Financial Advisors Make Over $100k

In this list of six-figure jobs for ordinary people, I found this tidbit:

Career Spotlight: Personal Financial Advisors

Personal financial advisors work on a one-on-one basis with their clients, recommending investments and products for wealth management. In another career expected to see a lot of growth, about 72,000 jobs for personal financial advisors are projected to enter the field through 2016. About a third are self-employed, often working from home.

• Recommended Training: Bachelor's degrees in finance, business administration, accounting, statistics, or economics are recommended for personal financial advisors. Those looking to make six figures in their work may be encouraged to earn an MBA.

• Earn Six Figures: Mean annual wages across the occupation were $89,220 in 2007. Personal financial advisors working in New York earned $131,660, and those working nationwide in financial investment earned $101,890.

A few things were interesting to me about these comments:

1. A personal financial advisor is listed as a job "for ordinary people", implying that almost any Jane or Joe can do it. Really? Is this true? And if it is true, do you really want to turn your finances over to such a person? Then again, if it's that easy, why can't you do it yourself? (which is something I always say, so maybe this is a job for ordinary people.)

2. Lots of job growth projected in the future. Not surprising.

3. Interesting they list education as "training" but not any sort of certification like a CFP degree.

4. Over $100k if you work in "financial investment." I wonder if this includes only planners or brokers, etc. Anyway, my guess is that these people make more than regular planners ($89k) because of the fees they charge on their recommended investments.

Comments

[pink panther]

One thing this doesn't mention is that it's a merit-based and competitive field, much like real-estate agents (only without the tangible property). Sure, a good advisor can command big bucks, but how many of these are there? And if your advice isn't worth anything, people will drop you. Where I live I think there is an Edward Jones office almost every block. I can go to the mall and count five or six. And that's just the high-brow, big-premium advisors trying to make it (not the advisors for lesser mortals with less cash to spread around). I don't know how they make it. Like real-estate, I guess the cream rises over time, but it's such a tight and competitive field you with your certification are going to be competing with former wall-street guns who are hanging out a shingle in a smaller, slower-paced place setting up their own firm with their bonus money.

BTW, if you want to know what you have to do to make it, Edward Jones actually has a great web site that tells what you need to do to get a franchise -- mainly all the work you put in. You get very little reward the first few years. (Again, not unlike real-estate where you have to try to break even and pay your fees and join a reality firm.) Eventually, if you build up a client base, you will earn more. But it's a super-high risk for moderate reward kind of thing.

[RDS]

I agree with pink panther that these averages are likely misleading. The "average" earnings of 90K per advisor could easily come from a handful of planners that pull in about 230K and 3 times as many that are making 30K. Back when I was a financial advisor this was certainly the breakdown in my office.

I think that financial planning is a career "that anyone can do" as much as anything else is. You have to build up a knowledge base. However, the amount that one needs to know to be a good planner - especially if you generally keep your clients in mutual funds - is less difficult to master than many believe. Perhaps the most important ability is communication. You need to be able to figure out what your clients really need, what the want, what they are willing to do, and convince them what the right thing for them is. When the markets go sour you need to remind them of their plan, and that what the are doing makes sense in the long run.

Anyone can do this. However, not everyone is great at it and not everyone is going to bring home a three figure salary.

RDS

[gharkness]

What the previous commenter alluded to, but didn't mention directly, and what the original recommendations did not mention at all, is that this is a SALES job. If you can sell, you can learn what it takes to be a financial planner. That does not, however, make a person honest, or the best financial planner for any particular individual.

Of course, it's much better to have the credentials, but if you can't sell, all the credentials in the world won't help you.

This, of course, bodes ill for customers of the financial planner. How much of the 'service' being purchased is real, and how much is sales BS? I guess caveat emptor applies here in a big way.

[Guru-Ry : the-financial-guru.net]

My brother-in-law is a financial planner/private pilot. He's self-educated and had to market himself, so it is a little difficult at first. But he's smart and likes helping others become wealthy and make smart choices when it comes to their portfolios and other income investment ideas. He has an aviation degree because that's what he loves to do. But, he learned and is still learning about financial/stock investing. The funny things is, he's better at handling his own and others money than our other brother-in-laws, who both have degrees in finance and business/accounting.

Sometimes I guess it's not what you know, but how you use that knowledge! My financial planner brother-in-law has also helped put us into a program that will have us owning our house in under 30 years; acutally we will own it in 3.25 years. He's great. He doesn't make 80k a year because we are in the midwest and not near a big city and because he does it part-time. Nevertheless, I applaud him and we both get excited on how soon we will both be financially free, and shoot, we're both not even 30 yet!

[Duane Gran]

Planners are naturally quite useful during the asset accumulation phase, but they add a lot of value during retirement. The formula for drawing funds out safely is much more complicated and emotion-laden than the formula (spend less than you earn) for accumulating wealth.

Who knows, in time you may find that working with someone who has navigated the retirement years during boom and bust for others has value.

[Jim]

Here's the Occupational Outlook Handbook page on financial analysts / financial planners:
http://www.bls.gov/oco/ocos259.htm#earnings

It says they have bachelors degrees. Plus the article from Yahoo cited mean (average) pay. The OOH page cites the median salary at closer to $66k annually.

By comparison, median earnings for all college graduates is about $51k.

Jim

[Rick]

Regarding what "Guru" said, you don't need a financial planner to pay off your house in 3.25 years. You simply need to to spend less than you earn. I wonder how much you paid the financial planner to get you in this "program." I'm guessing if you just followed FMF's steps to buying and paying off your house, you could also pay off your house in the same amount of time, but without spending all that on fees to the financial planner.

FMF's steps are simple. Something like: buy only what you can afford. Spend less than you earn. Put the extra towards your house.

Which I'm sure is exactly what this "program" has you doing, only you're paying a fee for it.

[Curious]

What about the vast untapped market of people who need financial advice but cannot afford the pricey limited services currently available?

I would like to tap and serve this market. How can I do that?

[Duane Gran]

Curious,

That market is largely untapped because it isn't profitable, but you are correct that the service is dearly needed. A financial advisor makes money in two (exclusive) ways:

1) Various forms of incentives in selling certain funds. This is clearly a conflict of interest but in many cases it is the only way professionally to justify the work required to manage a small portfolio.

2) Charge a fee based on assets under management. There is far less conflict of interest, but it only makes sense if the portfolio has more than 250k in it.

It would nothing short of turning lead into gold someone could devise a business model that served the small portfolio investor without inherent bias.