Qualifications That Every Financial Advisor Needs

What Is a Financial Advisor?

A financial advisor is a professional who works independently or is employed by a financial firm that gives guidance about investing and money decisions. Advisors may make money by charging clients a commission for trades or an advisory fee for managed accounts.

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

  • There are many types of financial professionals, from investment advisors and financial planners to accountants, lawyers, and tax specialists.
  • Regardless of their expertise, there are certain qualifications that establish the expertise of a financial advisor.
  • In order to sell securities, financial advisors are required to pass licensing exams by FINRA.
  • Having academic and professional training and education is a good indicator that your advisor is plugged into the world of finance and understands its complexities.
  • Additional credentials, such as the CFP or CFA designation can give you further confidence that your advisor has undergone rigorous professional education.

Understanding Financial Advisor Qualifications

The financial industry is strictly regulated in most countries. While everyone is free to share their opinion on the stock market, most countries have strict rules limited who can give financial advice in a professional capacity. These rules are intended to protect the public from self-serving, unethical, or uninformed financial guidance.

In the United States, financial advisors are regulated according to the type of service they provide, whether that means accounting services, investment information, or financial planning. In addition, they may also be required to register with the Securities and Exchange Commission or another regulator at the state or federal level, depending on the type and value of the assets under their management.

Below, we cover four important qualifications to look for in a professional financial advisor:


While there is no legal requirement to go to college, it would be difficult to start a career in finance without at least a four-year degree.

Most 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.

Advisor vs. Adviser

There is some disagreement about the correct spelling for this common financial term. Many financial firms default to the familiar "advisor," while the Securities and Exchange Commission uses the less common "adviser." No matter how you spell it, the professional requirements are exactly the same.

Professional Licenses

In order to sell securities, 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. There is also the Series 63 license, known as 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 allow advisors to sell additional products. Many insurance agents get their state’s life, health, and variable insurance license, which permits them 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.

FINRA may waive certain exam requirements for qualified candidates, such as those with foreign securities experience, or an acceptable substitute exam, such as the CFP.

Certifications and Designations

Financial advisors can further establish their credibility by getting a certification. Certifications are not required but are encouraged by financial advisory 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. In addition to the exam, the certification also requires coursework and several years of working experience.

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 of Financial Services and offers a similar program as the CFP.

In addition to passing the certification exam, many of these certifications also require extensive coursework or work experience.

Background and Skills

Financial advisors also need to have real-world experience. Interpersonal sales skills can help attract new clients and understand those clients' needs. If a new financial advisor has a hard time communicating and selling to prospects, there is no chance of success.

While it is possible to get hired straight out of college, most financial firms prefer to choose candidates with some professional experience. An internship in finance can help a new graduate get hired, and many advisors come into finance after a previous career in another industry.

Maintaining clients is similar to running a business, and many managers prefer candidates with sales experience. In addition, many of the certifications listed above include a work requirement.

What Qualifications Do You Need to Become a Financial Advisor?

The exact qualifications for a financial professional depend on what types of services they provide. Those who wish to recommend or sell certain products to their clients must pass the appropriate licensing exam from FINRA, and may have to register with a state or federal securities regulator. Professional certifications such as a CFA, CFP, or ChFC can add an additional level of expertise. Those working in finance as accountants or lawyers also have to meet the licensing requirements for their own industry.

How Do I Know If My Financial Advisor Is Trustworthy?

Financial regulators and certification bodies will keep disciplinary records for any financial advisor under their authority. For securities advisors, you also have the right to ask your firm about the background and work history of the person handling your account, as well as about the firm itself.

What Is the Most Useful Certification for a Financial Advisor?

In addition to the mandatory licensing requirements for different types of financial professionals, there are also several voluntary certifications that can demonstrate expertise in different fields. Two highly sought-after qualifications are the Chartered Financial Analyst (CFA) and the Certified Financial Planner (CFP).

The Bottom Line

When choosing someone to help manage money, it is important to know that your financial advisor is someone you can trust. In addition to their educational and work background, there are several professional licenses and certifications that can help identify a qualified specialist.

Article Sources
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  1. Financial Industry Regulatory Authority. "Series 7—General Securities Representative Exam."

  2. Financial Industry Regulatory Authority. "Series 63—Uniform Securities Agent State Law Exam."

  3. Financial Industry Regulatory Authority. "Series 65—Uniform Investment Adviser Law Exam."

  4. FINRA. "Qualification Exams Waivers and Exemptions."

  5. CFP Board. "About CFP Board."

  6. CFP Board. "Code of Ethics and Standards of Conduct."

  7. The American College of Financial Services. "Chartered Financial Consultant."

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