Notwithstanding all the the talk in recent years about the challenges facing the financial planning industry, from including rising competition to “robo” fee compression, the financial advisor career path remains quite appealing. Not only can advisors make meaningful, life-changing impacts on their clients’ lives, but with experienced advisors making 2-3X or more than the median household income in the US, it’s also a potentially lucrative career choice as well. And, with a possible shortage of new talent to replace the wave of ageing advisors who are expected to start retiring in droves in the next decade or so, it’s little wonder why the profession holds so much appeal, particularly for those who are mid-career and looking for a more rewarding opportunity. The caveat, however, is that it still takes a lot of time to succeed and grow your income as a financial advisor, which presents a major roadblock for those who want to career-change into the industry and just don’t have a lot of “income flexibility” to take a pay cut in order to get their proverbial foot in the door. Which leads many to wonder if it’s possible to transition into a career as a financial advisor on a part-time basis.
In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we look at the challenges facing the part-time transition for career changers, discuss why many consider simply opening their own RIA given the lack of part-time job opportunities, and offer some practical ideas for transitioning into the industry as a career-changer without going the (not-actually-recommended) part-time route.
Notably, the challenge of finding good part-time work to grow and develop as a financial advisor is a relatively recent phenomenon. Historically, there wasn’t much need for new “advisors” to have much professional knowledge or experience because, in reality, they weren’t providing actual advice, but were rather being paid to sell insurance or investment products (which simply requires some product and sales training). For career changers, it was often quite feasible to make the transition into such a sales role on a part-time basis, soliciting their existing friends and family and former co-workers for product sales for a few hours a week. However, for those who want to provide comprehensive advice, and get paid for it on an ongoing basis, the reality is that it’s really hard to gain the requisite experience in anything but a full-time setting.
Which is why there just aren’t many part-time job opportunities with real financial planning firms in the first place. As an alternative, some career-changers explore the option of simply launching their own RIA, which on the surface makes sense, because the raw startup costs to create your own advisory firm are very low, and it’s very possible to be up and running in a few months’ time on a shoestring budget. Unfortunately, the problem remains that giving people advice about how to handle their life savings is a sacred duty, so just because you can hang your shingle and open your own financial planning practice doesn’t mean that it’s the responsible thing to do! Not to mention the fact that it’s really hard to gain credibility as a professional, to be paid for your advice services, if you’re part-time anyway.
Accordingly, for career-changers who are looking for a practical (and responsible) path to a career as a financial advisor, the best thing to do on a part-time basis is start your education to become a CFP certificant. Because, by taking and passing the CFP exam, you’ll be in a much better position to get a better paying full-time job at a real financial planning firm. The next best thing to do is to take the Series 65, because while most states offer a waiver for the Series 65 exam for CFP certificants, the reality is that you’ll still need to meet the experience requirement before you can earn your marks. Also, start building your professional network by joining your local FPA chapter or NAPFA study group, because at some point, you’ll be looking for a full-time opportunity, and it’s a good idea to get in front of the folks who might someday hire you. Finally, simply recognize the fact that you are changing careers and that it’s just not realistic to think that you can do that without taking a step down in salary in order to (literally) pay your dues. So make yourself your first financial planning client, and figure out how to build up the savings necessary to take one step back in the short-term, so you can take two big steps forward in your new financial advisor career in the long run.
The bottom line, though, is simply that there are some very real challenges when transitioning into a career as a financial advisor on a part-time basis. However, those who are willing to do hard work of studying for (and passing!) the CFP exam, getting the Series 65 license, and building a professional network will have the best options. But rather than trying to be a financial advisor on a part-time basis, do those things on a part-time basis instead… which also allows you to stay in your current job a little longer in order to save up enough so that, when the time is right, you can make the transition to a full-time role as a financial advisor in a way that makes sense financially and professionally!