Financial Advisor Career: Pros and Cons

Financial Advisor Career: An Overview

Becoming a financial advisor is the same type of career playground you see only rarely. Good (successful) financial advisors bring value to their clients. For that, they can expect almost limitless income, a flexible work schedule, and the freedom to choose a professional niche.

But the career also comes with many challenges. It takes years of effort to build a clientele, and constant attention to navigate the regulatory rigours of the profession. And in good times it’s high-stress work.

Key Takeaways

Other potential benefits include the freedom to earn as much as you want, the luxury to create your own working hours, and the freedom to perfect and mould your way of practising.

The downsides are a high-stress environment, the grind it takes to develop a client base, and the ongoing work it takes to stay in compliance with regulators.

This is a lucrative career, but it’s one with a high burnout rate.

283,060

Number of financial advisors in the U.S. in 2022.

Pros of a Financial Advisor Career

An advisor who has been able to develop a business is well-rewarded. This profession earns a mean annual income of $137,740 nationwide as of May 2022.

But the payoff is hardly limited to compensation. Here is a short list of the major benefits of becoming a financial advisor:

Offering Meaningful Advice

The opportunity to provide valuable advice is unlikely to be at the top of the list of reasons why the young enter the profession, but it might very well be the aspect of it that rewards the most.

Consumers have trouble sorting through the multitude of choice available to them on the marketplace for investments and insurance vehicles, and have trouble assessing which are suitable for themselves and their families. Financial advisers they trust are often the source they seek to help educate them about their options.

What your financial advisor should do for you that can have the most impact on your future is help you make good financial decisions to achieve a healthy financial future. The success of your clients should be the success of your financial advisor.

Unlimited Income Potential

Your earnings are capped only by the length of your work days and your willingness to take on more clients. Most financial advisors are not working for someone. They’re working for themselves. This job has transformed many men and women who had entrepreneurial urges into multimillionaires.

Financial advisors who work on a fee-only basis earn income based on the amount of new business acquired. Some advisors earn commissions based on products they sell. Many advisors, however, are hybrids, earning a mix of both commissions and revenue-generating fees. The structure of these pay scales can be complex, but advisors can earn from six figures to seven figures based on how much new business they bring in each year, as well as the amount of recurring revenue they generate through commissions or fees.

Work Schedule Flexibility

It could be a struggle to balance work and home life – as in any new career – but once an advisor also builds his or her client base, the job allows flexible working hours.

Advisors with experience can time clients’ meetings to fit their own schedules and, as more years pass, work fewer than 40 hours a week.

Creativity in Practice Structure

Financial advisors can be creative in building their client bases.

Some emphasise a generation, designing their practice to baby boomers, or millennials; others specialise in advising Doctors, Lawyers or Entrepreneurs.

They could also specialise in certain areas of personal finance such as investment management, retirement planning or estate planning.

Cons of a Financial Advisor Career

Regardless of whether they’re working independently or for a financial services firm, financial advisors have a number of challenges to deal with, particularly when they’re just starting their careers. Some 15 to 16 per cent of financial advisors stay in the business for four years (according to one financial planning industry site).

High Stress Industry

Not dissimilar to many other sectors of the economy, what goes up for a financial services employee will often go down. And vice versa. The market drives everything that happens in the financial services industry, and what happens in any given financial year for a financial advisor most closely resembles the movement of the market.

Financial advisors manage a client’s fears and emotions around down markets at all times.

Continuous Prospecting

They are driven by her to receive certain monthly budgets to meet.For those firms structured with sales quotas this is an easy point to see. A financial services firm frequently manages its operations based on tallying monthly budgets for its financial advisors, a self-employed advisor has no such excuse, for she is likely in need of business just as urgently.

As long as they do not have a full client base, this actively involves advisors in selling themselves.

Advisors who ultimately quit working in financial services talk of the stress of having to invest the time and money to create and maintain a prospecting system that generates a steady stream of new clients. Growing a book of business in the first place is arguably the hardest part for a new advisor who is starting off with a limited personal network.

Regulatory and Compliance Requirements

Anyone wanting to sell products or give advice to consumers needs a licence, which takes time and study to get.

They also must take a certain amount of continuing education classes every year to maintain their licences, and they must carry errors and omissions insurance throughout their careers.

Staying current with regulations helps protect clients against malpractice, but it is an expensive and laborious undertaking for a financial advisor.

How Does Someone Become a Financial Advisor?

First, you need a bachelor’s degree, preferably in finance or economics.

Your second objective is to get a job on the trading floor of a financial institution who will tolerate apprentice (yes, ‘apprentice’) employees and will support you to become licensed through the Financial Industry Regulatory Authority, securing the relevant permits to work in this highly regulated domain. (Do it yourself? You can, but it’s much harder. And, in any case, you will gain both professional experience and contacts through the job.)

At the same time, however, it is worth thinking about what area or areas of the profession you might want to specialise in. Financial advisors work with their clients in a range of different areas, such as investing and retirement, estate and tax planning, and so on.

What Does a Financial Advisor Do?

This assignment involves developing a personal financial plan over the long term based on personal goals for oneself and one’s family (it might include a budget, savings scheme, investment plan, a retirement savings scheme, and so on).
After a strategy is in place, the advisor is responsible for carrying out the acts that reflect the client’s wishes in attaining the stated goals. These acts might include overseeing the client’s investments and making the needed changes in these investments, and reporting back to the client what has been done on a regular basis.

How Much Does a Financial Advisor Earn?

As of mid-2022, the median annual income across the country for a financial advisor is $137,740, according to figures from the National Bureau of Labor Statistics. It estimates the mean hourly wage for the profession is $66.22.

As expected, compensation varies with region: financial planners tend to be the best paid in Alaska (an annual average of $229,730) and New York (an annual average of $203,070) while in Arkansas (an annual average of $81,450) they earn the least.