Personal financial advisors
What Personal Financial Advisors Do
Personal financial advisors give financial advice to people. They help with investments, taxes, and insurance decisions.
Personal financial advisors typically do the following:
- Meet with clients in person to discuss their financial goals
- Explain the types of financial services they provide to potential clients
- Educate clients and answer questions about investment options and potential risks
- Recommend investments to clients or select investments on their behalf
- Help clients plan for specific circumstances, such as education expenses or retirement
- Monitor clients’ accounts and determine if changes are needed to improve account performance or to accommodate life changes, such as getting married or having children
- Research investment opportunities
Personal financial advisors assess the financial needs of individuals and help them with decisions on investments (such as stocks and bonds), tax laws, and insurance. Advisors help clients plan for short-term and long-term goals, such as education expenses and retirement. They recommend investments to match the client’s goals. They invest clients’ money based on the clients’ decisions. Many also provide tax advice or sell insurance.
Although most planners offer advice on a wide range of topics, some specialize in areas such as retirement or risk management (evaluating how willing the investor is to take chances and adjusting investments accordingly).
Many personal financial advisors spend a lot of time marketing their services, and they meet potential clients by giving seminars or through business and social networking. Networking is the process of meeting and exchanging information with people, or groups of people, who have similar interests.
After financial advisors have invested funds for a client, they and the client receive regular investment reports. They monitor the client’s investments and usually meet with each client at least once a year to update the client on potential investments and to adjust the financial plan based on the client’s circumstances or because investment options may have changed.
Many personal financial advisors are licensed to directly buy and sell financial products, such as stocks, bonds, annuities, and insurance. Depending on the agreement they have with their clients, personal financial advisors may have the client’s permission to make decisions about buying and selling stocks and bonds.
Private bankers or wealth managers are personal financial advisors who work for people who have a lot of money to invest. These clients are similar to institutional investors (commonly companies or organizations), and they approach investing differently than the general public. Private bankers manage a collection of investments, called a portfolio, for these clients by using the resources of the bank, including teams of financial analysts, accountants, and other professionals.
How to Become a Personal Financial Advisor
Personal financial advisors typically need a bachelor’s degree. A master’s degree and certification can improve chances for advancement in the occupation.
Personal financial advisors typically need a bachelor’s degree. Although employers usually do not require a specific field of study for personal financial advisors, a degree in finance, economics, accounting, business, mathematics, or law is good preparation for this occupation. Courses in investments, taxes, estate planning, and risk management are also helpful. Programs in financial planning are becoming more available in colleges and universities.
Licenses, Certifications, and Registrations
Personal financial advisors who directly buy or sell stocks, bonds, insurance policies, or specific investment advice need a combination of licenses that varies based on the products they sell. In addition to those licenses, smaller firms that manage clients’ investments must be registered with state regulators, and larger firms must be registered with the Securities and Exchange Commission. Personal financial advisors who choose to sell insurance need licenses issued by state boards. State licensing board information and requirements for registered investment advisors are available from the North American Securities Administrators Association.
Certifications can enhance a personal financial advisor’s reputation and can help bring in new clients. The Certified Financial Planner Board of Standards offers the Certified Financial Planner (CFP) certification. For this certification, advisors must have a bachelor’s degree, at least 3 years of relevant work experience, pass an exam, and agree to adhere to a code of ethics. The exam covers the financial planning process, insurance and risk management, employee benefits planning, taxes and retirement planning, investment and real estate planning, debt management, planning liability, emergency fund reserves, and statistical modeling.
A master’s degree in an area such as finance or business administration can improve a personal financial advisor’s chances of moving into a management position and attracting new clients.
Analytical skills. In determining an investment portfolio for a client, personal financial advisors must be able to take into account a range of information, including economic trends, regulatory changes, and the client’s comfort with risky decisions.
Interpersonal skills. A major part of a personal financial advisor’s job is making clients feel comfortable. They must establish trust with clients and respond well to their questions and concerns.
Math skills. Personal financial advisors should be good at mathematics because they constantly work with numbers. They determine the amount invested, how that amount has grown or decreased over time, and how a portfolio is distributed among different investments.
Sales skills. To expand their base of clients, personal financial advisors must be convincing and persistent in selling their services.
Speaking skills. Personal financial advisors interact with clients every day. They must explain complex financial concepts in understandable language.
Personal Financial Advisors
Percent change in employment, projected 2012-22
- Personal financial advisors
- Business and financial operations occupations
- Total, all occupations
Employment of personal financial advisors is projected to grow 27 percent from 2012 to 2022, much faster than the average for all occupations.
The primary driver of growth will be the aging population. As large numbers of baby boomers approach retirement, they will seek planning advice from personal financial advisors. In addition, longer life spans will lead to longer retirement periods, further increasing demand for financial planning services.
Decreased funds for corporate and state pensions also are expected to contribute to the trend of hiring personal financial advisors. Private corporations and state and local governments are facing shortfalls in their pension funds, which may lead to benefit reductions. This will require more financial planning from individuals and increase the demand for personal financial advisors.
Job prospects for personal financial advisors should be relatively favorable compared with other financial sector occupations. Those who obtain certification will likely see the best prospects.
|Occupational Title||SOC Code||Employment, 2012||Projected Employment, 2022||Change, 2012-22||Employment by Industry|
SOURCE: U.S. Bureau of Labor Statistics, Employment Projections program
Personal financial advisors
|Occupation||Description||Entry-Level Education||2012 Median Pay|
Budget analysts help public and private institutions organize their finances. They prepare budget reports and monitor institutional spending.'
|Financial analysts||Financial analysts provide guidance to businesses and individuals making investment decisions. They assess the performance of stocks, bonds, and other types of investments.'||Bachelor's degree||$76,950|
|Financial managers||Financial managers are responsible for the financial health of an organization. They produce financial reports, direct investment activities, and develop strategies and plans for the long-term financial goals of their organization.'||Bachelor's degree||$109,740|
|Insurance sales agents||
Insurance sales agents help insurance companies generate new business by contacting potential customers and selling one or more types of insurance. Insurance sales agents explain various insurance policies and help clients choose plans that suit them.'
|High school diploma or equivalent||$48,150|
Insurance underwriters decide whether to provide insurance and under what terms. They evaluate insurance applications and determine coverage amounts and premiums.'
|Real estate brokers and sales agents||
Real estate brokers and sales agents help clients buy, sell, and rent properties. Although brokers and agents do similar work, brokers are licensed to manage their own real estate businesses. Sales agents must work with a real estate broker.'
|High school diploma or equivalent||$41,990|
|Securities, commodities, and financial services sales agents||
Securities, commodities, and financial services sales agents connect buyers and sellers in financial markets. They sell securities to individuals, advise companies in search of investors, and conduct trades.'