In today’s complicated world of personal finance, financial advisors play a key role. They provide advice and insight for clients on many aspects of personal finance, including investments, insurance and estate planning. According to the U.S. Bureau of Labor Statistics, there are more than 270,000 financial advisors working in the United States, making it one of the more popular jobs available in the financial sector.
The financial advising field allows potential advisors to either have a general role with clients or work in a more specific section of the job field. With money and debt spread across many assets, such as a house, cars and a retirement fund, it’s never been more important for people to pursue valuable advice on how to manage their wealth.
What is a Financial Advisor?
Within the industry, there are four basic types of financial advisors; registered representatives, financial planners, financial advisors and money managers.
Registered representatives, who are sometimes called stockbrokers, are paid commission from their employers to sell investments and insurance products to customers. Stockbrokers are often employed by banks or investment funds such as Merril Lynch and Goldman Sachs, and many of these representatives charge fees “based on the market value” of a costumer’s portfolio, In addition, stockbrokers’ commissions could go rise or fall depending on how many trades are commissioned through their employer or client.
Financial planners, or independent advisors, provide financial counseling and can also execute trades as a stockbroker. These advisors could work for a tax or accounting business or work independently. Financial planners don’t specifically have any licensing requirements, but many have either CFP (certified financial planner), CPA/PFS (certified public accountant/personal financial specialist) or ChFC (chartered financial consultant) certifications.
Registered Investment Advisors
Registered investment advisors (RIAs) or investment advisor representatives (IARs) help customers across the financial spectrum, from family budgeting to investment management. They offer their services to clients for a flat-rate fee and usually have a fiduciary, meaning that they act in the client’s best interest.
Money managers are similar to RIAs and IARs, with the main difference that they can act on a customer’s behalf without advanced approval. Money managers develop personalized investment strategies for their clients and can make changes to portfolios without asking for permission first. With asset-based fees as opposed to fees per trade, money managers are incentivized to grow their client’s portfolios, so both receive a return on its investment. Managers, who often hold a CFA designation, have the experience, expertise and resources from years in the financial industry that can help them make successful investment decisions on a client’s behalf.
They check the liquidity of each account daily, and managers can use their expertise to administer a customer’s portfolio, ensuring that it is set up for a positive rate of return.
How Do You Become a Financial Advisor?
Advisors often have at least a bachelor’s degree, usually in a business discipline such as finance or economics. Once graduated and hired, financial advisors receive extensive on-the-job training as they begin their professional careers by building their client base. From there, they can learn about generating successful investment portfolios for their customers.
Nearly all financial advisors are recommended to acquire a licenses and certifications, which ensure the highest ethical standards and enhance an advisor’s reputation. Licenses are issued by a number of organizations, including the Financial Industry Regulatory Authority (FINRA) and the National Association of Personal Financial Advisors (NAPFA). The Series 6 and Series 7 licenses from FINRA are the gold standard for financial advisors working in securities and exchange, while personal financial advisors are recommended to hold either a CFP, PFC, ChFC or CFA (chartered financial analyst). It can take multiple years to acquire these licenses and certificates, so it’s important to start early.
Financial advisors can also improve their personal credentials with a master’s degree in finance or business administration, potentially moving into a management position within an investment firm.
Become a Financial Advisor
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Salary and Career Outlook
Compensation rates for financial advisors range depending on where they live and work, but they typically earn more than the average income level for most areas. Although different advisors can offer different fees, the median annual wage for a personal financial advisor in May 2017 was $90,640. For financial advisors working in the securities and exchange sector, the median annual wage was nearly six figures. In addition to base annual salary, advisors who work for financial firms often earn bonuses in addition to annual compensation.
With America’s large baby boomer population reaching retirement age, it’s expected that many of them will be looking to financial advisors to help manage their retirement and savings accounts. The BLS projects personal financial advisors to grow by a robust rate of 15 percent between 2016 and 2026. The BLS’ projected growth is more than twice the national average, with 40,400 new financial advising jobs expected to be added to the work force. Part of the BLS’ basis for its projections is the decline of pensions offered in both the public and private sectors, forcing individuals to save money themselves for retirement. These individuals are expected to request help from financial advisors to manage their assets as they age.
A recent study found that less than half of American adults over 30 can explain what a 401(k) retirement account is, despite the fact that in 2015, around 54 million American workers had 401(k) accounts. Financial illiteracy is a negative trend that is only growing, leading many people to reach out to financial advisors for guidance and counseling with wealth and retirement management. As a financial advisor, you’d be providing a public good that can help keep people on their feet and away from bankruptcy and homelessness with fiscally responsible decisions.
Before you can become a financial advisor, you need a bachelor’s degree, like the online business degree from Notre Dame of Maryland University. Our bachelor’s degree program provides you with the skills and knowledge you need to move right into the workforce as a financial advisor. Plus, you can take advantage of our fully online format, which allows you to balance your education with your busy life.