Qualifications Every Financial Advisor Needs

A financial advisor is a professional who works independently or is employed by a financial firm who provides guidance to clients on investments and monetary decisions. Advisors make money by charging clients a commission for operations or an advisory fee for managed accounts. In recent years, the financial advisory industry has moved from a typical “stockbroker” role to a more comprehensive financial planning approach.

Not everyone in the financial advisory space has the same knowledge, experience, or skills. Here are some key factors to consider to ensure that your financial professional is qualified for a good job.

Key takeaways

  • Good financial advisers must be properly qualified to manage your investments and give you good advice on your money matters.
  • Having an academic and professional education and training is a good indicator that your advisor is connected to the world of finance and economics and understands many of its complexities.
  • Additional credentials, such as the CFP or CFA designation, can give you more confidence that your advisor has received a rigorous professional education and has passed qualifying examinations of their knowledge.

Educational requirements

Brokerage firms require that all new applicants for financial advisers have at least a bachelor’s degree from an accredited educational institution. The specialty can vary, but most are in finance, marketing, or business. A Master of Business Administration (MBA) is not required, but it certainly adds to the financial advisor’s resume.

Professional Licenses

Financial advisors must approve and possess the General Securities Representative license, also known as Series 7. This test covers all the basic investment knowledge and regulations that financial advisers need to know. Financial advisers also hold the Series 63 license, which is the state Uniform Securities Agent license. This allows advisers to conduct business in multiple states. Advisors wishing to charge advisory fees must also take the Series 65 exam or the Uniform Investment Advisers Act exam. These three licenses belong to the majority of financial advisers in the industry.

There are many other licenses that financial advisers can obtain that allow them to sell additional products. Many counselors obtain their state life, health, and variable insurance licenses. This allows the advisor to sell life insurance, health insurance, long-term care, and variable annuities. There are several other investments that require a license before they can be sold, such as managed futures that require a Series 31 or commodities that require a Series 3.

Certifications and designations

Financial advisers can further establish your credibility by getting certified. Certifications are not required, but are recommended by brokerage firms. The most popular certification is CERTIFIED FINANCIAL PLANNER ™ (CFP). This exam is issued by the Certified Financial Planner Board of Standards Inc. and assesses assessors on their ability and aptitude to take a comprehensive and holistic approach to financial planning. The CFP Board also has a strict code of ethics and a standard of professional responsibility that lets clients know that anyone who holds the CFP brand is of high integrity.

There are many other designations available to financial advisers. The Chartered Financial Consultant (ChFC) is published by the American College and offers a program similar to CFP. There are many different designations and certifications available, and some are considerably more difficult to obtain than others.

Background and skills

Financial advisers should also have real-world experience, preferably in a business or sales environment. Consultants require interpersonal sales skills, as the goal is to attract new clients. If a new financial advisor has a hard time communicating and selling to potential clients, there is no chance of success.

New financial advisers are also rarely hired directly after college, because they need experience. Most advisers tend to have a previous career in another industry. Branch managers, who are often in charge of hiring, are more confident in hiring an experienced middle-aged applicant than a fresh-faced young man.

The advisers must also have an entrepreneurial quality, similar to a business owner. Once an advisor establishes a business book, this entrepreneurial spirit is what differentiates the successful from the mediocre. Keeping clients and a financial advisory practice is similar to running a business. Successful advisors employ a systematic approach to customer service, marketing, and investing. These advisors are proactive, rather than reactive, with clients. There the practices function like a well-oiled machine that is ready to grow.


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Mark Holland

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