Financial Advisor Qualifications Every Advisor Needs

A financial advisor is a professional who works independently or else is employed by a financial firm who gives guidance to clients about investing and money decisions. Advisors make money by charging clients a commission for trades or an advisory fee for managed accounts. Over the last few years, the financial advisory industry has been shifting from the typical “stockbroker” role to the more holistic financial planning approach.

Not everybody in the financial advisory space has the same knowledge, background, or skills. Here we describe some key factors that you should look out for to help make sure that your financial professional is qualified to good a job.

Key Takeaways

  • Good financial advisors should be appropriately qualified to manage your investments and give you sound advice for your money matters.
  • Having academic and professional training and education is a good indicator that your advisor is plugged into the world of finance and economics and understands many of its complexities.
  • Additional credentials, such as the CFP or CFA designation, can give you further confidence that your advisor has undergone rigorous professional education and passed qualifying exams of their knowledge.

Educational Requirements

Brokerage firms require that all new financial advisor applicants have at least a bachelor’s degree from an accredited educational institution. The major can vary, but most are in finance, marketing or business. A Master's in Business Administration (MBA) is not required but certainly adds to the financial advisor’s resume.

Professional Licenses

Financial advisors are required to pass and possess the General Securities Representative license, also known as the Series 7. This test covers all the basic investment knowledge and regulations that financial advisors must know. Financial advisors also have the Series 63 license, which is the Uniform Securities Agent State license. This allows advisors to conduct business across multiple states. Advisors who wish to charge advisory fees must also take the Series 65 exam or the Uniform Investment Advisor Law exam. These three licenses are held by most financial advisors in the industry.

There are many other licenses that financial advisors can get that allow them to sell additional products. Many advisors get their state’s life, health and variable insurance licenses. This permits the advisor to sell life insurance, health insurance, long-term care and variable annuities. There are several other investments that require licensing before they can be sold, such as managed futures that require a Series 31, or commodities that require a Series 3.

Certifications and Designations

Financial advisors can further establish their credibility by getting a certification. Certifications are not required but are encouraged by brokerage firms. The most popular certification is the CERTIFIED FINANCIAL PLANNER™ (CFP). This exam is issued by the Certified Financial Planner Board of Standards Inc. and tests advisors on their ability and aptitude to have a comprehensive holistic approach to financial planning. The CFP Board also has a strict code of ethics and a professional responsibility standard that lets clients know that anyone who maintains the CFP mark is of high integrity.

There are many other designations available to financial advisors. The Chartered Financial Consultant (ChFC) is put out by the American College and offers a similar program as the CFP. There are many different designations and certifications available, with some that are considerably more difficult to earn than others.

Background and Skills

Financial advisors also need to have real world experience, preferably in a business or sales setting. Interpersonal sales skills are required for advisors, as the goal is to attract new clients. If a new financial advisor has a hard time communicating and selling to prospects, there is no chance of success.

New financial advisors are also rarely hired directly out of college, because they need experience. Most advisors tend to have a previous career in another industry. Branch managers, who often are in charge of hiring, have more confidence in hiring a middle-aged applicant with experience over a fresh-faced young person.

Advisors should also have an entrepreneurial quality, similar to a business owner. Once an advisor establishes a book of business, this entrepreneurial spirit is what differentiates the successful from the mediocre. Maintaining clients and a financial advisory practice is similar to running a business. Successful advisors employ a systematic approach to client service, marketing and investing. These advisors are proactive, rather than reactive, to clients. There practices run like a well-oiled machine that is poised for growth.

Article Sources

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  1. Financial Industry Regulatory Authority. "Series 7—General Securities Representative Exam." Accessed July 29, 2021.

  2. Financial Industry Regulatory Authority. "Series 63—Uniform Securities Agent State Law Exam." Accessed July 29, 2021.

  3. Financial Industry Regulatory Authority. "Series 65—Uniform Investment Adviser Law Exam." Accessed July 29, 2021.

  4. CFP Board. "About CFP Board." Accessed July 29, 2021.

  5. CFP Board. "Code of Ethics and Standards of Conduct." Accessed July 29, 2021.

  6. The American College of Financial Services. "Chartered Financial Consultant." Accessed July 29, 2021.