How to Become a Financial Advisor
Learn about the qualifications, education, and experience financial advisors need before they serve clients.
Have you ever wondered what it takes to be a financial advisor? Even though this can be anyone who offers monetary advice to clients, the most high quality are those who have put in the work to earn qualifications and experience. Before serving clients, they must spend substantial time, effort, and money sharpening their expertise and earning their title.
In this article, we’ll highlight the pathway professionals must take to become an advisor. If you’re a potential client, this can help give you a better idea of the kind of qualifications and experience a reputable expert should have. On the other hand, if you’re considering a career in financial advice, this page will hopefully help you get started on your journey and understand what you’ll need to do to realize your goal.
Acquiring an education is the first major step prospective advisors must complete. Individuals must usually hold at least a bachelor’s degree before they can enter a program to get a professional designation. And though organizations such as the CFA Institute and CFP Board don’t impose strict requirements on the types of courses to study, it often helps to focus on adjacent majors, such as economics, finance, business administration, and accounting.
While college makes up the bulk of the knowledge needed to be a successful advisor, learning can also take place informally. Stephen Chang, MD, MBA, and Managing Director of Acts Financial Advisors in McLean, Virginia, says he “sought out knowledge wherever it could be found,” including reading “books such as The Millionaire Next Door,” visiting “websites like White Coat Investor and Mr. Money Moustache,” and checking out popular news outlets.
Becoming an advisor requires someone to absorb information from all sources, including at the university level and through their own initiative. This gives one the best chance to be more comfortable in the space and stay well-read on everything finance.
2. Decide Which Certification(s) to Pursue
The financial industry is nothing if not full of acronyms and titles. There are a vast number of designations, charters, and job titles. In general, each one has a different focus and puts an advisor on a certain path. Therefore, deciding which credentials to pursue tends to shape the type of professional a person becomes. It’s not uncommon for advisors to hold multiple titles from different organizations. This all works to strengthen their credibility and widen their knowledge.
Below is a list of some of the most common and reputable credentials financial advisors might have, along with some information about them:
- Chartered Financial Analyst (CFA), offered by the CFA Institute, is known as one of the top designations in the industry. Experts with the title often work in portfolio management and analysis roles. The required exam is often referred to as one of the hardest to pass.
- Certified Financial Planner (CFP) is a certification that focuses on providing holistic planning services to clients. Earning the title requires the completion of four requirements, including gathering thousands of hours of experience and signing an ethics declaration.
- Chartered Financial Consultant (ChFC) is a credential available through The American College of Financial Services. Like CFPs, these offer comprehensive planning and advisory services, helping with various aspects of one’s finances.
- Chartered Alternative Investment Analyst (CAIA) is a professional designation that refers to advisors who specialize in working with alternative asset classes. They may work in strategic and analytical roles, as well as at advisory firms.
- Certified Public Accountant (CPA) is a professional certification that enables someone to practice accounting for individuals and organizations.
- Investment Advisor Representative (IAR) refers to individuals who have registered with either the SEC or their state and work at registered investment advisor firms (RIAs).
But how does one choose which certifications to go after? This can feel like one of the biggest junctions on the way to finally becoming a financial professional. Ultimately, it depends on one’s skill set and overall comfortability in an area. For example, individuals with more analytical minds who feel at home with math might prefer being a CFA, CAIA, or CPA. On the other hand, someone might prefer being a CFP or ChFC if they enjoy working directly with clients and helping them in a broader sense.
Chang shares what went into his decision to earn a CFP designation, “I wanted to become a CFP because I admire their holistic philosophy of looking at the entire picture and circumstances of a client’s life and goals. Some advisors seem to be more focused on one or another part of client finances, whether it be insurance or taxes or investments. In my opinion, CFPs really focus on putting everything together when giving advice.”
3. Pass Exams and Earn Licenses
Along with receiving proper certifications, a financial advisor must also collect a specific set of licenses before they can begin practicing. Like professional designation programs, this involves studying for, taking, and passing exams.
The following is a list of licenses advisors often get:
- Series 3 allows professionals to sell futures and options contracts for commodity investments such as real estate, precious metals, and agriculture. Includes a 120-question multiple choice exam.
- Series 6, or the Securities License, lets advisors sell securities such as mutual funds and variable annuities. Includes a 50-question multiple choice exam.
- Series 7, or the General Securities License, enables an advisor to sell a wide variety of securities, including equities and fixed-income assets, among others. Includes a 125-question multiple choice exam.
- Series 63 allows broker-dealers who earn commissions to buy and sell securities in a state. Includes a 60-question multiple choice exam.
- Series 65 is an essential license that solidifies an individual as an investment advisor in their state. This means they’re free to offer advice to clients and recommend investments on a fee-only basis. Includes a 130-question multiple choice exam.
Note: information about exams comes from the Financial Industry Regulatory Authority (FINRA).
4. Register with the SEC or State Securities Regulator
In addition to getting certifications, advisors who manage and provide advice on investments must often register with the U.S. Securities and Exchange Commission (SEC) or their state securities regulator as an investment advisor. This involves preparing and submitting Form ADV, which allows the public to hold them accountable as a fiduciary.
The amount of assets under management (AUM) a given expert or firm has dictates whether they register with their state or the SEC. Per the SEC, an advisory company or expert must register with their state if they have less than $100 million AUM. They must file with the SEC if they have more than $110 AUM.
5. Collect Real-life Experience
Having tangible experience working in the field is one of the main cornerstones of becoming an effective financial professional. It puts what a person has learned in college to the test, allowing them to gain exposure to various situations and clients of all ages with different types of needs and net worth. Because of this, racking up on-the-job experience is often a primary requirement within professional programs, such as for the CFA charter and the CFP title. The idea behind working in the field, put simply, is that when a situation arises, an advisor will have the “been there, done that” mentality and be able to reach into their battle-tested toolbox for a solution.
Experience can also come in the form of personal trial and error in finance. Chang notes that he built up a stronger handle on his skills “by putting things into practice, such as preparing tax forms, setting up 401k plans for my small businesses, and buying and selling individual stocks and ETFs in a variety of stock accounts.” He emphasizes that he “had [his] successes and [his] mistakes,” but that he “learned from them both.”
6. Find Clients
One of the final steps is building a base of clients. Because the financial advice industry is a crowded market, this can be challenging. To find clients, an advisor should first understand which clients they want to serve. After this, the goal should become to market themselves in a variety of ways, including:
- Social media
- Building a website that establishes their brand, services, and ideal customer
- Word of mouth through other clients and colleagues
- Building a network in their community (i.e., joining the chamber of commerce, volunteering, etc.)
7. Continue to Learn
Laws, technology, and, by extension, client needs can transform over time. It is for this reason that financial advisors need to continue learning and absorbing information. And, while many programs often include a continuing education requirement, it falls on the person’s shoulders to stay up on everything happening in the industry. Keeping current and aware of market trends, government regulations, and strategies puts an expert in the best position to deliver quality advice to clients.
Frequently Asked Questions
How much money do financial advisors make?
According to the Bureau of Labor Statistics (BLS), the median salary for a financial advisor in 2022 was $95,390 per year. This, of course, can vary based on an array of factors, including location, number of clients, experience, etc. Often, the professionals who are in more demand and have a larger number of years of experience under their belt can command higher salaries. This is especially true if they’re the owner or a high-ranking officer at their firm.
How long does it take to become a financial advisor?
This can vary on several factors, including length of time in college, the credentials a professional gathers, and the licenses they need. As an example, it takes about 18 to 24 months to become a CFP, according to the CFP Board. Including college in the total, though, means it can take up to six years to earn the designation.
Is becoming a financial advisor hard?
Becoming a financial advisor isn’t easy by any stretch. It involves years of diligent studying both in college and when earning designations. On the surface, it may appear like some certifications and titles are straightforward to get — just put in some time and check off the boxes. Underneath these credentials, however, are long hours of work. Potential advisors must have the willingness to learn, a desire to work in finance, and, above all, a passion for helping clients.
Can you switch careers and become a financial advisor?
It’s not uncommon for individuals to pivot from their original career trajectory and then try their hand as a financial advisor. Sometimes, one’s past experiences can help them be more successful in their new role. Stephen Chang, who made the jump from medicine to finance, says he believes his “past experiences,” including owning his own business and being a doctor, “help [him] to connect with [his] clients more strongly than if [he] had gone into this field straight out of school.”
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