Getting started as a financial advisor is difficult, in a world where most job offers to become a financial advisor still require getting all of your own clients from scratch, and compensation is tied to the amount of clients and business the new advisor brings in. But the reality is that when a financial advisor is hired from the start to get new clients and generate their own revenue, it’s not really a “financial advisor” job in the first place; it’s a job offer to be a financial salesperson, as the key to success is not selling the advisor’s time or expertise, but the company’s products and solutions instead. Which for many (or even most) people, is a terrible way to start a career as a financial advisor.
In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss why taking a position as a financial salesperson is not a good path to becoming a financial advisor, and how those who are interested in actually becoming financial advisors can pursue a better first job instead.
It is first crucial to distinguish between a financial advisor and a financial salesperson. Regardless of what title a company gives to their representatives (no one calls their representatives salespeople because “sales” is taboo, while “advisor” sounds professional), the reality is that when you actually look at the duties of jobs at especially a lot of large national firms that hire “financial advisors”, these firms are looking for financial salespeople, usually because their business is the manufacturing and/or distribution of financial services products (e.g., insurance or investment products). The biggest clue is that you are expected to get your own clients from day 1, and that their training is focused not on earning the CFP certification and learning to give better advice, but on sales training, how the company’s products work, and how to implement them in various client situations. In fact, new advisors often aren’t even allowed to charge clients a separate fee for advice (or need to reach a certain level of production or experience before you will be allowed to)… because, again, these firms are hiring financial salespeople rather than financial advisors.
Fortunately, however, it is not this way at all firms. There are non-sales roles in the industry where you can work as a paraplanner or associate advisor in an existing advisory firm, where your job is to support an existing financial advisor and their clients, rather than bring in new clients – roles that are needed at firms that are actually in the business of giving advice to their clients. The caveat, though, is that firms hiring paraplanners and associate planners these days often want their candidates to have CFP certification (or at least to have passed the CFP exam), so if you are not at that stage, just getting your foot in the door (working in operations or another area) may be your best bet.
Ultimately, the progression of entry-level jobs in the advisory industry (from most to least preferred) would be: (1) a paraplanner or associate planner; (2) an operations, client service, or administrative job; (3) any other salaried job in financial services; and (4) a job as a financial salesperson (as long as you can afford to stay in the business if it turns out that you struggle with sales and getting new clients from the start).
But the key is to understand that the real “entry level job” to a career as a financial advisor is not to start selling products from day 1, and companies hiring “advisors” to do so are really hiring financial salespeople for a sales job instead. Fortunately, even if you don’t succeed in an initial financial salesperson role, you can still move forward in one of the other entry-level positions, whether via association websites like the FPA or NAPFA, the CFP Board’s Jobs Board, or our listing of opportunities at New Planner Recruiting. Additionally, a growing number of large firms are realizing this challenge and increasingly hiring new advisors onto teams in entry-level support roles.
But if an honest assessment of your skills does not suggest you would be a good candidate for a sales role, then accepting a job as a financial salesperson is likely not the best path forward for you! And at a minimum, it’s important to go into the role with your eyes wide open!
(Michael’s Note: The video below was recorded using Periscope, and announced via Twitter. If you want to participate in the next #OfficeHours live, please download the Periscope app on your mobile device, and follow @MichaelKitces on Twitter, so you get the announcement when the broadcast is starting, at/around 1PM EST every Tuesday! You can also submit your question in advance through our Contact page!)
#OfficeHours with @MichaelKitces Video Transcript
Welcome, everyone. Welcome to Office Hours with Michael Kitces.
For this week’s Office Hours, I want to talk about what is still one of the most common inquiries I get from readers from the blog, and that’s finding that first financial advisor job opportunity. And the email I get is almost always the same. It says:
“Dear Michael, I’m writing to get a second opinion about a financial advisor job opportunity I have. I’m new to the industry and I’ve been offered an opportunity from some major firm to become a financial advisor with them, and I’m really excited to be an advisor, but I’m nervous about the fact that I have to get all my own clients and I’m not certain that I can get enough clients quickly enough. Do you think this is a reputable firm and a good job opportunity? What should I do?”
And the answer I have to give them almost every time, “This is not going to be a good job opportunity for you and it’s not a good path to becoming a financial advisor, and it’s probably not going to work out.” And it basically doesn’t even matter which major firm it happens to be that’s given them the opportunity because this isn’t just about one big firm versus another, it’s with the entire path to becoming a financial advisor in the first place. Because the truth of that job is that it’s not actually a job to become a financial advisor, it’s a job to become a financial salesperson. And according to industry data from Cerulli, only about 20% to 30% of financial salespeople who join a firm even survive the first 3 years and the rest fail and leave.
The Difference Between A Financial Advisor And A Financial Salesperson [Time – 1:34]
Now, the key distinction to understand here is the difference between financial advisor and financial salesperson. Now, I’m not talking about what the companies call themselves or what they put on the business cards because virtually no one calls themselves financial salesperson anymore these days, they say financial advisor because the word “sales” is taboo and “advisor” sounds professional, but the reality is that when you look at the actual duties of the job is that you’re a financial salesperson.
The first and primary hint is that you’re taking a job as a salesperson as the firm says you have to get your own clients from day one. Because let’s be honest, no one is going to pay you for your financial advice when you have no formal education as an advisor, no CFP certification, and not a day of actual experience as a financial advisor in your first place regardless of what’s on your business card.
Now, what they will do or at least what they might do is buy a product that your company offers that can help them with their financial situation. Maybe they’re underinsured and need more life insurance, you can help them with that. Maybe they have an old 401(k) that needs to be rolled over and reinvested, you can help them with that. Maybe they are trying to figure out how to generate some additional income at retirement, you can help them with that.
But the reason you can help them with these problems is not because you’re getting paid for financial advice yet, it’s because you’re representing a company that sells life insurance or investments or annuity products and the situations I just described are scenarios where these clients might be buyers of one of those products from your company. And if everything goes well they’ll implement one of those products with you and you’ll get paid for selling the company’s product, because that’s how it works when you’re a financial salesperson. And that’s why the company wants you to get your own clients because your job is to find people who will buy the company’s products because that’s the job of a financial salesperson.
In fact, most of the time if you even just try asking them, “Can I charge a separate fee just for giving advice even if they don’t want or need one of our insurance or investment products?” See what the company says. Usually, you’ll hear, “Well, around here we get compensated for our advice with the products we implement,” because again, the job is to sell the products. Or they may say, “Well, if you reach a certain level of production or you’re here for three years or five years first then you’re allowed to become dual-registered and charge separate planning fee because it actually takes time to become a financial advisor.” They let you sell products out of the gate because it doesn’t take as much time to learn to be a financial salesperson, but you just need sales training on how to sell, product training on your company’s products and how they work.
But the point here is that not to debate between fees versus commissions, which is really a whole other discussion. There are advisors out there who really are in the business of advice and happen to get paid through the solutions they implement at the end of their advice process, but those advisors have training and education and years of experience actually working as an advisor to add value with their advice and then happen to implement a needed solution at the end. When you’re starting from day one with no training and education experience to do anything but sell the products and they say, “We want you to be an advisor,” and you’re compensated for selling the products, your job is to sell products.
And again, the reason why all this matters is that 70% or 80% of the industry’s new recruits into sales don’t even last for 3 years because sales is such a brutally difficult thing to do, especially when you’re new to the industry and don’t have any experience. It’s tough even when you have sales experience because most consumers don’t trust financial advisors because so many of us are financial salespeople and consumers have figured it out. If you don’t believe me, tell a stranger you meet at a social event, “I’m a financial advisor,” and see what they do and watch them take, like, a step back away from you.
And unfortunately, the reality is the industry has a long history of doing this because, from their perspective, one of three things happens.
- Either you’re really good at sales, in which case you have a fine career as a salesperson.
- You’re really bad at sales, in which case you’re going to be gone in three to six months and it won’t cost them anything.
- Or three, you may try and struggle to get some clients then decide this isn’t for you and leave, and the company keeps your clients.
So from the company’s perspective, those three scenarios are win, win, and win. If you’re good at sales you succeed with them, if you’re not it doesn’t cost them much because you leave quickly, and if you join and get some clients and then leave, they make a profit and keep all your family and friends as clients after you go and leave the business. But from your perspective, either you’re good at sales and stay or you’re not or you’ll be gone long before you ever get enough experience to actually get paid for your financial advice.
Starting Your Financial Advisor Career Path – A(ny Non-Sales) Job [Time – 5:39]
So what’s the alternative for someone that’s looking to build a career as a financial advisor but doesn’t want to risk getting burned out on a sales job or just knows deep down they’re not going to be good at sales in the first place? Simply put, the answer is to find a non-sales job in the industry first. Ideally, this, I think, would be finding a job as a paraplanner or an associate advisor at an existing advisory firm where your job is to support other existing advisors with their other existing clients.
Because firms that are actually in the business of giving advice and not just doing product sales need advisors to help give advice to the existing clients. Because firms that are focused on product sales don’t, they just need to find the next new client to do the next transaction because that’s how the model works. But advice-centric firms generally have ongoing clients that need ongoing advice and service and therefore need ongoing support advisors to facilitate it. In fact, one of the fundamental reasons we launched our New Planner Recruiting business years ago was to help new advisors coming into the industry find those we’ll call them, like, real financial planning job opportunities.
The caveat, though, is that firms hiring paraplanners and associate planners these days often want their candidates to have CFP certification, or at least have passed the CFP exam. And if you’re just coming to the industry for the first time, you may not have that yet. You may not have even started yet, which means paraplanner or associate planner jobs may not feasible for you out of the gate. And it means the next alternative is find any other job you can and get your foot in the door.
And I see a lot of advisors that focus so much on finding, like, the one true, perfect job for their career path out of the gate. You don’t have to find the perfect job out of the gate, you have to find a job out of the gate. You can morph your way to the perfect job later at some point down the road. You know, just work towards what gets you to the initial job you need to get started with your career and morph from there.
Now, what those jobs look like varies by the firm. It could be working in an operations or administrative capacity in the firm. Maybe it’s a job as a client service administrator that will handle paperwork and work alongside another advisor. I spent almost two years of my early career working in support roles for other established financial advisors, helping to complete annuity and insurance applications, open investment accounts and track the status of ACAT transfers, and make sure client portfolios are traded and invested, and all the things that have to get done in a firm, doing ongoing work for clients.
Eventually I moved on from that role and advanced my career, but it was incredibly valuable experience. Because it’s actually quite helpful when you’re working with clients to understand how all that stuff works, and it got my foot in the door with a couple of years’ experience to then move to a better job with more opportunity. Especially because while I was doing those initial operation or administrative jobs, I got my CFP certification, which let me take on more and more financial planning tasks over the years and built my career and helped me to move forward.
But the key is to understand the real entry-level job as a financial advisor is not to go get clients and start selling products from day one, it’s to get experience working in advisory firm from day one. Or if you have to, just any financial services industry job and you can move laterally from there over time. Because the truth is virtually any experience in the industry is helpful to learn your way. Understand the companies, understand the dynamics of the industry and what the opportunities are. Ideally, it’s working with a firm where you can pay your dues, as they say, and get some real relevant experience and then move up the ladder as a financial advisor.
And the good news, at least, is these jobs are generally salary jobs. You don’t have to go get clients. You don’t have to sell products. You just have to be good at helping the firm service its clients and start getting experience and learning and developing the skills to move forward.
I know it’s difficult for some people getting started, especially if you’re a career changer and accustomed to a certain potentially higher standard of living, that, you know, the reality for career changers or starting a new career is you may have to take an entry-level job for a period of time, get the experience you need and then move up. The good news is experienced advisors often make $100,000 or $200,000 a year, the most successful make far more than that. But you have to start somewhere, which may mean taking one step back to take two steps forward in your career or taking one small entry-level step to try to climb bigger steps later.
Finding The Right First Job As A Financial Advisor [Time – 9:31]
The key point here is to understand that unfortunately, the financial advisor job offer from a lot of big firms is usually not a good way to start your career as a financial advisor because it’s not a financial advisor job, it’s a financial salesperson job, regardless of what it says on your business card. That’s why they want and expect you to get your own clients early on and bring people in that can buy the company’s products.
And that’s why a lot of major firms have increasingly been soliciting career changers lately because career changers often come with what’s known as their own natural market, existing friends and family with whom they could do business from day one, often from their former career or industry.
But again, it means, I hate to break the news to you, you’re not getting hired for your potential as a financial advisor, you’re getting hired because you’re coming to the table with good prospects for the company’s products. Which again, either you’ll sell your friends and family and succeed and make money and the company makes money, or you’ll sell a few of your friends and family and not succeed and then you’ll move on and the company keeps your friends and family as clients. That’s their marketing strategy.
And the challenge for some advisors, even if you succeed, if you decide in the future that you don’t want to stay at that company, you often can’t take your clients with you without a fight. The firm may not be in the Broker Protocol. They may have strict rules against leaving. They may require you to repay prior commission draws that you received if you haven’t sold enough products before you leave. It’s one thing for an experienced advisor to jump in eyes wide open into a company where it’s hard to leave because they make the conscious decision, the company has good resources, it will be a good partner and it’s a good trade-off for them, but it’s another when you simply get recruited there to start your career and then discover you’re pretty good at sales and then realize you can’t make a change later without starting over again anyways.
But the bottom line is simply this, notwithstanding what companies put on their business cards, there’s a difference between financial advisor jobs and jobs as a financial salesperson. And unfortunately, the reality is the companies that are in the business of manufacturing and distributing products they create are generally in the business of selling those products and hiring salespeople to do it. So make sure you understand what kind of job you’re getting yourself into. And if you really want to get started in the financial advisor career track is I would view it your preferred list of, like, job pathways in:
- associate or paraplanner
- operations, client service, some kind of administrative job in a firm
- any other salary job in the financial services industry
- (distant option) is taking a job as a financial salesperson
The truth is even if you don’t succeed is actually still good and valuable experience for the next step. I started my career as a financial salesperson. I was terrible at it. I was still able to move forward with that experience, though, and find other job opportunities that worked out better because any experience helps. But not all of us have the financial flexibility or situation to be able to start out of the gate and fail horribly, as I did, and then try to navigate your career from there.
And I will say don’t even think about trying to go out on your own and starting your own firm from scratch with no experience. Any of the options I listed above, including financial salesperson elsewhere, is better than going out as an independent solo from the start with no experience. In the long run, great opportunities to be a solo independent advisor, but not the way to start a career and get the training and experience you need.
Fortunately, though, there are more and more of these jobs available. You can find them on association websites like FPA and NAPFA, CFP Board’s jobs board, our New Planner Recruiting job opportunities, and a growing number of large firms that are realizing this challenge and even hiring new advisors into teams in support roles rather than trying to send them out to sell from the start.
But again, the bottom line is just, as we wrap up, to understand that financial advisor jobs that require you to get your own clients from day one are not advisor jobs, they’re sales jobs. And there are and will always be a lot of opportunities for salespeople because it’s a difficult thing to do. So if that’s you, that’s great, if that’s not you, don’t let yourself be misled. Ask good interview questions. We’ve covered this in prior Office Hours before. Understand the nature of the job. Know yourself and what you’re really good at, and figure out if one of these other entry-level pathways may be a better fit for you in the long run.
Hopefully this is some food for thought. Office Hours with Michael Kitces, normally 1 p.m. East Coast time on Tuesdays, but as you can see, I’m recording from conference hallways at AICPA’s Personal Financial Planning Conference this week. But thanks for joining us, everyone, and have a great day.
So what do you think? How would you advise new planners to pursue a career in a non-sales role? What are the best first jobs for financial advisors? Please share your thoughts in the comments below!