We have been writing this newsletter for close to 3 years and have had an online presence for almost 5 years. In that time period I have been asked by subscribers and readers dozens of times why I am not a financial advisor. I can’t help but chuckle ever time I hear that question because I get the same question from my mom at our family gatherings.
Everyone who knows me personally, knows without a doubt that I love personal finance and investing. Some people like their cars, others like their sports, I love my finances. Truth be told I actually looked into becoming a financial advisor about a year ago, unfortunately the in depth job description I found was very disappointing.
Financial Advisor Job Description
1.) Part Time Does Not Exist – All reputable firms that hire entry level financial advisors do not offer part time work. In fact any firm worth their salt require all new financial advisors to work approximately 50-60 hour work weeks. I love working hard just as much as the next guy, but I am happy at my current job and the possibility of scaling into financial advising is not available.
2.) Business Model – Speaking of scaling in, when I researched the average personal financial advisor salary it was another nail in the coffin. Successful advisors make a very good living however, it takes a lot of hard work to get there and doesn’t happen overnight. There are a couple ways advisors are compensated (Fees, commissions, etc) but typically most advisors at big brokerage firms charge approximately 1-2% of assets under management.
As I said before I am happy at my current job and am handsomely compensated. In order to match my current salary it would require a lot of time and sales within my first year. While not impossible, after talking to some financial advisors they said it is not typical to see that type of success in the first year. I crunched some quick numbers and here’s what I found:
- $50,000 salary – $5 million Assets Under Management
- $75,000 salary – $7.5 million Assets Under Management
- $100,000 salary – $10 million Assets under Management
Now granted your income opportunities are virtually unlimited acquiring between $7.5 & 10 million in Assets Under Management is no easy task.
3.) Red Tape/Legal Requirements – Oh my gosh, then came the red tape. The SEA of red tape I should say. I honestly do not know where to start. I will say as a financial advisor for a bigger reputable firm they have entire departments that keep the red tape at a minimum to advisors but it’s still there. A couple of the biggest things that stuck out to me were the following:
4.) Licensing & Qualifications – Series 65 exam, plus you will more than likely want a financial designation (CFP, CFA, PFS) which requires more schooling and previous financial work experience.
5.) Federal & State Regulation/Compliance – These are the laws that you must abide by as an investment advisor. They actually were not all that bad but seemed very tedious and in short a huge headache. File this form…. Report this…. Pay this fee…
6.) Sales Aspect – This is the cold hard truth in my opinion of the financial advisor industry. If you are not making money for your company then you are not an asset. This means if you are not gaining clients you will surely lose your job. Your financial knowledge is absolutely meaningless if you cannot convince a potential client to invest with you and your firm. I have the utmost respect for those individuals in sales and I am humble enough to state that sales is not my strong point. I simply try to add value to someone’s life and if they choose to except my advice “good” if they don’t then “no hard feelings.” The pressure of having to make a sale is not something that I want in my life right now.
7.) Life Style – At my current job I am fortunate enough to come into work put in my hours and go home. I literally take nothing home with me at all. This means uninterrupted time with my family and I am not anchored to my smartphone dreading communication from my office. I personally place a large value on my current situation compared to the alternative as an investment advisor. Any advisor worth their salt in my opinion would be available 24/7 for their clients. Additionally, in order to acquire new clients advisors attend a lot of networking and social events that occur during non traditional work hours.
The Big Takeaway
While I love finances and believe I would thoroughly enjoy being a financial advisor, I am a husband and a father before anything else. As the sole provider for my household I will not take the risk to become an advisor and jeopardize the stability of my household. Please make no mistake, their are a lot of great financial advisors available, but for my particular situation it is not feasible at this time.