Financial advisors play a vital role in guiding clients through a sea of financial decisions. They help folks plan for retirement, manage investments, save for a child's education, and more.
A career in financial services also has the potential to earn you quite a lot of money. Financial management is a career which not only allows for a comfortable lifestyle, but also provides an opportunity to make a significant impact on others’ lives.
So, how to become a financial advisor?
We drew up a roadmap of the steps to become a financial advisor. We cover the necessary education, licensing requirements, and strategies needed to build a successful practice.
Understanding the Role of a Financial Advisor
Before diving into the process of becoming a financial advisor, it's important to comprehend what the role entails.
Job Description and Responsibilities
A personal financial advisor assists clients in managing their finances, providing advice on all sorts of topics. From retirement and estate planning to tax and investment advice, even making insurance recommendations.
Advisors work with clients to understand their financial goals and develop strategic plans to reach them.
Retirement planning
When you think of a financial advisor, creating financial plans is perhaps the first thing that comes to mind.
Using financial planning software (like Planswell’s), you’ll help individuals set themselves up to retire comfortably at a reasonable age.
Planning software will help you identify suitable investment options, tax plan, and estimate future retirement expenses. You’ll also advise clients on potential sources of retirement income, such as Social Security or 401(k) plans.
Estate planning
When it comes to estate planning, a financial advisor's duties are multi-faceted. You’ll guide clients in strategizing the distribution of their wealth and assets after their demise to minimize tax implications and ensure their wishes are fulfilled.
This includes advising on wills, trusts, beneficiary designations, powers of attorney, and healthcare directives. They collaborate with attorneys to ensure legal documents align with the client's intentions.
Financial advisors also review the estate plan periodically or when significant life events occur, such as marriage, divorce, or the birth of a child, to ensure the plan remains optimal for the client's evolving situation
Investment management
In order to successfully manage clients’ investments, you’ll perform an in-depth analysis of their financial goals, risk tolerance, and time horizon.
This will inform the investment strategy you present, as it must align with their goals. Once you have assets under management, you’ll handle the selection, monitoring, and adjustment of a diversified portfolio of assets such as stocks, bonds, mutual funds, and ETFs.
Regular performance reviews are done to ensure the investments are yielding the desired returns and adjustments are made as necessary based on market conditions or changes in the client's financial situation.
Your ultimate goal is to maximize returns while managing the risks involved.
Insurance coverage
You’ll also help clients protect themselves in case of emergencies. You’ll perform a comprehensive review of existing insurance policies — life, health, home, auto, and disability.
Your goal will be to evaluate if the coverage is adequate for the client's needs and circumstances. This involves understanding the client's financial goals, family situation, health condition, and risk profile.
Ultimately, you’ll suggest changes, additions, or consolidation of policies to ensure optimal protection.
Education and Certification Path
What degree for a financial advisor is required? What degrees do financial advisors need? These questions might be swirling in your mind. Let's clarify them.
Bachelor's Degree
Aspiring financial advisors usually need to have a bachelor's degree. The degree for a financial advisor isn't specific; however, fields like finance, economics, accounting, or business can provide foundational knowledge.
Relevant Courses
Consider taking courses in financial planning, estate planning, taxes, risk management, and investment. They’ll equip you with the necessary knowledge to advise clients on diverse financial matters.
Advanced Degrees and Certifications
Earning an MBA or a Master's in Finance can provide a competitive edge. Certifications such as the Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA) can enhance your credibility and make you more marketable.
Gaining Relevant Experience
Experience is a crucial aspect of your journey. Internships and entry-level jobs in finance offer a great start to your career in finance. Having a mentor and building a professional network can greatly enhance your growth and understanding of the industry.
Securing Necessary Licenses and Certifications
OK, so you've acquired the necessary education and gained some experience. Now what? You might ask "Do I need a license to be a financial advisor?"
In fact, you do.
OK, but "What licenses do you need to become a financial advisor?"
FINRA Series 7 and Series 66
These are among the licenses needed to become a financial advisor. The Series 7 license allows you to sell a broad range of securities. The Series 66, on the other hand, qualifies you as both a securities agent and an investment advisor representative.
Certified Financial Planner (CFP) Certification
A CFP designation is a highly respected certification in the financial advisor field. Earning it requires extensive study, passing a comprehensive exam, and meeting other requirements. These include relevant work experience and adherence to a code of ethics.
Other Certifications
Depending on your interest, you might consider other certifications. The Chartered Financial Analyst (CFA) certification for investment analysis, or the Certified Public Accountant (CPA) for tax-related advising, for example.
Continuing Professional Development and Career Growth
As a financial advisor, your learning shouldn't stop. It’s important to stay updated with the latest industry trends and regulations. Joining professional associations is a great way to stay informed, which will help with nurturing client relationships. (That’s integral to your success as a financial advisor.)
Potential Challenges and Overcoming Them
The journey to becoming a financial advisor comes with its challenges. Staying current, building a client base, managing stress, and navigating ethical challenges are some of the hurdles you might face. However, with the right mindset and strategies, these can be overcome.
Now you know what degree do I need to be a financial advisor, and that the answer to "do you need a license to be a financial advisor?" is yes.
Becoming a financial advisor is a journey, one that requires knowledge, skills, and the right attitude. Here's to your success in this rewarding career!
How to Become a Retirement Advisor FAQ
What major do you need to be a financial advisor?
There is no specific degree requirement in order to become a financial advisor. However, certain courses of study can provide job training while still in school that would help you be more successful as a financial professional. Degrees like finance, economics, business administration, and data analytics are all well-aligned to the day-to-day tasks of financial advising.
What exams do financial advisors take?
There are several exams financial advisors must pass in order to earn their advisor license. While state laws can dictate some requirements, there are a few common exams most advisors will need to take:
Series 7
Passing the series 7 exam will allow you to sell basically any financial product: stocks, bonds, options, futures, and packaged securities. The exam is 250 questions long and tests your general knowledge of financial products and markets.
Series 6
In order to sell packaged securities such as annuities or mutual funds, you will need to obtain your series 6 license. The Series 6 exam tests your knowledge of basic topics, such as key job functions, relevant laws and regulations, and making client recommendations.
Series 65
If you’d like to operate as a fee-based advisor (rather than getting paid on commission), you’ll need to pass the series 65 exam. The exam tests your general financial knowledge, but it also includes some ethical questions.
How do you get a financial planning license?
In order to obtain a license as a Certified Financial Planner (CFP), you must meet the following requirements:
- Hold a bachelor’s degree from an accredited college or university and obtain at least 3 years’ relevant work experience.
- Complete a CFP Board certified training program or obtain an advanced degree or certification in a relevant field (CPA, ChFC, CLU, CFA, etc.).
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