“If I knew then what I know now.” After some experience in the financial advisory industry, I learned a lot about how it works from the inside and I love helping out others looking to join the industry. It’s one of the few careers where the pay is high, there are not many barriers to entry, and employment opportunities are expected to grow much faster than average. (Similarly, check out entry level insurance jobs.)
According to the U.S. Bureau of Labor Statistics, from 2010 to 2020, the number of financial advisors is expected to grow by 32% (much faster than average). The exact number of jobs is expected to increase from 206,800 to 273,200. The average salary of a financial advisor was $64,750 per year in 2010.
1. Proceed with caution: There are many firms out there looking to take advantage of you.
Be wary of commission-only positions where the firm encourages you to sell insurance and investment products to your friends and family. It can ruin relationships and often times you don’t know enough about those products yet. If the products don’t work out for your friends and family, they may be stuck with the negative effects for years after you leave the company. With the standard turnover rates for these positions, it is likely that you will leave quickly.
I won’t mention the companies because I don’t want the liability, but in my opinion, they are the ones that advertise their jobs the most frequently and don’t require any experience. They can do this because many of these firms have an extremely high turnover rate for these positions (upwards of 80%) so they are consistently hiring to replace those who left.
This does not mean that some will not become successful through this route, but just be aware that the odds are you will not be successful and will be out of the industry within 5 years. The biggest thing contributing to your success at these positions and in financial advisor positions overall, will be your sales ability.
2. If you are not good at sales or cannot learn within a short timeframe, you’re gonna have a bad time.
It’s hard to start a career as a financial advisor because no matter how great you are at recommending sound financial decisions and tools, at the end of the day you have to bring in new clients. That means most positions will require that you go out and try to gain clients through networking, calling, emails, meeting in person, referrals, public speaking, seminars, and other forms of marketing.
Most training programs and offices require that you gain a certain number of clients or assets in the first 6 months to one year of production, or you will be let go. Of utmost importance is the ability to gain clients and sell products and/or your services, so if you don’t have ability to pursue clients and ask someone to trust you with their money, this job is not for you.
3. There is a big difference between the types of financial advisors.
There are four main types of financial advisors:
Commissioned – These financial advisors are often referred to as Brokers, agents of Broker Dealers, or Registered Representatives. The financial advisor receives a commission for selling an insurance or investment product, such as mutual funds, annuities, structured products, and insurance. In these commissioned transactions, the financial advisor is not always required to act in a client’s best interest, but just needs to make sure the investment is suitable. This can lead to conflicts of interest where the advisor is selling a financial product that is suitable, but not in the clients best interest or has higher fees and a higher commission than other options.
Fee-only – Fee-only financial advisors only charge fees by a percentage of assets managed, a retainer, or by the hour, and do not make a commission for selling insurance or an investment product. An example of this would be if a client has $100,000 in their account, the advisor might typically receive a management fee of 1% per year, or $1,000. Fee-only advisors are required to act in a client’s best interest (a fiduciary standard is the technical term for it). Most fee-only financial advisors heavily promote that they are fee-only, so you can easily learn if this is the case by researching them and visiting their website.
Fee-based – Fee-based advisors sell both products for a commission and have the ability to charge management/hourly fees. It is a combination of the two above options. This creates some confusion, because at certain times they are required to act in a client’s best interest, and at other times they are not.
Salaried – Another situation that is becoming more common is salaried employees that can receive bonuses based on the products they sell or assets they gather. This is a form of advisors that has popped up more at banks and credit union locations. They often receive bonuses paid in one of the three ways mentioned above as well so your hard work can be rewarded.
Keep in mind, a advisor’s title or designations, such as CFP, CFA, financial advisor, or financial planner does not indicate the type of financial advisor they are. These titles are generally independent of the type of fee structure. Also, broader fiduciary rules for financial advisors have been under consideration recently, so we have yet to see how the industry may adapt to new regulations regarding payment structures.
4. Be ready for some studying.
Most financial advisors must past the Securities Industry Essentials Exam (SIE, Series 7 Exam, Series 66 Exam (or a combination of Series 63 and 65 exams), as well as acquire insurance licenses. These tests are primarily memorization of laws, financial instrument information, and standards. They aren’t conceptually difficult, but they are lengthy and not commonly known material. They will take many hours of studying to be familiar with the info and the tests are a formidable length. (3 hrs 45 mins for the Series 7 and 2 hrs 30 mins for the Series 66) You will have to be ready to buckle down and study before even getting your career going.
5. You can go independent and have your own business.Even though you may start under a companies’ brand and with their training, after establishing your clients you may be able to start your own “independent” business. Can you take your clients with you? The industry standard answer is yes, but some companies require you to sign agreements that don’t allow this. If the firm you are currently at or potentially joining has signed on to the broker protocol, you may be allowed you to take your clients with you if you join another firm that has also signed it if you move your clients in a specific way.
Why would you want to do this? At some of the larger companies, your payout (the percentage of commission or fees you keep) can be as low as 25%. As an example, with a 25% payout, if you make $10,000 in commissions or fees, you are only able to keep $2,500. If you go “independent” your payout can be as large as 100%, and you can keep the whole $10,000, but you don’t have as much marketing and overhead covered by the company. You also don’t always need to have the startup money saved to go independent. Many “independents” are provided big upfront bonuses when they move to a new firm with their clients.
6. You can become set for the rest of your life and pass on your wealth to your family, or sell for a big payday.
Gathering clients takes years, but once you have an established book of business, it becomes a real asset that produces income every year. Many advisors are able to take this asset and transition in another family member as an advisor to service these clients after they have retired. Also, you can sell you book of business to an unrelated advisor and transition the business to him or her for a substantial sum of money. If you can keep your clients year after year and have a consistent stream of income, this may become the biggest asset you have!
7. It’s a cut-throat business, but it can be extremely rewarding, and not just financially.
Just because the industry is heavily regulated by both the SEC and FINRA, does not mean that other advisors won’t play dirty. The competition is stiff and the money is lucrative, so some advisors aggressively try to poach each other’s clients, even if they have to stretch the truth and do unethical things to make that happen. This is less so than it used to be, but you still need to watch out!
Though it can be very competitive, the best part about this business is you get the opportunity to help regular people who will rely on their savings to live a long and healthy life.
It’s not like some other financial careers where you help really rich people get richer. If you can give excellent financial guidance, you can help people make and save hundreds of thousands of dollars over their lifetime and provide them with a comfortable retirement.
8. Where the best place to start is…
In my opinion, forgo the large wirehouses and insurance company commission-only positions and try to get a job at a small branch office or family office that does fee-based or fee-only advising. This often results in more guidance and help from experienced financial advisors and less pressure to sell products no matter what. They hire people to train as advisors and also paraplanners that help create the financial plans for clients. Research small financial advisory practices in your area or branch offices of large firms where it is a small team atmosphere and you are sure to be happier with your career. Best of luck!
– The JobUnlocker Team
Post last updated 10-27-2019
Good read. I agree when you said its all about sales. If you know nothing about sales, then forget financial advisor jobs.
Love the post and I had already come to the conclusion that you did on my own, but reading item #8 was really confirmation for me. I really appreciate this post!
Do you have any tips for finding those family based businesses who are looking for someone to bring in? I’d love to have a conversation with you either via phone or email if you can spare a few minutes.
Thanks for the article. So, I’m starting out with an internship in the business at a commission based company. It’s a top 10 internship with a top 5 financial firm, so I couldn’t pass up the opportunity for the training. However, the more I read and study in the field, the more I would like to branch out to other firms that aren’t solely commission based. I would also love some advice and direction, whether through forum or email, on where I should go next after my internship. Should I stay with the company for a couple years and get experience and further licensing or move on to greener pastures?
Thank you so much for the post. I recently got into an interview and was a little amazed and also confused why such internship was so well “advertised” with some fancy pamphlets and stuff. I did a little research and find out that this internship might be very sales oriented and then I came across to your article. Your article helped me decided to pursue something else for my career.
Great input on the industry…. I am currently with a top commission-based company, and I am interested in looking for a smaller firm, more tailored to my interests – financial planning. Any ideas on how to find these places and how best to negotiate would be helpful.
Jeremy I was thinking of going into the financial advising & and counseling. I don’t know too much about the field, all I know is that I do enjoy helping people get out of their financial hardships. Anyhow I was just wondering if you can give me a little bit if guidance as to where to start. Do I need a degree? Do I need a license? If so what’s the process and procedures to go about getting this? And what are the duties of a financial advisor at a financial firm? I hear you talk of products, insurance and investments. … do you have any advise as to where to look for more info and guidance
Great read, appreciate your input. I’m actually switching careers in a few months, foregoing the corporate world and moving into advising. Would love to get some feedback on suggestions you would give someone new to the industry. Every bit helps!
Very informative reading you got here. I first learned about financial advising when I was getting my B.A. in Accounting. Since then I gone on to more of an entrepreneur, accounting, even risk management direction on my professionalism. I recently met an old classmate that is doing Financial Advising and it had spark my interest once again into leaning towards what I love to do the most. I really have a passion on talking on and reading on business information and find financial advising as a medium to do this while helping clients on their financial growth. While I am in a transition position in careers, I will really appreciate to get in contact with you in discussing going about this new path of a career. In the mean time while I am in suspension on this decision, I am leaning towards making steps in getting a bigger picture on the business and finance information that I am reading. I intend to do this by finding books that will educate me in the types of financial products and really find out how it all works in the grand scheme of things. Any help will push me in the right direction.
My name is Brandon and I thoroughly enjoyed your article. I have a B.S. in Accounting, but have been unable to find an accounting job within the last 5 years. Recently, I’ve considered going into financial planning because I like giving financial advice to help people better their situation. The 2 things that bother me about it are the sales aspect and having to work with insurance. I would much rather work with tax planning, retirement planning, and investing. I do not want to do anything that involves insurance. The sales aspect terrifies me, but a small part of me thinks I could get used to it.
I would love to hear your thoughts on this matter. Thanks!
great article. I commend you for telling people the way it is. For the last several months I was a licensed Insurance agent with a huge insurance company. After I got Property & Casualty; Life & Health; I started attempting to market myself. The training I got was next to nothing; binder and a password to the insurance website where I was supposed to navigate and learn to market myself. When I told my “mentor”/ senior agent I didn’t know enough of the product to sell to people, he told me just, “fake it til you make it.” Being he spent 10 years in community banks and credit unions, it didn’t take long for me to become jaded. Anyone considering Insurance should also be wary of several things that grabbed my attention:
1. The amount of commission sales. If I sold an $1100 auto policy I would receive $105. The company takes way more than the amount of work an agent does.
2. Companies stealing a book of business after firing the agent. Insurance companies have been know to take fire agent and keep their clients for an extended time.
3. Lack of training. Basically watch videos on the Insurance website and follow a script. 75% of my cold calls were disconnected numbers.
4. Unrealitistic expectations- insurance companies usually want people working 7 days a week or 12 hours. Even though they say their is time for the family, this is a big lie.
5.Micromanaging- I would have trainer/senior agent sitting next to me, looking over my shoulder listening to every call trying to tell me what to say “all the time”.
6. Lack of ethics- rebating, sexual harassment, gossip and lying. Insurance companies Over-promise and under-deliver.
*Anyone considering issuance better have family in the industry with an existing book of business where they work as an independent broker. Other than that, THINK AGAIN!
Thanks for the article.
Informative article, many thanks. I’m contemplating a financial advisor position that would be with a “fee-based” provider; while I do some of my own stock trading today, this represents a career change for me at age 58. The firm I am considering starts its people on salary and then migrates them to fully commissioned, which I believe is probably best in my situation.
Any other tips that would benefit me in this adventure would be appreciated!
Thanks for your post, now I had good information to start with financial advising endeavor.
Thank you for posting this article. It was very informative.