Financial advisors are just like a counselor and therapist. Only they are more invested in helping their client’s financial goals. A financial advisor is the one. Who can help their clients build their wealth and achieve their final goals in time.
They are usually a part of a firm (large or small) are independent in their working style. Either way, they are specialized in certain financial advising niche and handle a certain financial account and clientele type. Their daily roles include planning financial budget, implementing the solutions, and reviewing the processes for their clients.
So, if one wants to become a financial advisor. And wants to know what their roles are in detail, read further.
Process of becoming a financial advisor
To pursue any career, there is always a certain path they need to walk on to become successful. Financial advisors can be many types, but the basic plat to become a financial advisor remains the same. The steps to becoming a financial advisor are:
Bachelor’s degree
The very first thing that one needs to complete. While on their way to become a financial advisor is to get a bachelor’s degree. Now, as a financial advisor, one should have a thorough knowledge of finances and accounting. Therefore, pursuing a bachelor’s degree in any financial and business-related program will do just fine.
Do an internship
Now, while one is pursuing their bachelor’s degree. It is better to hone the skills and learn more about the field of finance, investments, and the financial market. And nothing can be more perfect than joining an internship in a financial firm. One can learn a lot many things, about finance, and also learn about financial advisors’ responsibilities and functions. Having an internship will also boost one’s resume and will show a certain experience. Which will be a positive point while getting a permanent job.
Get licensed and certified
Many want to be a financial advisor. And that is why the amount of competition in this field is ever increasing. Therefore, one must take their time to get certified and licensed. Certifications and licenses can be acquired anytime, and there is not a particular timeline to it. One can get a job and then get certified and licensed. Or can get certified right after getting their bachelor’s degree. Licenses and certifications help one to become more specialized. And have a clear niche in this big world of financial advisory.
One can pursue:
- Insurance licenses
- Securities licenses
- CFA (chartered financial analyst)
- CFP (chartered financial planner)
Get a job in the field and work for a firm that specializes in financial advising. To create a better portfolio and a strong field reputation. Also, one should keep learning even while one is working. This will help gain more knowledge, and that will help in advising the clients in the right way.
What Does a Financial Advisor Do?
When one hears about a financial advisor. The first thing that comes to one’s mind is that they are the ones who advise. And plan the finances of their clients. It is true to an extent. But one cannot draw the function of financial advisors in such a general way; they have way more specializations and diversity in their work than understood.
In general, a financial advisor is the one who helps in planning the finances. Reducing the financial risks, and grow one’s wealth with proper wealth management in a loner period. They are the ones who will help their client in achieving their long term financial goals.
A financial advisor can have different roles, as they can be a financial planner. Tax advisor, investment advisor, financial coach, or wealth managers.
Some of the functions and roles that financial advisors take up are:
Budgeting:
Financial advisors help in reaching one’s long term financial goals by helping in creating the right financial budget. They help in allocating money in the right place and create a zero-based budget. Which will help in achieving a certain goal at the right time. They are financial coaches who help their clients see the bigger picture and help them reach them financially.
Managing debt:
Debt is something that can ruin one’s financial goals. Therefore there is always an urgency in handling the debt in the right manner to avoid any complications. Financial advisors help in managing the debt and planning. The finances in the right way to avoid digging a deeper debt hole.
Estate planning:
One of the major decisions that one needs to take about their retirement is what to do with the assets. A financial advisor can work towards a better wealth management plan to chalk out a plan regarding one’s assets. They will advise their clients regarding what is good for them and their families. Financial advisors also help with retirement planning by projecting. The proper financial needs of the future, so that one can invest the right way to build wealth.
Insurance advising:
Insurance policies are a major requirement in today’s world. To minimize the financial risks and to make sure that one will not have to pay out of their pockets. When in an emergency, there is always a need for the right insurance. Financial advisors can help get the right term policy, health policy, etc. That will fit their client’s requirements and financial position.
Tax planning:
Dealing with taxes and understanding the details can be very overwhelming. The best thing about a financial advisor is that they have complete knowledge of the taxes, and they can help their clients understand the proceeding in a way that they can understand, sans the jargon. They can help in managing taxes, using the tax break, make the right donations, and overall help reducing the tax burden.
Investment planning:
Lastly, the financial advisors are the true experts on investment. They can help build wealth by creating the right portfolio with the right mix of investment instruments. Whether a person should buy bonds, or shares or get mutual funds, everything is planned and guided by a financial advisor. They have the market knowledge and have vast information regarding the regulations, which is used to help their clients pick the right security and instruments for their future.
Types of Financial Advisors
Finding the right financial advisor is very important if one wants to make the right decisions regarding their money. People need to find the right advisor because if not, then they may invest money in the wrong place and that may lead to major financial problems in the future.
Choosing the right financial advisor is subject to certain factors like:
- Is it the financial objective?
- What are their fees?
- Is it their experience?
- What are the licenses and certifications they hold
In general, there are 4 types of financial advisors to choose from:
Dually registered or independent financial advisor.
They sell and manage various securities, investment products, and assets to the clients. They are independent but are affiliated by any brokerage company. And they are ones who offer securities through a firm and for that they charge a fee. They either charge fees or a certain percentage of the assets that they handled. In certain investment products, they may charge commissions as well.
Financial brokers
They are also known as registered representatives of broker dealing firms. So,they sell various types of investment products and financial instruments like insurance, annuity, mutual funds, etc. for what they sell; they get a commission on the product. Other than the commission, the brokers also geta an annual fee, which is calculated based on the overall portfolios market value. Also, the brokers do not fall into the fiduciary regulatory standards.
The hourly planners
These are general financial planners who advise on financial products and decisions, but they do not go around managing the assets. They provide hourly service to their clients and thus are called as hourly planners. They will help in reviewing the current portfolio and investments, tax returns, allocation of money, insurance coverages, etc. These services are perfect for those who can handle their investments and have limited assets.
Fee-only fiduciary
These financial advisors are the ones who get fees for their services from their clients. They do not get paid in commissions, and that is they make sure that they give the best of the advice to their clients. Fee-only fiduciaries can be a part of a small firm or a big firm, and they help with complete financial planning and advising. Most of the time, their fees can either be based on a certain percentage of managed assets or can be a retainer fee.
Other than these advisors there are also certain others to count for:
- Wirehouse financial advisors
- Bank financial advisors
- Private bankers
- RIA’s
- Investment advisor
- CFA and CFP’s etc.
Licenses for Financial Advisors
After one gets their bachelor’s degree and gets the required qualification in subjects that is relevant to becoming a financial advisor, one will have acquired a certain number of licenses. These licenses are crucial because they will allow one to advise their clients without the licenses, one cannot give any financial advice to any clients.
Depending on how one works, like, whether one works with a larger firm or a smaller firm, there are a bunch of licenses that one will have to get. However, getting these licenses is not an easy task. One will have to appear in different exams designed by NASAA and regulated by FINRA and will have to pass them to become eligible for a license. Each exam is for a certain type fo financial advising niche and provides a license to advise in the same circle of clientele.
Some of these financial advising licenses are :
- Series 6 license
- To get this license, one will have to appear in the investment company/ variable contracts products limited representative exam.
- The exam will encompass job functionalities of a securities advisor, including regulatory fundamentals, evaluation of customer’s info, develop business, and handle accounts of purchase-related to securities.
- This license is basically a securities license. To appear in the exam and to get the license, one will have to sponsored by the self-regulatory organization (SRO) or by any firm that is a member of FINRA.
- This license allows a financial advisor to sell various financial products like:
- Municipal fund securities
- Mutual funds
- Unit investment trusts
- Variable life insurances
- Variable annuities
- Series 7 license
- To get this license, one will have to appear in the general securities representative (GS) qualification exam.
- The exam will check one’s knowledge of the general securities, which will encompass topics like variable annuities/options, sales of municipal, corporate, and investment co. securities along with government securities, etc.
- This is a general securities representative license. And to appear in the exam, one will have to be sponsored by SRO or FINRA regulated firm.
- Also, to get licensed, along with the series 7 exam, one needs to pass the securities industry essentials exam (SIE).
- Series 66 license
- Series 66 license exam is to check the knowledge of a candidate reading the laws, guidelines, regulations, and prohibition of the unethical business procedures.
- The exam also covers topics related to investment vehicles like business information, economic factors, client investment strategies, and recommendations.
- To appear in this exam, one should have a series 7 license or should be appearing in the series 7 exams. Also, one can take a series 65 series exams, if not series 7.
- The candidate need not be sponsored by any form or regulatory association for getting the license.
- Series 65 license
- This license is required for those advisers who will not be paid in commission but fees in a state.
- This is a FINRA sponsored exam. Also, the candidate does not require any sponsorship from any firm to appear.
- The exam will encompass topics of investment and its general practices. It will also ask questions regarding laws and regulations in the field of investment.
- Series 63 license
- This license is for those who want to be security agents and advisors withing state borders. For the exam for sponsorship is required by any firm.
- Having these licenses means one can buy and sell securities like variable annuities, mutual funds, bonds, stocks, etc.
- The exam covers topics related to securities and other state regulations imposed on the securities.
Final Words
Becoming a financial advisor takes time and patience, along with lots of hard work. One should be ready to work continuously towards learning more about the financial market and opportunities. This will help them reach out to the clients in a more informed way, and will also help in advising their clients productively. One needs to have an interest in communicating with people, selling products, and have a helping demeanor towards their clients to become successful.
