Financial Advisors Careers and Compensation
The recent 2020 data from the Bureau of Labor Statistics (BLS) says that the median salary of a financial advisor is $89,330. This is above the median annual wage of all workers in the United States. However, the compensation of financial advisors vary because of different factors including location, education, and experience.
How to Become a Financial Advisor?
In order to become a financial advisor, you must have work experience in the field. Experience can come from working with clients or in banks or brokerage firms. To become a financial advisor, you must complete the following requirements:
- Degree in finance, accounting, business, economics, etc.
- Series 6 & 63 Licenses are required through the Financial Industry Regulatory Authority (FINRA). Salesperson license requires passing 2 exams while the representative requires 3.
- Series 7 License – only required if you want to work as a broker, which requires an additional exam. This license is needed if you want to offer securities such as stocks or mutual funds.
- State Insurance License – some states require an insurance license for those who plan on selling investment products such as annuities.
- Registration with the Financial Industry Regulatory Authority (FINRA) – this involves filling out a form, which requires basic information of applicants. A criminal background check is also required for registration purposes.
Financial Advisor Career Options
A standard financial advisor can have several career options by expanding their business in a certain direction. Some of these options include:
In order to sell insurance products, a financial advisor must be licensed. This allows them to sell life insurance, long-term care insurance, and annuities.
Working as an investment manager allows you to manage the investments of others. In this profession, you can work for a brokerage firm or an independent company that focuses on mutual funds or hedge funds.
This career allows you to advise clients on how to best save and invest for retirement goals. Some brokers may offer this service, but it is easier to do if you specialize in it. You must also be qualified and certified by your company or employer.
Factors that Influence a Financial Advisor’s Pay
Several factors affect the pay of a financial advisor. These include:
- Location – The average salary of a financial advisor varies by location. It is easier to find high-paying jobs in the Northeast and Midwest regions rather than the West or South.
- Education – A bachelor’s degree is typically needed to become a financial advisor. People who have a master’s degree or higher tend to be higher earners.
- Industry – The type of industry you work for will affect your pay, including commissions or fees. The finance and insurance industry offers a greater salary than the other industries such as education and health care.
- Experience – Having more experience usually results in a larger salary.
- Connections – working with well-known and respected companies and organizations may result in higher pay.
How Much do Financial Advisors Make?
Financial advisors make a very good living. However, there’s no specific number of dollars an advisor can point to and say “That’s how much I make”. What makes the salary such a hard figure to pin down? Well, for starters, fee-based financial advisors get paid in many different ways: commissions, fees, and/or salaries.
- Fee-based advisors make $68,000 a year in salary and commissions combined. That’s according to the Financial Planning Salary Survey conducted by financial planning associations from across North America (CFP Board, FPA, CFA).
- Commission-based financial advisors make $90,000 a year compared to their fee-based counterparts. Commission structures can vary greatly and can be influenced by many factors.
- Brokerage Firm advisors are often compensated through a base salary plus commissions. Advisors who work for insurance companies don’t make the same level of base salary, but their risk may be offset by commissions on products they sell or bonuses based on their production.
Ultimately, financial advisors’ compensation is dependent on many factors, including the type of work they do, their experience level, and where they are located in terms of geography. The key point to remember is that if you are a good advisor who brings value to your clients, you can make a lot of money.
Financial Advisors Pay Scale
Some financial advisors may be paid a salary, while others may only be paid on commission. A typical pay scale looks like this:
- Entry Level (1-3 years of experience)
$25,000 – $30,000 a year / Assistant Financial Advisor
- Mid-level (4-7 years of experience)
$50,000 – $80,000 a year / Financial Planner
- Experienced (7+ years of experience)
$90,000- plus a year / Senior Financial Advisor
Ways that a Financial Advisor Can Increase Their Earnings
- Build Seniority – The longer you work for an organization, the more responsibility you receive and the higher your pay will be.
- Continue Learning – Financial advisors should always be updating their skills and knowledge through classes or seminars.
- Bring Clients – As an advisor gains more responsibility within his/her organization and experience in the industry, the more referrals and clients they will bring in.
- Build a Team – As advisors continue to grow their client base, they may want to allow other financial advisors to work on their team. This can increase your production and make you eligible for higher bonus payouts.
- Develop New Skills – Financial planners should always be willing to take on new challenges, whether that means learning how to sell life insurance or even taking classes online.
- Type of Commission – Different types of commissions result in a higher income for financial advisors.
- Bonuses – Financial advisors may be able to receive bonuses such as vacations to tropical locations, cash bonuses, and new cars.
- Job Growth – the projected job growth for financial advisors is at a faster rate than average. From 2014 to 2024, it is estimated that there will be 13% more jobs within this field from 11% nationwide.
A financial advisor is a specifically qualified financial specialist who underwent trainings and certifications to best serve their clients. Their services do come with a cost and may differ from each other depending on the financial advisor you are working with. Learn more about how financial advisors are getting paid in this article: Financial Advisor Fees
The Bottom Line
There are many different careers in the financial industry, but none of them will pay you an entry-level salary. That is why it is imperative to gain as much experience as possible early on so your education and hard work can be rewarded with a successful career. A financial advisor can make anywhere from $25,000 to $100,000-plus (or more) per year as an entry-level advisor. However, how much do financial advisors make is dependent on many factors, including their location, education level, experience, and connections. If you are interested in the financial services industry–either personal finance or investment management–know that it is a career field where you can achieve true success if you work hard and build your skills.
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.