Becoming a financial advisor is a career path you might consider if you enjoy helping others and have a passion for finance. Like any other profession, there are both advantages and disadvantages to working in the financial services industry. Weighing the main pros and cons of becoming a financial advisor can help you decide if it’s the right field for you.
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What Do Financial Advisors Do?
Financial advisors offer financial advice to clients. That’s a simplified explanation but it gets to the heart of what being an advisor is all about. A financial advisor works with clients to help them define their financial goals, develop strategies for reaching those goals and implement them. Financial advisors can offer advice in a broad range of areas, including:
Advisors may serve lots of different types of clients or focus on a specific niche or market segment. For example, some financial advisors work exclusively with high-net-worth clients while others cater their services to women.
Financial advisors are paid for their services, typically on a fee-based or fee-only basis. Fee-based advisors can charge a fee for services and receive commissions from recommending specific products to their clients. Fee-only advisors only get paid based on the services they offer.
A financial advisor can hold one or more professional certifications. For example, a Chartered Financial Analyst (CFA) designation means that an advisor has specialized expertise and knowledge in the areas of investment planning and portfolio management. A Certified Financial Planner (CFP), meanwhile, may offer a broader scope of financial advice that covers retirement, investing and taxes, among other topics.
Being a financial advisor comes with certain benefits, but it’s important to keep the potential downsides in mind. If you’re weighing the merits of a career in financial services, here are some of the key things to know.
Pros of Being a Financial Advisor
Being an advisor is an opportunity to share your knowledge and expertise with others.
You can make a positive impact on your client’s lives and helping them to achieve their goals can be extremely gratifying.
Advisor careers can offer flexibility, especially if you’re operating your own practice.
There’s unlimited earning potential, as demand for financial advice remains steady.
You can use your creativity and there are always opportunities to learn, adapt and grow.
Cons of Being a Financial Advisor
Building an advisor practice and growing a client base may be challenging.
Completing the necessary requirements to get certified and licensed can be time-consuming and costly.
Working hours are often long, particularly in the early stages of growing an advisor business.
Constant interaction with others can make this career less attractive for individuals who are introverted.
Starting an advisor practice can require a sizable amount of capital.
Assessing your personality type, work ethic and overall interest in finance can help you clarify whether a financial advisor career may be a good fit.
If you’re someone who thrives on meeting new people and you can work 40 to 50 hours a week without batting an eye, for instance, then you might see a career in financial advice as a challenge you can’t wait to dive into. On the other hand, if you’re more introverted you might need to consider how you can structure your business so that you’re able to serve your clients’ needs to minimize social fatigue.
Pursuing a career path as a financial advisor could absolutely be worth it if you’re passionate about finance and helping others to realize their goals. Income potential aside, being a financial advisor may appeal to you if you enjoy work that’s challenging and you’re interested in a career that allows you to build relationships with others.
Of course, it’s important to consider the investment of time and money that may be required to become an advisor and grow your business. You may feel that you’ve wasted both if you put in the work to become an advisor, only to realize later that it’s not really what you want to do.
It’s also helpful to remember that working with people can be a stressful job, especially if you and your clients’ personalities don’t always gel. Keeping the duties and responsibilities of a financial advisor in perspective and setting realistic expectations can help you to mentally prepare for the demands of the job.
How Do You Become a Financial Advisor?
Becoming a financial advisor typically begins with earning a bachelor’s degree in a finance-related field. For example, you might get a degree in accounting, economics or finance. At a minimum, it’s helpful to complete coursework in areas that are relevant to finance, even if your degree program is focused elsewhere.
Note that if you plan to get a CFP designation, you’ll need to complete an approved degree program. The Certified Financial Planner Board of Standards maintains a list of accepted programs on its website.
If you plan to sell investment products or offer investment-related advice, you’ll need to know which additional designations or licenses you need. For example, if you’re interested in the wealth management niche, you’ll likely need to complete the Series 65 exam to obtain a license. That exam, along with other required exams for financial advisor licensing, is administered by FINRA.
While completing the coursework and exam requirements to become a financial advisor can be daunting, the bigger challenge may be getting hired if you’re not yet ready to launch your own practice. Completing an internship and focusing on building out your network are two strategies that could help you to get hired.
The Bottom Line
A career as a financial advisor can be rewarding but it may not be right for everyone. Talking to other advisors about what they do can help you gain more insight into what you can expect and what this type of job requires. If you decide that becoming a financial advisor is right for you, finding a mentor to follow can help with navigating the waters.
Tips for Jump-Starting Your Financial Advisory Business
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Expand your radius.SmartAsset’srecent surveyshows that many advisors expect to continue meeting with clients remotely following COVID-19. Consider broadening your search. And work with investors who are more comfortable with holding virtual meetings or spacing out in-person meetings.
Working hours are often long, particularly in the early stages of growing an advisor business. Constant interaction with others can make this career less attractive for individuals who are introverted. Starting an advisor practice can require a sizable amount of capital.
Successful financial advisors offer valuable advice to their clients. In return, they get virtually unlimited earning potential, a flexible work schedule, and their choice of professional specializations.
Lack of work ethic. It takes a lot of hard work and discipline to break into a career as a financial advisor. While many are willing to work hard for a period of time, fewer are willing and able to maintain the high-level work ethic required to survive and thrive as a successful advisor.
Answer: From a regulatory perspective, it's usually prohibited to ever charge more than 2%, so it's common to see fees range from as low as 0.25% all the way up to 2%, says certified financial planner Taylor Jessee at Impact Financial.
Prospecting. Prospecting for new clients is a fundamental but often challenging aspect of a financial advisor's daily routine. In the initial stages of your career, you'll likely find yourself dedicating a significant amount of time to networking, making phone calls, sending emails, and attending conferences.
What Percentage of Financial Advisors are Successful? 80-90% of financial advisors fail and close their firm within the first three years of business. This means only 10-20% of financial advisors are ultimately successful.
This is not a job you can leave at the office at night or on weekends. It sticks with you always, in your brain, even in your dreams. The stakes are too high. Advisors are responsible for the financial stability, goals, hopes, and dreams of their clients.
Financial advisor stress is real, and you're not alone if you feel the pressure. According to a survey carried out by Financial Planning Association, Janus Henderson, and Investopedia: 71% of advisors have experienced moderate or high levels of negative stress, compared to 63% of investors.
Being a financial advisor can be challenging, but it is also rewarding. It requires a strong understanding of financial markets and products, as well as the ability to communicate complex financial concepts to clients. Financial advisors also need to be able to build trust with clients and manage their expectations..
Industry studies estimate that professional financial advice can add up to 5.1% to portfolio returns over the long term, depending on the time period and how returns are calculated.
A typical financial advisor workweek spans a minimum of 40 hours, though some advisors may work more than that. There's no rule, however, dictating that you must work at least 40 hours a week in order to become a financial advisor.
If you're wondering whether doom and gloom stories about financial advisors becoming obsolete, here's some reassurance: people will always need financial advice.
As a financial advisor, it takes hard work to attract clients and even more work to keep them. Clients can part ways with their advisors due to poor communication, mismatched expectations, underperformance, lack of personalized advice, trust issues, high fees, and inadequate financial education.
The future of financial advisory lies in the ability to build and maintain loyalty not just with the current generation of clients, but with their successors as well. This requires a shift in both mindset and practice as advisors begin embracing a more comprehensive approach to client engagement.
While 1.5% is on the higher end for financial advisor services, if that's what it takes to get the returns you want, then it's not overpaying, so to speak. Staying around 1% for your fee may be standard, but it certainly isn't the high end. You need to decide what you're willing to pay for what you're receiving.
Generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor. Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could $500,000, $1 million or even more.
Expensive to start: Starting an advisor practice can require a sizable amount of capital. Difficult to grow: One of the big struggles of many advisors is trying to find ways to grow their practice as it takes consistent work unless you're able to find the right solution.
Financial advisors score highly on extraversion, meaning that they rely on external stimuli to be happy, such as people or exciting surroundings. They also tend to be high on the measure of openness, which means they are usually curious, imaginative, and value variety.
“Our industry is all about people and we need a diverse range of professionals to cater for a wide range of clients, so age should not be a limiting factor,” he says. There is nothing to prevent anyone of working age becoming an adviser based on age alone.
Advisor headcount was largely unchanged in 2023 as the number of advisors grew by just 2,706 in 2022, according to The Cerulli Report—U.S. Advisor Metrics 2023. The number of new advisors barely offsets trainee failures and retirements, emphasizing the critical need for the industry to attract and retain talent.
Yes. Specifically, if your advisor was licensed through the Financial Industry Regulatory Authority (FINRA), you can file an arbitration claim to get some or all of your money back. Whether your claim will succeed depends on exactly what happened.
They also tend to perceive familiar assets as less risky and earning a higher rate of return, which can result in under- diversification in a portfolio and resulting lower performance.
Significant loss threats include advisor death or disability, key person loss, an unexpected disaster (natural or otherwise), lawsuits, and failure to plan for business succession.
Financial advisors and insurance agents may have a certain reputation in many circles. While I believe the majority are honest, some advisors may give the rest a bad name by focusing on the commission instead of the client. And, even if you meet an honest advisor, how can you know they will do the job suited for you?
Introduction: My name is Aracelis Kilback, I am a nice, gentle, agreeable, joyous, attractive, combative, gifted person who loves writing and wants to share my knowledge and understanding with you.
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