Ever since I wrote about my day job and told you the difference between a CFP vs a CFA, I receive emails on a continuous basis from readers about becoming a financial planner. Today, I’ll try to answer most of these questions with some kind of “reference” for all students who love personal finance as well for all those thinking of a career change… that will pay the bills big time!
A while ago (back in 2008!), I wrote a quick piece about how to become a financial planner. The article was short and sweet and today I think there is more to add now that I’ve been one for the past 6 years.
I’m pretty sure school requirements differ from one country to another but generally, you need a bachelor’s degree. If you have one in finance or at least a certificate in financial planning, that would be ideal! If not, I think the certificate in financial planning is enough to pass the CFP exam in most places.
A financial planner usually deals with wealthy clients; therefore, it’s kind of stupid to think you will be able to impress your clients with a simple certificate in financial planning. This is why I strongly suggest getting a bachelor’s degree. I personally decided to complete an MBA to add more letters to my business card but that’s a choice ;-). If you are going for a master’s degree and you are not afraid of working, a master in taxation could be even better (most people hate paying taxes and they would love someone who can manage to save a few bucks through tax optimization).
Once you have your certificate in financial planning, you are not done yet. You need a professional title called the CFP (Certified Financial Planner). You can read more about the certification process at the CFP Board (US), Canadian Securities Institute (Canadian, duh!) and IQPF (Quebec). This certification make sure you know the basics in all the financial planning fields:
1. Estate Planning
2. Personal Finance
5. Legal Aspects
6. Retirement Planning
You don’t need to be a pro in all fields. Your role as a financial planner is like a family doctor; you look at your clients’ financial situation and deliver a diagnostic on all 7 fields. Then, if there is a need for a professional to step in (like a lawyer, accountant, insurance rep, etc), you can refer your client to the specialist.
It is good that you have your own specialization. If you are very strong in one or two aspects of financial planning, this will give you an edge against your competitors and will also help you with sales. On my side, I’ve decided to focus on investments, credit (personal finance) as well as retirement planning. I also have good knowledge of taxation and insurance. But my USP (Unique Selling Proposition) is based on Honesty, Efficiency and Proactivity.
Now that you have a certificate in financial planning and your CFP title, there is another big decision to make: Investments or Insurance?
Ideally, you will need an investment license or life insurance license. If you want to be self-employed, you can even get both! But to start, I suggest you get one or the other and start with one specialization. This is a lot of stuff to learn and doing everything at the same time is not always a good option. If you plan to start your career in a bank, you will need the investment license and won’t be able to use a life insurance license (this is the case in Canada, I’m not sure about the US).
In addition to the following, I suggest:
#1 a Bachelor’s degree
#2 a Specialization in at least 2 fields
#3 a Master’s degree
If you have read everything above and are still with me, that’s a good sign. Advising people about their personal finance should not be taken lightly and this is why it is important to study hard and acquire as much financial knowledge as possible. Now…. Is a Financial Planner a used car salesman or a professional advisor?
Like it or not, sales is a part of the job when you are a financial planner. But you are not selling what you think. The point is not to sell a financial product. The point is to sell your vision, your knowledge, your trustworthiness. If you can sell yourself as a professional advisor, your clients will want to do business with you.
It has nothing to do with products, nothing to do with your best rate. It’s all about trust.
If you are capable of selling yourself, the sales part will be done. So if you hate selling stuff, don’t worry, good financial planners are not salesmen.
That’s a tricky question in this field since you can be self-employed or work for a firm. And you can be 100% commissions, 50/50 (or any other kind of mix between commission and base salary), base salary only or fee based (independent financial planner specialized in writing financial plans where you pay for the plan only).
According to the US Bureau of Labor Statistic, a CFP makes anywhere between $100,000 and $168,000, bonuses and commissions included (I got the stats here).
From my own experience, a CFP can start with a base salary of roughly $50,000 to $60,000 depending on his background (and level of commissions). If you have a high commission payout, your base salary will be lower (duh!). At the end of our first year, you should bring in around $60,000 to $80,000 if you are good at your job. Here’s how much I made from this job per year:
2008: $64,000 (worked 9 months as financial planner)
2013 (estimated): $100,000
*if you have followed my blog for a while, you probably remember the article about the chronology of my income. The amounts differ since the previous article included my employee benefits along with my online income.
As you can see, I had built my portfolio from 2008 to 2011 then I moved to another job closer to where I live. I had to start a new book of clients and this is why my income in 2012 and 2013 has decreased to roughly $100K. Still, it’s a pretty good income as you can see and it is fairly stable over time. I expect to see the numbers growing in the upcoming years. Since I work with a base income structure, I don’t expect to make more than $150K per year.
If you go the self-employed route, you can go anywhere from $20,000 to $1,000,000 per year and even more. This is not BS or a sales pitch, I’ve seen notices of assessment (Gov’t verified revenue) showing over $1M from a top adviser. But the guy was bringing in between $25M and $50M per year in his book.
As I’ve mentioned before, this is up to you to become a car salesman or not. Some people like more money than their clients and this is obviously an easy job to make tons of money if you keep on selling. I’ve met true salesmen during my career and they are making a lot of money. While compliance has become very important in this field, it doesn’t mean that some people prefer to push highly paid financial products down their clients’ throats while following the rules.
The good news is that you don’t need to be like that to make a good living. If you advise your clients and truly work for them, the money will come. The only difference is that you may not be a shooting star the first year, but income will gradually increase year after year. The best part is that the job becomes a lot easier once your portfolio is established and your clients trust you. Even better, at one point, they will refer their friends and family to you and the cold call sessions will become history!
Therefore, I suggest you become a personal finance superhero for your clients instead of another car salesman. It will pay over time!
If you want to have an idea of my day at work, I’ve already covered what a financial planner does, but it goes beyond that. I’m not ready to tell you that it’s one of the toughest jobs on earth (far from it) but it’s not as easy and glamorous as you think.
#1 There are tons of paperwork
#2 You will be told “no” by prospects almost everyday
#3 You will have fight to get new clients, and fight again to keep them away from competition
#4 You will have to comfort your clients during market volatility
#5 You will have to face angry people when it doesn’t go well and there is nothing you can do about it
#6 You will face the pressure of “selling” while you need to advise clients
Going to the latest point, the pressure of selling will come regardless if you are self-employed or if you work for a firm. For self-employed financial planners, the pressure comes from their commission statement. As self-employed, you will probably be 100% commission base. Therefore, no sales means no pay check. If you are not sitting on a comfy emergency fund, you might find this situation uncomfortable.
If you work for a firm, you will get monthly (I’ve even seen weekly) performance reports of everybody on your team. You don’t want to fall into the last spots. Your boss may ask you how many calls, meetings, plans you have done in your week. What is coming next and how your “pipeline” (list of potential deals to be closed shortly) looks.
Overall, the financial industry is not made for the faint of heart. If you bring the numbers in, you are a superstar. If you don’t, well, maybe it’s time for you to look for another job.
Some places are more edgy than others, I can only advise you to meet with a few branch manager so you can gauge which one prefers to serve their clients well vs the one who prefers to see the money first. You can usually tell which one is which after your 1hr interview.
As a final note on this exhaustive article, I thought of sharing a few CFP fast track tips. I believe I’ve accomplished some serious achievements during my career as a CFP and I should share them with you.
If you are not ready to make the big jump towards a 100% commission job, I suggest you start out working for a bank. You will get a great base income, employee benefits and additional commissions if you are a good financial planner. I’ve learned a lot by working for a bank. The best part is that you have the time to learn even if you don’t bring in the money the first month, you still receive a pay check!
Regardless if you are going self-employed or for a bank, it is important to choose a reputable firm. Clients are more likely to trust you if you work for a known institution then if you work for John Doe investing Inc. It makes your first approach easier (remember my Primerica reviews)….
I’ll be honest; there are tons of competitors out there. What makes you a better CFP than the guy with the same suit and the same tie next door? Your USP will make the difference. Find out what you are truly good at, prepare your speech and be interesting. This is why it is so important to be strong in a few fields of financial planning where your clients will see you as an expert. You have to become #1 on their list for anything related to money.
Asking for references from your clients is never easy. But when you do something awesome and truly help your clients, it’s easy to only suggest: “Do you like what I’ve done for you? Don’t you think you can let your friends benefit from it too?”. People tend to hang around with the other individuals in the same social demographic situation. Therefore, if you hit someone with $500,000 to invest, chances are that this guy has a few friends in a similar situation. Don’t ask for referrals, ask your client how you can help his friends as you helped him.
I remember when I started my career; my assistant was complaining that I was doing too much for my clients. That it was up to them to do this or that and not me or… her! But this is exactly the point: going the extra mile will make you a superhero for your client. People refer their contacts to someone who provided a wow experience, not to someone who did an okay or a good experience. If you can flabbergast your client, you will have more money coming in!
Don’t think you do too much for your clients, you can always do more!
All right! I’m pretty much done with all I have to share with you about becoming a financial planner. I can tell you that it’s the perfect job for me and that I truly like it. If you have any questions, it’s the time to share them with your comments
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