Financial advisors work primarily for financial institutions such as banks, mutual fund companies, and insurance companies. They counsel individual clients and institutions to help them attain their financial goals.
Formerly called stockbrokers, brokers, account executives, or registered representatives, financial advisors were primarily responsible for buying and selling securities, such as stocks and bonds, on behalf of clients. These responsibilities have changed to include financial advice and guidance on investment strategies, mutual funds, bonds, and stocks.
The change in titles and responsibilities has to do with meeting client needs in a continually changing economy. In addition to facilitating transactions, financial advisors need to be investment advisors and financial planners who take a holistic view of their clients' financial needs and goals. Other variations in title, such as wealth management advisor, also are used, sometimes to denote a financial advisor who has additional training, certifications, or experience.
Though the term financial advisor has been in general use since the early 1990s, it is not without controversy. Many critics still maintain that it implies adherence to the strict fiduciary standard that requires acting in the best interests of clients, rather than the less stringent suitability standard that traditionally binds brokers. For example, Merrill Lynch was among the last of the major firms to adopt the term, entirely due to this concern on the part of its legal and compliance department, which was very conservative at the time.
Some financial advisors focus on serving individual or retail clients, while others concentrate on business or institutional clients. Securities firms may prefer their financial advisors to specialize in one type of client or a mix of clients. Business clients who require specialized advice and services involving working capital management or business loans, for example, may prefer financial advisors with detailed knowledge in these areas.
Financial Advisor Duties & Responsibilities
This job generally requires the ability to do the following work:
- Meet with individuals or institutions to assess their financial needs and counsel them on strategies that match their financial goals.
- Explain tax laws and insurance that may be relevant to their investments.
- Explain the types of services provided to clients.
- Help clients plan for future expenses such as a home, education, or retirement.
- Research investment opportunities.
Financial advisors counsel clients on investment opportunities, consistent with the clients' needs, goals, and tolerance for risk. The job requires keeping abreast of the financial markets, constantly monitoring the investments in clients' portfolios, and staying current on new investment strategies and vehicles.
They have a high degree of professional autonomy, more akin to being an independent entrepreneur than a corporate employee. There is a close link between performance and reward, with virtually unlimited earnings potential. When a financial advisor does their job well, they make an impact on their clients' lives.
The responsibilities of a financial advisor can be overwhelming, as they are under pressure to provide accurate, timely information to clients. Financial advisors must constantly process information, make quick and accurate decisions, and sell services daily. There is not much room for error, as poor decisions can be costly to clients and ruin the advisor's and the firm's reputations.
Financial Advisor Salary
A financial advisor's compensation typically is commission-based. That is, a financial advisor receives a share of the revenue generated for the firm by their clients. Other metrics, such as the total value of client financial assets on deposit with the financial advisor's firm, may also factor into compensation. Top financial advisors can earn over $1,000,000.
The U.S. Bureau of Labor Statistics (BLS) provides salary information for personal financial advisors as follows:
- Median Annual Salary: $88,890 ($42.74/hour)
- Top 10% Annual Salary: $208,000 ($100/hour)
- Bottom 10% Annual Salary: $41,590 ($20/hour)
Source: U.S. Bureau of Labor Statistics, 2018
PayScale's salary information for financial advisors is as follows:
- Median Annual Salary: $58,713 ($28.23/hour)
- Top 10% Annual Salary: $122,333 ($58.81/hour)
- Bottom 10% Annual Salary: $34,824 ($16.74/hour)
Source: PayScale.com, 2019
Education, Training, & Certification
Those interested in a position as a financial advisor will need the following education training, and licensing:
- Education: A bachelor’s degree in finance, economics, accounting, business, mathematics, or law is good preparation for this career. Coursework may include investments, taxes, estate planning, and risk management. Programs in financial planning are becoming increasingly available in colleges and universities. Also, a master's degree in business administration or finance can increase the chances of moving into a management position and attracting new clients.
- Training: New employees often receive on-the-job training usually for more than a year. New advisors work under the supervision of senior advisors and learn how to perform their duties, including building a client network and developing investment portfolios.
- Certification: Those who buy or sell stocks, bonds, or insurance policies, or who provide investment advice, need a combination of licenses depending on the products they sell. In addition, advisors at small firms who manage client investments must be registered with state regulators, while advisors at large firms must be registered with the Securities and Exchange Commission (SEC). Those who sell insurance need licenses issued by state boards. Information on state licensing board requirements for registered investment advisors is available from the North American Securities Administrators Association (NASAA). Financial advisors can also obtain a Certified Financial Planner (CFP) certification, which can help attract new clients. This certification requires a bachelor's degree, three years of work experience, successful completion of an exam, and adherence to a code of ethics.
Financial Advisor Skills & Competencies
Financial advisors should have the following skills to perform their job successfully:
- Interpersonal skills: The ability to manage relationships with clients, staff, and others inside and outside of the firm, which includes dealing with failure and dissatisfied clients.
- Analytical skills: The ability to account for a range of information, including economic trends, regulatory changes, and the client's risk tolerance when determining an investment strategy.
- Communication skills: The ability to distill complex financial concepts into information that clients can understand.
- Math skills: The ability to work well with numbers, as math is necessary for performing calculations, analyzing financial data, and determining a financial strategy.
- Sales skills: The ability to successfully acquire new clients and explain investment ideas to existing clients.
- Stress management skills: The ability to work well under pressure to deliver client information on a timely basis.
According to the BLS, employment of personal financial advisors is projected to grow 15% until 2026, much faster than the average for all occupations. A growing number of baby boomers are nearing retirement and will need guidance from personal financial advisors. Also, longer lifespans will lead to longer retirement periods, which will also increase the demand for financial planning services.
Financial advisors primarily work in offices at small or large firms. Some travel may be required to attend conferences, seminars, or networking events to bring in new clients. They may also need to travel to clients' offices or homes.
Most financial advisors work at least 40 hours per week. They often go to meetings on evenings and weekends to meet with clients.
How to Get the Job
Look at job postings on local financial firm websites. You may need to apply directly on the site, so be prepared to upload your resume and cover letter.
CREATE A NETWORK
Join an organization such as the Financial Planning Association (FPA) or the National Association of Insurance and Financial Advisors (NAIFA) to connect with others in the industry. These organizations hold conferences, seminars, and other events that create networking opportunities that can lead to a job.
Comparing Similar Jobs
People interested in a career as a financial advisor should also consider the following jobs, along with their median annual salary:
- Budget Analyst: $76,220
- Financial Analyst: $85,660
- Financial Manager: $127,990
- Securities, Commodities, and Financial Services Agent: $64,120
Source: U.S. Bureau of Labor Statistics, 2018