Personal financial advisors assess the financial needs of individuals and assist them with investments, tax laws, and insurance decisions. Advisors help their clients identify and plan for short-term and long-term goals. Advisors help clients plan for retirement, education expenses, and general investment choices. Many also provide tax advice or sell insurance. Although most planners offer advice on a wide range of topics, some specialize in areas such as retirement and estate planning or risk management.
Personal financial advisors usually work with many clients and often must find their own customers. Many personal financial advisors spend a great deal of their time marketing their services. Many advisors meet potential clients by giving seminars or through business and social networking. Finding clients and building a customer base is one of the most important aspects of becoming a successful financial advisor.
Financial advisors begin work with a client by setting up a consultation. This is usually an in-person meeting where the advisor obtains as much information as possible about the client's finances and goals. The advisor creates a comprehensive financial plan that identifies problem areas, makes recommendations for improvement, and selects appropriate investments compatible with the client's goals, attitude toward risk, and expectation or need for investment returns. Advisors sometimes seek advice from financial analysts, accountants, or lawyers.
Financial advisors usually meet with established clients at least once a year to update them on potential investments and adjust their financial plan to any life changes—such as marriage, disability, or retirement. Financial advisors also answer clients' questions regarding changes in benefit plans or the consequences of changing their job. Financial planners must educate their clients about risks and possible scenarios so that the clients don't harbor unrealistic expectations.
Many personal financial advisors are licensed to directly buy and sell financial products, such as stocks, bonds, derivatives, annuities, and insurance products. Depending upon the agreement they have with their clients, personal financial advisors may have their clients’ permission to make decisions regarding the buying and selling of stocks and bonds.
Private bankers or wealth managers are personal financial advisors who work for people who have a lot of money to invest. Because they have so much capital, these clients resemble institutional investors and approach investing differently from the general public. Private bankers manage portfolios for these individuals using the resources of the bank, including teams of financial analysts, accountants, lawyers, and other professionals. Private bankers sell these services to wealthy individuals, generally spending most of their time working with a small number of clients. Private bankers normally directly manage their customers' finances.
Personal financial advisors held about 275,200 jobs in 2020. The largest employers of personal financial advisors were as follows:
- Securities, commodity contracts, and other financial investments and related activities - 58%
- Self-employed workers - 20%
- Credit intermediation and related activities - 13%
- Insurance carriers and related activities - 3%
- Management of companies and enterprises - 1%
Personal financial advisors typically work in offices. Some also travel to attend conferences, teach finance seminars in the evening, and attend networking events to bring in more clients.
Most personal financial advisors work full time and some work more than 40 hours per week. They also may go to meetings on evenings and weekends to meet with prospective or existing clients.
Education & Training Required
A bachelor's or graduate degree is strongly preferred for personal financial advisors. Employers usually do not require a specific field of study for personal financial advisors, but a bachelor's degree in accounting, finance, economics, business, mathematics, or law provides good preparation for the occupation. Courses in investments, taxes, estate planning, and risk management are also helpful. Programs in financial planning are becoming more available in colleges and universities.
Personal financial advisors who directly buy or sell stocks, bonds, insurance policies, or specific investment advice need a combination of licenses that varies based upon the products they sell. In addition to those licenses, smaller firms that manage clients’ investments must be registered with state regulators, and larger firms must be registered with the Securities and Exchange Commission. Personal financial advisors who choose to sell insurance need licenses issued by State boards. State licensing board information and requirements for registered investment advisors are available from the North American Securities Administrator Association.
Other Skills Required
Personal financial advisors need strong math, analytical, and interpersonal skills. They need strong sales ability, including the ability to make a wide-range of customers feel comfortable. Personal financial advisor training emphasizes the different types of investors, and how to tailor advice to the investor’s personality. They need the ability to present financial concepts to clients in easy-to-understand language. Some advisors have experience in a related occupation, such as accountant, auditor, insurance sales agent, or broker.
Private bankers may have previously worked as a financial analyst and need to understand and explain highly technical investment strategies and products.
How to Advance
Although not always required, certifications enhance professional standing and are recommended by employers. Personal financial advisors may obtain the Certified Financial Planner (CFP) credential. This certification, issued by the Certified Financial Planner Board of Standards, requires 3 years of relevant experience; the completion of education requirements, including a bachelor's degree; passing a comprehensive examination, and adherence to a code of ethics. The exam tests the candidate's knowledge of the financial planning process, insurance and risk management, employee benefits planning, taxes and retirement planning, and investment and estate planning. Candidates are also required to have a working knowledge of debt management, planning liability, emergency fund reserves, and statistical modeling.
Personal financial advisors have several different paths to advancement. Those who work in firms may move into managerial positions. Others may choose to open their own branch offices for securities firms and serve as independent registered representatives of those firms.
Employment of personal financial advisors is projected to grow 5 percent from 2020 to 2030, slower than the average for all occupations.
Despite limited employment growth, about 21,500 openings for personal financial advisors are projected each year, on average, over the decade. Most of those openings are expected to result from the need to replace workers who transfer to different occupations or exit the labor force, such as to retire.
The primary driver of employment growth will be the aging population. As large numbers of baby boomers continue to retire, they are likely to seek planning advice from personal financial advisors. Also, longer lifespans will lead to longer retirement periods, further increasing demand for financial planning services.
In addition, the replacement of traditional pension plans with individual retirement accounts is expected to continue. Many people used to receive defined pension payments in retirement, but most companies no longer offer these plans. Therefore, individuals must save and invest for their own retirement, increasing the demand for personal financial advisors.
The availability of “robo-advisors,” computer programs that provide automated investment advice based on user inputs, may partially temper demand for personal financial advisors. However, the impact of this technology should be limited as consumers continue turning to human advisors for more complex and specialized investment advice over the projections decade.
The median annual wage for personal financial advisors was $94,170 in May 2021. The median wage is the wage at which half the workers in an occupation earned more than that amount and half earned less. The lowest 10 percent earned less than $47,570, and the highest 10 percent earned more than $208,000.
In May 2021, the median annual wages for personal financial advisors in the top industries in which they worked were as follows:
- Securities, commodity contracts, and other financial investments and related activities - $99,970
- Management of companies and enterprises - $79,780
- Credit intermediation and related activities - $76,620
- Insurance carriers and related activities - $69,410
Personal financial advisors who work for financial services firms are often paid a salary plus bonuses. Commissions, incentive pay, and production bonuses are included in the wage data here; nonproduction bonuses are not included.
Advisors who work for financial investment firms or financial planning firms or who are self-employed earn money for their services in one of two ways. They either charge a flat fee or earn commissions for the financial products that they sell.
Most personal financial advisors work full time, and some work more than 40 hours per week. They also may go to meetings on evenings and weekends to meet with existing clients or to try to bring in new ones.