Financial Advisor

You'll need a bachelor's degree to become a financial advisor, preferably in finance, accounting, statistics, or business management. After school seek out an internship and consider what certifications you might want to pursue. There is no certification to become a financial advisor, but there is to become a certified financial planner. To get that you'll need to complete coursework on financial planning through a CFP Board Registered Program, have a bachelor's degree, and take the CFP exam. To become an independent financial advisor, you'll need to register a firm with the SEC as a registered investment advisor and yourself as an investment advisor representative.

Fee rates and overall costs differ from financial advisor to advisor. There are five different fee structures: Fixed-rate, commission, hourly, or performance-based fees. Financial advisors may rely on one or more of these, but the most common fee structure is based on a percentage of assets under management (AUM). According to AdvisoryHQ, the average financial advisor fee in 2021 was 1.02% of AUM. That means for an account with $1 million AUM, the fee would add up to $10,200 annually.

You can likely manage your finances without an FA. But financial advisors can help you develop a comprehensive plan that addresses your major financial stressors such as retirement, home ownership, children, inheritance, college planning, marriage, divorce, and insurance. They also can provide informed advice when unexpected financial issues arise. They keep current on new financial products and all of the changes in investing, tax laws, and insurance regulations, and other legislation that could affect your financial affairs so you don't have to. 

You can find a financial advisor by asking for recommendations from family and friends, or you can search online. Many professional financial planning associations offer searchable databases of advisors such as the National Association of Personal Financial Advisors and the Financial Planning Association. No matter what title an advisor claims to have, it is your responsibility to vet any potential advisor's credentials, experience, and fee structures before sharing your financial information. You can look up a firm's or individual's background by looking up the firm's Form ADV on the Investment Advisor Public Disclosure website.

According to the U.S. Bureau of Labor Statistics, the mean annual wages for a personal financial advisor in 2021 was $119,960. New York, the District of Columbia, Washington, Massachusetts, and Montana top the locations in the U.S. with the highest mean wages, but the states with the highest concentration of jobs include Connecticut, North Carolina, Rhode Island, Illinois, and Massachusetts.

A fiduciary is a professional held to a fiduciary duty, meaning the person must act in their client's best interest not their own. Fiduciary financial advisors make investment decisions with you in mind and disclose any personal conflicts of interest, while an advisor who isn't a fiduciary may recommend products based on an expected commission or fee. Not all advisors who are members of a professional financial organization, for instance, have a fiduciary duty to clients, but certified financial planners do. It is part of their certification.