From taxes to retirement: Everything to know about the evolving role of financial advisers
Whether you’re worried about tax liabilities, focused on estate planning, saving for college, or preparing for retirement, a professional financial adviser can be an important guide.
“You need to find somebody you can trust,’’ said Brad Sanders, director of personal wealth management at Stonebridge Financial Group.
If you’re interested in preparing people for these key money moments in their lives, the following information will help you get started as a financial adviser.
As Americans face inflation, rising interest rates, and a lack of affordable housing, financial advisers can help the everyday investor navigate these choppy financial waters and set a course for success.
Years ago, advisers were people who sold financial products and services for banks and insurance companies. But as the number of potential investments has increased and the disappearance of pensions requires more employees to be proactive about saving for retirement, the role of financial advisers has evolved as well.
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Today, financial advisers offer expertise and advice that their clients pay for. And they don’t just crunch numbers. They spend time meeting with their clients to get a sense of their goals, and to create a game plan for achieving them.
Qualifications for the job
“You don’t have to have an MBA to be a financial adviser,” said Michael Kitces, head of planning strategy at Buckingham Wealth Partners in Reston, Virginia. “But a college degree is usually necessary.”
“The entry pathway is typically to earn certified financial planner certification, on top of a bachelor’s degree, although graduate-level master’s degrees are now emerging,” he said.
And given the constantly changing economy, a financial adviser's education must keep pace with the current environment in order to produce the best results for their clients over time.
“We encourage all advisers to continue their education with programs offered in their area of specialty,” said Brian Heckert of FSM Wealth in Nashville, Illinois, adding that many advisers are also in study groups. Such gatherings “allow us to dive deep into topics with people who are exploring these ideas and working daily with client needs.”
The effort can make for a lucrative career.
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Starting incomes for those who have just completed the CFP educational requirement without experience often range from $50,000 to $70,000, depending on where the adviser works and lives, Kitces said. He adds that his firm’s research has found the median income for an experienced financial adviser is $192,000.
Advisers may work for a flat fee, similar to how a client would pay an accountant or attorney, or a commission, which is based on a percentage of the assets that are under management, Heckert said.
“The more assets, the lower the rate,’’ he said, adding that while many professionals in the field have shifted to advisory services there are still people who work for commission.
Whatever the payment arrangement, advisers are required to have certain licenses and affiliations.
“From a regulatory perspective, you need a Series 6 license to sell mutual funds, or a Series 7 license to sell stocks or bonds and must be affiliated with a broker-dealer to sell,” said Kitces.
“By contrast, to get paid a fee for advice or investment management, you need a Series 65 license, and must be affiliated with a Registered Investment Adviser.”
Sanders of Stonebridge suggested asking advisers you’re considering hiring for examples of investments they recommended that offered a better payoff for the client than for themselves. “Markets go up and down,’’ he said, “but you need to make sure you are working with somebody who puts your best interest ahead of their own.”
He also recommended interviewing several financial advisers before settling on one.
Career starting points
There are various ways to begin a career as a financial adviser. The first step to finding your path is comparing your personal values to those of the prospective employer.
“Determine if what you hear aligns with why you decided to pursue being an adviser,” said Lazetta Rainey Braxton, MBA CFP and co-founder and CEO of 2050 Wealth Partners in New York City. “Remember that all experience is good experience even if it compels you to question if your first job in the profession was the right one for you.”
Considering advisers use math skills every day to assist clients in making informed financial decisions for today and the future, many might assume that a math major or mathematical wizard would give them a career edge. Soft skills, however, are more valuable and can set you apart from other job applicants as you progress in the field.
“The greatest asset for many advisers is emotional intelligence – the ability to meet clients where they are emotionally with their money and guide them with using their money to support their life and legacy,” said Rainey Braxton. “Recognizing their goals and values, being a great listener, showing compassion, holding them accountable to their goals, and letting their best interest direct the engagement.”
A few decades ago, everyday investors may have been able to take a largely hands-off approach to their finances and still do fine, some advisers say.
“In the mid-1980s when I started, most of the middle class could save money in an interest-bearing deposit making 10%,” said Heckert. He said many people didn’t need to invest more to generate higher earnings because a $200,000 certificate of deposit at a bank paying that rate would generate $20,000 in income. “Combined with Social Security and the mortgage (being) paid off,” Heckert said, “there was little need to plan.”
He said, “401(k)’s were just starting and most people who had company-sponsored retirement plans back then were involved in pension plans that paid a monthly income. It was much simpler because the options were much simpler.”
But now, traditional savings accounts pay less than 1% interest. Pension plans are a rarity for workers, the benefits of Social Security are inadequate for many, and saving and investment options are more complex.
Consumers can purchase individual stocks or bonds. They can buy real estate and exchange-traded funds. They can set up an annuity, or purchase cryptocurrencies and other alternative investments.
In the face of so many choices and so much information, consumers can feel confused and overwhelmed. Plus, every individual has different needs. A financial investment that is beneficial for one might be detrimental to another. An adviser can provide clarity and help develop the best-customized plan.
“The world has evolved so much in recent years, and people are inundated with access to more information than they can possibly review,’’ said Sanders of Stonebridge. “A quality adviser is somebody in your corner to wade through mountains of information and help make recommendations that are in your best interest.”
Financial field lagging in youth, diversity
There is a particular need for more financial advisers who reflect both younger and more diverse populations. While the arena of personal financial advice has evolved in some aspects, it has a ways to go when it comes to better reflecting its potential customer base, some advisers say.
There was a time when the clients seeking personal financial advice were primarily older white males, and the providers of those services mirrored that demographic.
But the landscape is changing as the nation becomes more ethnically diverse, Generation Z has entered adulthood, and more women take the reins financially
Women are in charge of one-third of total household financial assets, according to research by McKinsey and Co. released in 2020. And by the end of this decade, McKinsey forecasts that women in the U.S. will oversee a significant amount of the $30 trillion in assets belonging to Baby Boomers.
Meanwhile, those who are under 40 may have different timelines for when they’ll stop working than many Baby Boomers who are already retired. Many Gen Zers and millennials are pursuing a financial route dubbed “FIRE” financial independence to retire early.
But the community of professional advisers doesn’t necessarily reflect these groups.
While women are roughly half the U.S. population, they are only 23.4% of certified financial planners, according to the CFP Board, a nonprofit group that sets standards for the industry.
Certified planners in their 20s represent 5.7% of those professionals, compared with 22.9% who are in their 30s, and 25% who are in their 40s, according to the board. And while roughly 83% of the nation’s 93,997 certified financial planners are white, just 4% are Asian, 2.8% are Latino, 1.8% are Black and 0.2% are American Indian or Alaskan native.
“I think there is a lack of youth and diversity in the financial services industry,” Sanders said, citing a 2019 JD Power survey that found the average age of financial advisers was 55, with about 20% of the industry 65 and older. “As our population continues to age and retirement and wealth transfer topics affect more people, the industry needs to become younger and attract qualified and dedicated professionals.”
Women of color represent a prime client pool.
"Women of color are achieving success in corporate America and as business owners,’’ says Kamila Elliott, a member of the CFP Board and CEO and founder of Collective Wealth Partners in Atlanta. Yet “statistics share that we often work longer hours, face larger obstacles in creating businesses, and often face capital challenges. Therefore having a financial professional to provide support and guidance is even more critical to their long-term financial success”
Stephanie Vaught, a financial coach and CEO of the Detroit-based firm Social Money Finance, added that as the nation rapidly moves toward a time when people of color are the nation’s majority “wealth will evolve, and more diverse professionals will be able to help clients plan for their future.’’