Starting Your Practice As A Financial Advisor
Financial advisors help people reach their financial goals through saving and investing wisely. Becoming a financial advisor requires education, licensing and training, but can lead to a very rewarding career.
As a financial advisor, your day will consist of meeting with clients, asking them about their financial goals, and discussing how they might reach those goals. You may also spend time writing financial plans, which are reports that show how much a client may need to save for a certain goal, or how much they might need for retirement. You will also need to educate yourself on current investment products and trends in the business.
Education and Licensing
You do not need a degree in finance to become a financial advisor, but it helps to have some business courses under your belt. In fact, a college degree is not required to become a financial advisor, but many companies require that you have one in order to be hired.
If you want to sell or recommend securities (stocks, bonds, mutual funds, etc.) you will need FINRA Series 7 and 63 licenses. These are the national and state securities broker licenses. If you want to sell insurance and annuities, you will also need to be licensed for that in your state.
Joining a Broker/Dealer
As a newly licensed advisor, you may choose to go to work for a broker/dealer which will provide training on their products and procedures. They may also pay for your licenses.
Your firm will also provide training on how to build your practice. The ability to prospect for new clients may be the single biggest factor in whether or not you will be successful as a financial advisor. When you're just starting out, you will need to pick up the phone and call people you know and ask them for business. You will need to ask friends, family members, college classmates, neighbors and everyone else you know to give you their business and to refer people they know to you.
Once you have started working with clients, be sure to ask them for referrals. The best way to get new clients is to have your existing clients send them to you.
Financial Planning Designations
There are several certifications that you can get that indicate you have specialized education in financial planning. Once you have secured your Series 7 and 63 licenses, you may want to pursue additional certifications.
The Certified Financial Planner, or CFP, designation is the granddaddy of them all. To get it, you'll need to take six courses in various aspects of planning. Then you need to sit for a two-day, 10-hour exam. You also need three years of experience working for a financial planning firm.
Commission-based or Fee-based?
Financial advisors, even those who work for a large broker/dealer, typically have their own practice. They usually get a percentage of the commission on each sale they make, after the broker/dealer takes their piece. This percentage increases as the individual advisor's sales increase.
Some financial advisors start their own firms on a fee-only basis. This means that they collect a fee for offering advice, and they do not get commission on the investments they sell. They will make general recommendations to clients, but will not sell stocks, mutual funds, insurance or any other products. These advisors are typically CFPs.
Financial advisors provide a much-needed service by sharing their knowledge of financial products and services. They can also make a very good living in the process.