How to become a financial advisor
Do you have a passion for finance and helping others navigate their financial journeys? If so, becoming a financial advisor might be a great career choice.
Financial advisors and financial planners play a crucial role in helping people and businesses in making smart decisions about their money. Whether it's providing investment advice, retirement planning, or estate planning, financial professionals have a lot to offer.
But how do you become a financial advisor? And what could set you apart from others in this role? In this article, we'll explore the steps you need to take to make this profession your reality. We'll discuss:
- The responsibilities of a financial advisor
- The necessary licenses to obtain
- The time it takes to become one
- Important factors to consider before pursuing this career path
If you're ready to learn how to become a financial advisor, let's dive in!
What does a financial advisor do?
The term "financial advisor" usually refers to a registered financial professional (or, to use the technical term, a registered representative).
By contrast, the term “investment adviser” is a legal term that refers to an individual or company that’s registered as such with either the Securities and Exchange Commission (SEC), or a state securities regulator. When properly registered and licensed some key services provided could include:
1. Financial planning
Financial advisors that assist in creating personalized financial plans could be a registered investment professional, an investment adviser, or both - depending on the licenses they hold. Financial plans are typically based on many factors, including the client’s:
- Goals
- Risk tolerance
- Income
- Expenses
- Assets
- Liabilities
- Time horizon
With this information, a financial professional can develop strategies with the goal of achieving someone’s unique financial goals.
2. Investment advice
Financial advisors often offer advice on investment options such as stocks, bonds, mutual funds, and real estate. Depending on the type of investment being discussed, the financial advisor is required to obtain specific licensing, which we'll come back to later.
They sometimes assess market conditions, conduct research, and recommend suitable investment opportunities in an effort to help clients grow their wealth.
3. Retirement planning
Financial advisors sometimes also help individuals plan for a secure and comfortable retirement. They might assess retirement savings, estimate future income needs, and develop strategies geared towards maximizing savings for retirement. Some can even assist in determining the best time and best states to retire.
4. Risk management
Financial advisors often evaluate potential portfolio risk and develop strategies to mitigate them. When licensed as an insurance agent, they may recommend insurance options, such as life insurance, health insurance, and disability insurance, to help protect clients and their assets.
5. Estate planning
Financial advisors may be able to assist clients and their attorneys in creating an estate plan to distribute assets and manage tax liabilities after their passing. They may help with creating wills, establishing trusts, and ensuring a smooth transfer of wealth. While financial advisors can be a valuable resource in estate planning, they are not legal professionals and clients should always consult their lawyers when engaging in estate planning.
6. Tax planning
Some financial advisors can assist clients in minimizing tax liabilities by strategizing income needs, and working with other specialists to find ways to help clients keep more of their hard-earned retirement dollars.
Successful financial advisors build trust and credibility not just with their clients, but throughout their communities. They shouldn’t approach financial planning from a templated, one-size-fits-all approach. They get to know their clients’ unique needs and create a financial plan from there.
What credentials does a financial advisor need?
Now that you know how a financial advisor’s expertise, knowledge, and personalized approach make them valuable in the financial space, let’s go over the licenses they are required to have.
Aspiring financial advisors must acquire these licenses to legally provide professional financial advice. These licenses ensure that advisors have met the necessary regulatory qualifications and possess the basic knowledge required to guide individuals and businesses in making investment decisions.
There are several types of licenses they might need, depending on the services they offer and the products they sell. The most common licenses include:
SIE (Security Industry Essentials): This introductory-level exam assesses a candidate’s knowledge of basic securities industry information. In order to become registered to engage in securities business, an individual must pass the SIE and a qualification exam appropriate for the type of business the individual will engage in.
North America Securities Adminstrators Association (NASAA) Series 66: This license is designed to qualify candidates as both securities agents and investment adviser representatives. It covers topics that have been determined to be necessary to provide investment advice and effect securities transactions for clients. However, to register as an investment adviser representative based on the Series 66, an individual must also have passed the FINRA Series 7 exam and the exam must be valid (i.e., not expired).
Life and Health Insurance License: Advisors who offer insurance products like life insurance, annuities and health insurance must obtain this license.
The licensing process involves fulfilling specific requirements set by regulatory authorities. Financial advisors typically need to pass exams related to the licenses they’re going for. These exams assess their understanding of financial concepts, industry regulations, and ethical guidelines.
In addition to passing exams, advisors may need to meet education and experience requirements. These requirements may vary depending on the license and the state in which the advisor operates. Some licenses may also require ongoing continuing education to maintain the license.
Obtaining these licenses are not only required, but they’re also beneficial to their business. These licenses demonstrate a level of credibility and professionalism to clients. While these licenses are not an endorsement from any regulatory agency, like FINRA or the SEC, clients might feel more confident seeking advice from licensed advisors, knowing that they have met certain standards.
How to become a financial advisor
Here’s a step-by-step checklist on how to become a financial advisor:
1. Obtain your education and qualifications.
Many financial advisors hold a bachelor's degree in finance, economics, business, or a related field. While not required, obtaining a master's degree or professional certification can enhance your credibility and open up more opportunities.
2. Earn your required license(s).
Financial advisors are required to obtain the necessary licenses to practice. This typically includes passing exams such as the SIE, Series 7 and Series 66 exams administered by the Financial Industry Regulatory Authority (FINRA).
3. Get professional experience.
Building experience in the finance industry is crucial to becoming a successful financial advisor. Consider internships, entry-level positions, or volunteering at financial institutions to gain practical knowledge and skills.
4. Skills and Attributes.
To excel as a financial advisor, you need a combination of technical skills and personal attributes. Strong analytical skills, attention to detail, and good communication skills are essential. Additionally, having a deep understanding of investment strategies, tax laws, and financial planning tools is crucial.
5. Continue learning throughout your career.
Becoming a financial advisor requires a commitment to continuous learning and staying updated with industry trends.
How long does it take to become a financial advisor?
When considering a career as a financial advisor, an important factor is how long it takes to get there – which depends on a variety of factors.
Although there are no formal educational requirements to sit for the FINRA exams, advisors may need to meet their employer’s education and experience requirements. typically a financial advisor will earn a bachelor’s degree in business, economics, or a related field. This undergraduate degree usually takes around four years to complete. However, some aspiring financial advisors may already have a relevant bachelor's degree, which can shorten the overall time required.
After completing a bachelor's degree, many potential advisors often pursue additional education and certifications. This can include obtaining a Master of Business Administration (MBA) with a focus on finance or completing the CERTIFIED FINANCIAL PLANNER® program. These programs can take anywhere from one to three years to complete, depending on the individual's schedule and program structure.
If you’re looking to expedite your path to becoming a financial advisor, accelerated programs are available. These programs are designed to condense the educational requirements into a shorter timeframe, allowing individuals to enter the profession more quickly. Accelerated programs may offer intensive coursework, flexible schedules, or a combination of both Ultimately, the time it takes to become a financial advisor will vary depending on individual circumstances and choices. It's important to carefully consider the educational path that aligns with your goals and commitments. By investing the necessary time and effort, you can position yourself for a rewarding career as a financial advisor.
What to consider before becoming a financial advisor
Before you set out to become a financial advisor, it’s important to consider if this is the right career for you. You can make a good living, but it does require a unique set of skills and qualities. First, ask yourself:
- Do I have strong analytical skills?
- Do I enjoy working with clients?
- Am I good at making complex topics easy to understand?
- Will I enjoy continuing my education and staying up-to-date with market trends?
- Do I build a good rapport with people?
If your answers are “yes,” you could be on the right track.
Don’t be afraid to interview professionals in the field and get their take on the job. Hopefully all of this can help you make an informed decision on whether or not becoming a financial advisor is right for you.
At Jackson, we love working with financial professionals. Learn more about who we are and how we can help retirees and pre-retirees.