How to Become a Financial Advisor (or Planner)

Financial AdvisorThere are a lot of folks asking how to become a financial advisor (or financial planner).

How do I know? Because not long ago, I was the one asking that question.

Since then, I’ve entered my PhD program in Personal Financial Planning and I’ve done a good bit of research on the subject which led me to produce this article.

What is a Financial Advisor?

There is no simple definition for the financial advisor (often called financial planner). Loosely, it’s anyone who provides financial advice, investment management, or brokerage deals in exchange for money.

There is no particular path that leads to the title “financial advisor.” Some advisors have advanced graduate degrees related to financial planning or economics, while others have no formal college education.

“Financial advisor” could refer to a licensed stockbroker, registered investment advisor (RIA), insurance agent, CPA tax professional, estate planner, banker, or some quack who watches Mad Money on CNBC all day long.

This is problematic for the public because they don’t know who to trust for financial advice. Seemingly anyone can call himself a financial advisor.

There is some regulation and generally speaking, the individuals who call themselves financial advisors fall into 2 categories. Registered investment advisors (RIAs) or licensed stockbrokers.


  • (Also called a registered representative) To become a licensed stock broker one must pass the series 7 and series 63 FINRA exams while being associated with a brokerage firm. Some insurance agents sell securities and are required to pass other exams.
  • A broker typically makes money on commissions from the sale of stocks, mutual funds, or other securities to investors.
  • I don’t think the commission based brokerage route is the best option for those looking to become an advisor. It can create a conflict of interest with clients based on the nature of commission based compensation.
  • If I’m giving investment advice as a broker, will I recommend the security that provides me the greatest commission over the one in your best interest?

Registered Investment Advisor (RIA)

  • To become a registered investment advisor (RIA), one must pass the series 65 exam.
  • Most RIAs charge an upfront fee in exchange for investment advice or ongoing asset management.
  • After passing the exam, and before charging for advice, RIAs must register with either the SEC or the home state in which they do business. Where they register will depend upon the scope of their business and the amount of assets they have under management.
  • If there is no commission to make, an investment recommendation should be in the best interest of the client. This is the model that typically makes the most sense for independent financial advisors.
  • Advisors who hold the following designations do not have to pass the series 65 exam in order to give paid investment advice. The reason being that these designations require more knowledge and a more comprehensive exam.

How to Become a Financial Advisor

Passing the Series 65 exam will not make you qualified to manage millions of dollars or write comprehensive financial plans. It’s a fairly simple test that covers the basics.

As stated above, there are no formal educational requirements to become a Registered Investment Advisor or a stockbroker, but certain education can certainly help distinguish an individual.

A degree in personal financial planning is a good option. Colleges and universities all over the country now offer degree options that also satisfy the educational requirements of the Certified Financial Planning (CFP) board, allowing students to take the CFP exam and work towards the Certified Financial Planner (CFP) designation (Read my article on how to become a Certified Financial Planner). It seems that the CFP designation is becoming the norm inside the financial planning industry.

There are quite a few masters programs now dedicated to financial planning and even a few PhD programs like the one I’m currently enrolled in. The CFA, CLU, and ChFC are popular financial designations as well.

How Do You Make Money?

There are a couple of compensation models for financial advisors as I hinted at above.

Commission Based

Many brokers make money solely from commissions earned on the products they sell. Again, they must hold licenses beyond the series 65 or CFP if they sell securities.

As I stated above, because these advisors are paid exclusively from commissions, some may be inclined to sell a product when it’s not in the best interest of the client, or to upsell a product with a higher commission when it’s not necessarily the best option available. Some insurance sales pay a commission equal to 100% of the first years premium!

Fee Based

This model allows an advisor to charge a fee for investment advice while also allowing commissions to be made on product sales. Some advisors charge an hourly rate, or a monthly rate, or a flat fee for a comprehensive plan. There is no one size fits all fee model.

The commission earned on sales is still a potential problem here.

Fee Only

As the name states, these advisors make no commissions. They charge a flat rate or an hourly rate in exchange for fiduciary investment advice.

If you go the fee only route, you won’t sell securities for a commission, but you’ll have to quickly learn how to sell yourself!

Assets Under Management

Some Advisors actively manage money for clients and charge them a percentage of their assets under management each year (typically 0.5% to 2%). This compensation model can be beneficial to client and advisor. If the advisor doubles the client’s money, then the percentage made will be doubled as well. Advisors should still act in the best interest of their clients, not chase the highest returns.

Available Jobs

Beyond education, experience is a big part of becoming a financial advisor. Once you’ve studied and passed your exam, you have a couple of options to earn a living.

Mega Brokerages

For those without any designations or an advanced degree, often the only place willing to hire are insurance companies or big brokerage firms. These firms typically ask you to meet unreasonable sales quotas each month. It’s all about cold calling and convincing family members to buy a security that makes you a small commission and the firm a bigger commission.

This is no way to earn a living. Most folks are miserable and quit within 3 months. Others are forced to forget about fiduciary standards (promising to hold the client’s best interest above your bottom line).


I’ve read mixed reviews about banks. At one point, they often took care of advisors and paired them with willing clients who were treated right. That could be a rewarding route, assuming the investment advice isn’t based on earning a commission.

On the other hand, many recent reports tend to agree that banks are now seemingly all about the commission.  As an advisor, it’s more cold calling and hard selling which isn’t much better than the big brokerage firms.

Small Financial Planning Firms

This is a good route for advisors, but usually requires a degree in financial planning and/or one of the advanced designations (commonly the CFP). Sometimes smaller financial planning firms are called “boutique firms.” They are commonly fee based or fee only. Some of these firms will treat you well and allow you to work under a mentor who can teach you the ropes of the business.

Start Your Own Firm

You can also immediately start your own firm. It can be tough without any formal experience, but many have gone that route. It allows flexibility and high earning potential. Building a client base can be very difficult from scratch and still requires a lot of networking.


With a masters degree or higher, there are teaching opportunities at local colleges and universities. Teaching experience also satisfies the work experience required by the CFP board to carry the CFP designation.

Wrap Up

The route to becoming a financial adviser can be difficult but rewarding. Building a client base is never easy and requires a lot of hard work. You will certainly be rejected by some clients and might struggle to earn a decent wage if you start a firm from scratch.

On the other hand, established advisors are usually rewarded with a very well-paying career. In addition to the earning potential, advisors can help clients achieve their financial goals and dreams. It’s hard to beat the ability to earn a good living while helping others.

There are several personality traits that most successful advisors share. These include sales and people skills (yes, you have to sell yourself even if you don’t sell securities!), basic math skills, business acumen, and loads of self motivation.

I hope I’ve answered your question on how to become a financial advisor. Did I miss anything?

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