People often confuse the role of a financial planner with other, similar jobs like a financial advisor. While there may be similarities between these jobs, there are some key differences. A financial advisor is generally someone who helps people manage their money, while a financial planner develops personalized financial plans for their clients. Both professionals may also differ when it comes to their educational backgrounds and designations. Financial planners may also have a special area of expertise. If you're thinking of becoming a financial planner, there are some key points you need to think about. Do you have the right education and the skills necessary to be a success? Is this even the right career path for you? Read on to learn more about financial planning and take our quiz to help you make a more informed decision.

Key Takeaways

  • Financial planners help people manage their money while sorting through their financial matters.
  • Finding clients and building a customer base is crucial to experiencing success as a financial planner.
  • Becoming a financial planner requires a bachelor's degree, along with courses in investments, taxes, estate planning, and risk management.
  • If you're comfortable with sales, are great with people, have excellent analytical and communication skills, and can work independently, financial planning may be right for you.

Financial Planners: The Basics

Financial planners help people manage their money while sorting through their financial matters. Like financial advisors, they help their clients develop financial goals for the long-term. These professionals assess their clients' stage of life, risk tolerance, along with potential investments.

Financial planners also earn a living by helping people sort through and choose investments, insurance, and other financial products. Because many financial planners also specialize in specific areas, they may provide tailored services for their clients. Some of these services include—but aren't limited to—retirement planning, general investment analysis, estate planning, tax planning, and education planning.

Obtaining New Business

Finding clients who need those services and building a customer base is crucial to experiencing success as a financial planner because referrals from satisfied clients are an important source of new business. Whether you find new clients by giving seminars or lectures, through social or business contacts or simply by cold calling, find them you must.

Your success as a financial planner depends on your ability to find and retain a roster of clients.

Having a broad social network is one reason many successful financial planners enter the field after working in a related occupation such as accountant, auditor, insurance sales agent, lawyer or securities, commodities, and financial services sales agent.

Education Requirements

Financial planning employers look for candidates with a bachelor's degree in accounting, finance, economics, business, mathematics, or law. Courses in investments, taxes, estate planning, and risk management are also helpful. Programs in financial planning are becoming more widely available in colleges and universities.

Financial analysts may also seek special designations like the Certified Financial Planner (CFP), the Chartered Financial Analyst (CFA) and the Chartered Financial Consultant (ChFC) designations.

Generally, a license is not required to work as a personal financial advisor, but advisors who sell stocks, bonds, mutual funds, or insurance may need licenses such as the Series 6, 7, or 63. These exams are administered by the Financial Industry Regulatory Authority (FINRA) and in order to take most of these exams, sponsorship by a member firm or self-regulatory organization is required.

Where Do Advisors Work?

More than half of all financial advisors work for finance and insurance companies, including securities and commodity brokers, banks, insurance carriers, and financial investment firms. However, four out of 10 personal financial advisors are self-employed, operating small investment advisory firms, usually in urban areas.

According to the Bureau of Labor Statistics, the overall employment of financial analysts and personal financial advisors is expected to increase 7% between 2018 and 2028, faster than the average for all occupations. This is a result of the increased investment by businesses and individuals, the rising number of self-directed retirement plans and the growing number of seniors. Personal financial advisors will benefit even more than financial analysts as baby boomers save for retirement and as a better-educated and wealthier population requires investment advice. In addition, people are living longer and must plan to finance more years of retirement.

Is Financial Planning the Right Career for You?

Take this quiz to help you find out:

Quiz: Is Financial Planning Right For You?
1. How comfortable are you with making sales?
A. I could sell my grandmother a ticket to a SuperNova concert with no guarantee that she'll enjoy the performance.
B. I could sell my grandmother that SuperNova ticket, but I would feel guilty if she didn't like the show.
C. Only a bad person would sell his or her grandmother a SuperNova ticket.

2. At what stage of life are you?
A. I just graduated from college.
B. I've been out of school for a few years.
C. I've been in my line of work for several years, but I\'m ready for a change.

3. How much of an extrovert are you?
A. I have been the president of nearly every club I have ever joined.
B. I have enough friends to make me happy.
C. A good book, a room to myself, and no interruptions is my idea of heaven.

4. You could be described as:
A. Both analytical and a good communicator.
B. Analytical but not a good communicator, or a good communicator but not analytical.
C. Neither analytical nor a good communicator.

5. At work, I prefer to do my job:
A. Completely independently
B. Somewhat independently.
C. As part of a team.

6. What appeals most to me about becoming a planner is:
A. The challenge of building a client base.
B. The creation of my own business.
C. The analysis of investments.

7. According to the Bureau of Labor Statistics, the median annual income for financial planners was $88,890 in 2018, including commission income. How do you feel about that?
A. I've never been average and I'll earn more than the median.
B. That would work for me.
C. Working for commissions only makes me nervous.

Results

If you answered mostly As then financial planning could be the right career for you. You're energized, not terrified, by the idea of earning a substantial amount of your compensation through commissions. If you have the right connections and the energy level to work that network, you could succeed in this tough career.

If you answered mostly Bs, then you need a backup plan. Financial planning might work, but you're likely to end up among the 80% of planners who, according to William F. Cole's "The Complete Financial Advisor," are in the business for less than five years. When sales don't work out, what will you do next and how will you sell yourself to your next employer?

If you answered mostly Cs, don't even think about financial planning. If you love the portfolio analysis side, consider working as a financial analyst. If math is your strong subject, go into financial engineering or quantitative analysis. You'll make more money without having to sell all day long.