors work on a commission system, though some have a fee based system for earning money on their financial advice. Want to learn how to become a financial advisor? Read on for details on how much financial advisors earn, what kind of education and training financial advisors need, and the steps to becoming a qualified financial advisor.
Potential Earnings and Income of a Financial Advisor
The potential earnings and income of a financial advisor have as much to do with the size of their client base and how often they work as any other one factor. In 2010, financial advisors reported earnings between $24,000 at the lower end and as much as $145,000 for the top ten percent of the profession. Why is there such a wide range of financial advisor salaries? If a financial advisor works for commission and doesn't have many clients or works mostly for people with lower incomes, their earnings will naturally be lower than an advisor with a huge client base of wealthy individuals and corporations.
Another factor in the potential earnings of financial advisors is whether or not they charge fees for their services or work on commission. Fee-based financial advisor services are more common in less affluent areas, where a financial advisor may set up shop and perform one-time services for clients. These types of financial advisors generally earn less money, though their income may be more steady since they don't make commission.
The earning potential for a financial advisor who works in a larger financial institution, like an investment bank or other corporate financial service, is limited only by the amount a company will pay you for your services. For example, financial advisors working for Morgan Stanley earn as much as $400,000 per year, but these are usually highly-trained and highly experienced advisors working in an executive capacity.
Financial Advisor Education and Training
Financial advisor education and training varies from person to person. Certification in financial planning is one way to get into the profession. Earning this certification, known as CFP, requires intense study of hundreds of areas of financial interest, from the fundamentals of investing to retirement planning.
Students who want to earn their CFP certification should take courses in finance that cover the wide range of financial planning topics covered by the CFP certification exam. But before you can take that exam, you have to earn at least a bachelor's degree in any discipline whatsoever.
The bachelor's degree requirement is a condition of CPR certification in every state in America, though it is not required for you to take the CFP Certification Examination itself. It works like this--once you pass the CFP Certification Exam, you'll have to show an official transcript from a four-year college certifying that you've graduated with at least a bachelor's degree. What you major in doesn't matter--it could be anything from a foreign language to the fine arts.
Many people decide to take the CFP Exam before they finish their bachelor's degree, because people who pass the CFP Exam have five full years from the date they passed the test to prove they earned their bachelor's degree. If potential CFP recipients still haven't earned their bachelor's degree within five years, they can ask for a one-time three year extension for that requirement, which is usually granted no questions asked.
People who earn certain degrees or professional titles can earn their CFP without taking the Exam. If you are already a licensed Chartered Financial Consultant, Chartered Life Underwriter, or Chartered Financial Analyst, you automatically earn your CFP just for the asking. Similarly, earning a Ph.D. in business or economics, a Doctorate in Business Administration, or work as a licensed attorney or Certified Public Accountant means you automatically earn CFP certification.
Qualifications for Financial Advisors
Along with the education requirement for becoming a financial advisor, the board that certifies financial planners and advisors requires a certain amount of work in the field before certification can be granted. This work experience must come from "the supervision, direct support, or teaching" of the personal financial planning process to clients.
This work experience must be equivalent to Three years of full-time work, or 6,000 hours total. Six months of that experience has to be earned within a year of reporting your work experience, but that experience can come from up to 10 years before or after your exam date.
It's fairly complicated, so if you have any questions, you should contact your state licensing board for specifics and to see if your experience counts toward your licensure.
Step by Step Becoming a Financial Advisor
1. Take college classes in finance on your way to earning a bachelor's degree in any field, though a degree in law, business or finance would be ideal.
2. Gain work experience in the field of financial advice. This work experience is required for your certification as a financial advisor or planner.
3. Take the certification test for the specific license you want to work as a financial advisor.
Becoming a financial advisor requires years of work experience and study, but the potential financial rewards are huge. Working as a financial advisor means helping people keep their finances together and paving the way for your own secure financial future.