What Is the Career Path for a Financial Planner?

Financial planning is consistently ranked as a profession with significant earnings potential, low stress, and excellent future job growth. The Department of Labor believes that job growth for financial planners or personal financial advisors will be at a rate of 7% through 2028, higher than the average for all occupations. The niche itself is fairly new; up until a few decades ago, it was composed of stockbrokers, bankers, or insurance sales representatives. Now, financial planners help their clients put together all the pieces of the finance puzzle, and the demand for their services continues to rise.

Key Takeaways

  • Financial planners work closely with clients to help them build an investment portfolio to secure a comfortable future financially.
  • Most financial planners have a bachelor's degree in a finance-related field and an MBA.
  • Many financial planners also attain Certified Financial Planner (CPF) or Chartered Financial Analyst (CFA) accreditations.

Understanding the Requirements for a Financial Planner

A bachelor's degree in a finance-related field is a typical starting point, but some firms also hire psychology and other humanities graduates. A financial planner requires the ability to build trust in clients, explain complex financial products in layman's terms, and obtain client buy-in for a plan of action. These skills are often considered more important than detailed knowledge of mutual funds and trading strategies.

A master's in business administration (MBA) will help a financial planner to the climb up the corporate ladder toward a management position. There are occasional doctorates in finance-related fields among managers, but MBAs are most common.

A senior financial planner at a large firm can earn a six-figure base salary with a matching annual bonus.

Certification

A critical factor in becoming a financial planner is to obtain certification. The gold standards are Certified Financial Planner (CFP) and Chartered Financial Analyst (CFA) accreditations. A similar certification in terms of status is the Certified Public Accountant (CPA) accreditation for an accountant.

The prerequisites for the CFP exam include three years of experience (two years if you fulfill certain criteria), college-level courses in finance determined by the CFP board, and a mandatory bachelor's degree or better. The exam itself is an intense, two-day, 10-hour barrage of questions on every field of personal finance. All applicants must agree to a thorough background check before the CFP is awarded.

The CFA is often considered a tougher accreditation than the CFP requiring four years of experience and a series of three grueling exams. Either certification virtually guarantees good employment prospects.

There is also the Chartered Financial Consultant (ChFC) certification. This program does not require a bachelor's degree, but it is recommended. The certification is awarded upon completion of seven required courses and two elective courses.

Licensing

While financial planning does not technically require licensing, some financial planners elect to obtain Financial Industry Regulatory Authority (FINRA) licenses such as the Series 6, 7, or 63. This enables them to sell stocks, bonds, mutual funds, insurance, and whatever else the client may need. These licenses may require membership in self-regulatory organizations.

Career Path

Since all of the major certification bodies require a few years of industry experience, most financial planners start out in junior positions working part- or full-time while completing their studies.

After obtaining certification, the financial planner can take clients without supervision. The median salary for CFP-accredited financial planners is $88,890 as of 2018, according to the latest figures from the Bureau of Labor Statistics, although this can vary considerably between cities. Most financial planners also receive annual bonuses and/or profit-sharing that can easily be in the five-figure range.

$88,890

The median annual wage for personal financial advisors as of May 2018, according to the Bureau of Labor Statistics.

Many financial planners are content to remain in their roles moving to higher net worth clients and higher compensation levels. A senior financial planner at a large firm can have a six-figure base salary with a matching annual bonus with a relatively low-stress work situation.

Some financial planners prefer to become self-employed after completing their certifications. Since the cost of doing business is basically the price of a small office space, many find the earnings potential higher than regular employment at a finance firm. The key to independence and self-employment is to build a network of contacts and a stable client base.