The Great Resignation of people fleeing the work force or changing professions is having widespread effects on many industries in the economy. Financial planning and family and wealth management are no exception. While perhaps more wealth is being created at the top of the economy than any time in history, financial planning has seen consolidation in its ranks with many venturing out on their own pursuant to changes brought about by the pandemic. With change can come opportunity, so if you’re interested in pursuing a career in financial planning now could be the time.
Let’s take a look at some industry statistics before you decide to take the leap. The number of people employed as personal financial advisors has been growing at a rate of 7.71%, from 352,351 people in 2019 to 379,512 people in 2021. According to DataUSA, the overall demographic numbers are compelling. The industry currently is made up of roughly equal numbers of men and women, with an average annual salary of $143,617. The average age in the industry is roughly 45 years of age.
For the neophytes among us let’s first define what a financial planner is and does. Embedded in the name, a certified financial planner (CFP) will help you create and maintain a financial plan. The process usually begins by determining an individual’s financial goals and needs and assessing their appetite for risk. Advice can be given on a wide range of topics, including investments, retirement planning, saving for a home, etc. Some CFP’s specialize in more parochial areas such as divorce, small business owners or simply retirement planning.
Before delving in too deep, you need to understand what kind of education, certification and experience are necessary to pursue the CFP path. To begin, a four year college degree is needed before one can begin the pursuit. Also, a certified financial planner is a type of financial advisor who possesses one of the most rigorous certifications for financial planning knowledge. CFP’s must have several years of experience related to financial planning, pass the CFP exam and adhere to a strict ethical standard as set by the Certified Financial Planner Board of Standards. According to the CFP Board, a non-profit organization that serves the public by fostering professional standards in personal financial planning, there are four categories that must be met. They are education, the exam, experience and ethics, and can be detailed as follows:
- Complete the education requirement. The CFP Board requires completion of specific coursework on financial planning and a bachelor’s degree or higher. Applicants have up to five years from the date they pass the exam to receive their bachelor’s degree.
- Pass the exam. The exam consists of 170 multiple-choice questions to be completed in a total of six hours. According to the CFP Board, about 67% of first-time exam-takers passed in 2019.
- Gain professional experience. To meet the experience requirement, prospective CFP’s need to complete either 6,000 hours of professional experience related to financial planning or 4,000 hours of apprenticeship that meets additional requirements. These hours can be completed either within 10 years before taking the exam or within five years after passing it.
- Adhere to the ethical standard. The last steps of becoming a CFP are to sign the Ethics Declaration, in which you commit to acting as a fiduciary for your clients, and pass a background check conducted by the CFP Board.
With this said, financial planning can be one part finance, and one part counselor. Like a therapist, you will be helping a client prepare for the biggest events of their lives, like having a baby, managing an inheritance or retirement. These events can be potentially anxious times for people, not to mention other fears such as a recession or running out of money. So if you haven’t guessed it already, a potential CFP must be proficient in math or finance and have the inter-personal and sales skills necessary to benefit a client. As you might have guessed the day to day job functions will vary based upon the needs and goals of your clients. “Every day is different because every client has a different need,” says Michelle Bender, a certified financial planner at Potomac Financial Consultants in Germantown, Maryland. When not in meetings a CFP is typically prepping for upcoming meetings and doing sales and marketing to access new clients. It all really boils down to sales. The financial products and services being utilized are generally nothing new. This is true of whether you hang out your own shingle or work for another group. According to Brittney Castro, a certified financial planner and founder and CEO of Financially Wise, “Most successful financial planners are those who are naturally inclined to talk to people and be more out there and run a business.”
In addition to the CFP certification, there are a couple of other notable designations that also begin with “C.” One is a Chartered Financial Analyst or CFA. They generally specialize in investment and portfolio analysis. While CFA’s can consult with retail clients, most of those with the designation work for investment funds or advice corporate clients. Next there is certification known as the ChFC, which is a Chartered Financial Consultant. The CFP and the ChFC generally require similar course work and will lead you down the same career path. The CFP will be a bit more stringent regarding education and difficulty of the required exam. Lastly, a CFP, or Certified Public Accountant, is somewhat distinct from those mentioned thus far. A CPA is a terminal degree certification in accounting and opens professional doors in taxation and corporate accounting, among others. Another option if you are entrepreneurial minded is to become a Registered Investment Advisor or RIA. If you want to pursue this tract you’ll likely need to register your firm with the SEC as a registered investment advisor, or RIA, and yourself as an investment advisor representative, or IAR. As such, you must pass the Series 65 or Series 66 exam and complete the registration process outlined by the Investment Advisors Act of 1940. Hopefully this will help guide you in your decision on whether to pursue a career in financial planning and wealth management.
