How to Become a Financial Planner
By Neal Frankle
If you want to know how to become a financial planner, I’ll explain it. I get asked how to be a financial advisor all the time. I thought I’d share my response with you in case you were considering jumping into the profession.
If you are interested in becoming a financial planner you have to understand the following:
1. Understand what business you are in.
Being a financial planner is a business. I think it’s one of the best small business ideas you could think of…but it’s a business.
There are two kinds of people in the business – those who love money and numbers and those who love people.
Those who love money, math and investments usually go to work for mutual funds and insurance companies. They don’t deal with clients. Usually those folks obtain a CFA – Chartered Financial Analyst certification.
If you want to work with people, you really don’t need a CFA certification, but you do need to learn how to deal with people. That includes some level of salesmanship. In fact, when you start, that’s all you really are – a salesperson.
Nobody hands you clients – you have to make that happen by yourself. A successful financial planner is a person who knows how to build and manage a business. If you don’t like rejection, don’t start this career.
2. Know who to stay away from.
If you go to work for an insurance company or brokerage firm, they require that you hit all your friends and family up for business. Once you do, your employer will toss you if you don’t produce enough business. Also, who you work for will influence which clients use you as a financial planner.
On the other hand, if you go to work for a bank, they’ll introduce you to clients. It’s a great place to start and it’s how I launched my career.
3. Understand licenses.
Anyone can call themselves a financial planner, but if you want to work with clients, you’ll need to work with a broker/dealer (yuk) or become a Registered Investment Adviser. The broker/dealer route is commission-based. The Registered Investment Adviser route is more consultative-based.
Of course, you’ll need to find your own clients still, so you need to think about how you’re going to do that regardless.
4. Know the Education Requirements.
It helps if you have a bachelor’s degree in Accounting, Economics, Finance, Marketing, Business or Commerce. If you’ve studied Mathematics or Computer Science, that will help too. This is just a small part of good financial advisor training.
5. Understand Certification.
You can become a financial planner without certification, but it sure helps to have it. It demonstrates commitment and responsibility. I became a CFP (R) – Certified Financial Planner – and I highly recommend that program to anyone.
To get the certification you need to take an examination. There are over 285 colleges and universities that can help you prepare for this exam. You also need to have three years’ full-time work experience.
How to Become a Financial Planner…and How to Be a Successful Financial Planner
The first question I’d ask you is, what is your definition of success?
To me, it includes being of service to my clients and supporting my family.
Becoming a successful financial planner requires work – and it never stops. You constantly have to educate yourself and learn. Above all, sharpen your listening skills. Work hard at understanding what your clients really need and want. Sometimes, they don’t even know, and you have to be able to help them discover it.
My 25 years’ experience tells me that these skills are far more important than any other. You’ll learn the most valuable lessons over the years. Don’t wait to master the subject prior to getting to work.
I love being a financial planner and if you like helping others significantly enhance their lives, you will too.
Start off by taking care of the basic requirements. Always think about how to market your services, put your clients above yourself and keep learning. That’s how to become a financial planner, if you ask me.
If you’re a financial planner, was your career path different? What would you add?
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Hmm I’m glad you wrote this because I had no idea that you could become a financial planner without any real training! It’s kind of funny actually because that would mean that it’s possible for me to hire a financial adviser who knows less than I do. . .fascinating.
So. . .how would you find a ‘good/competent’ financial planner? AND how would you know when you have found one. Thought provoking!
excellent question….stay tuned!
OK Sam…….stay tuned….I”ll follow up man.
Will be great! I really think this would be a fun profession to be in as a 2nd profession.
I guess the issue is, if I want to do this in 5-10-15 years already, better to start now right?
Getting a CFP seems like a no brainer… as well as doing it in a high retireee state like Hawaii or Florida yeah?
Thnx, Sam
My experience tells me to work with people I love. Hence, I work w/retirees, highly-paid employees and small business people. Those are the folks I get excited about. I think you could find the people you want to work with just about anywhere Sam.
If you want to start in 5 + years….try to get some experience in the financial services industry and determine if it’s really for you.
You might do this in retirement….I know you’re swimming in cash now anyway.
I wish I was Mr. Duckworth swimming in cash!
Is it possible for you to use your blog WealthPilgrim to gain further business? How do you see your blog as it ties in with your business.
Cheers, Sam
Hi Neal, I’ve wondered this question so thanks for highlighting.
One needs 3 years of work experience doing anything or does it have to be related to financial planning? Might be good to add a follow on post or tips on studying for the CFP and the process (cost, where to take, how long to study, etc). Heard there are changes a coming.
Can you share with us how much CFP’s can make based on X # of clients and fees? If it’s consultative based, how do you charge? Is it by session, by milestone goals, etc? Very curious!
Thanks,
Sam
I know of another PF blogger who does get business from his blog. I have generated a little consulting work. We’ll see how things go. My intention here was never to focus on that. I wanted to create a place where everyone could get objective advice and info without feeling like I was trying to sell them something. That’s most important to me right now.
Maybe down the road things will change.
OK. Perhaps that person is Jeff at Good Financial Cents.
Here are a couple of points for clarification.
In order to obtain a CFP one must possess a Bachelor’s degree in addition to sitting for the examination.
One must be registered and affiliated with an SEC or a state Registered Investment Advisor in order to practice as a fee based financial planner. One can affiliate with an established firm, or if he/she possesses the credentials, he/she can start up one’s own firm via creating a Form ADV, following the registration process, etc.
My opinion is that unless one has one’s own firm, this is not a hobby or a nice to have credential, and like you mentioned, the low producer will be canned no matter what type of firm he/she is affiliated with. It takes a great deal of money/compliance/supervisory efforts and a payback to cover costs and generate a bit of profit is a minimum requirement.
I’ll agree w/Al.
The credential (CFP(R)) takes a lot of work to obtain. My point is however, I don’t think it provides ALL the training planners need. It is a great basis but a good planner needs more. Such as years and years of experience…and it sounds like AL has been at it for awhile.
Interesting write-up!! It made me think for quite sometime. Do you really mean it when you say professional training is not essential for expertise in this field? What do you think about a long tenured experience? I have been in this field for quite some time and I sincerely think real life dealing with financial ordeals of various clients help to increase your skill.
Belmont,
I think the education is critical…but it’s not enough. Your years and years of experience are much more important IMO…
This is good to know. I didn’t know the requirements for this . I will be sure to look for that when I am seeking a financial planner.
I think you pretty much hit all the nails on the how’s of becoming a planner. One thing I might add is the way I went. I have my Master’s of Science in Financial Planning and I got it from The McCallum School at Bentley University. Just another direction to accumulate the credentials and experience needed to be able to give good advice. To the point @Simple in France made in the first comment; yes anyone can be an “advisor” including kids looking for jobs right out of high school that get talked into the gig which is more of a sales job than anything else. So be very very careful when picking out people to help you craft real financial plans..not everyone out there is like Neal Frankle or myself
Kudos on the article!
Hey Nunzio,
That’s a very nice compliment…
I agree 100% ….it’s super important to take care when it comes to picking advisers.
I have learned a lot about PF in the past few years. Although my degree is not in personal finance or any other business degree, I feel that I would make a real difference in people’s lives.
This is a good (and timely) post. I might consider this as a secondary job. I know it would be a very satisfying experience.
Very informative article. What is the difference between a Financial Counselor, a Financial Advisor and a Finanacial Planner?
Being a Financial planner should NOT be taken lightly and should NOT be a second job. Please do not minimize our profession. We help people every day achieve their goals. Yes, there are individuals that call themselves “advisors” and “planners” but a CFP should not be confused with any of these.
Unfortunately, I’ve met CFP’s who are not very professional at all.
Forbes.com reported last week that the #1 industry to start a new business is in financial services and included financial planning and income tax preparation.