So You Want To Become A Financial Advisor?
By CHM on Feb 12, 2008 in Featured
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This morning - over on Moolanomy - is an interview Pinyo conducted with yours truly last week.
As a part of the interview Pinyo asked me, “what’s the minimum requirement for someone to offer financial advice?”
I thought he meant what was the minimum amount of investable assets you need to work with a financial advisor, and I went on to answer that question. Although he was happy for that answer, what he was really trying to ask me was… what qualifies someone to offer advice to the public professionally?
(For the purposes of this post, we’re going to add 5 little words to the end of that question. So the question now reads… what qualifies someone to offer advice to the public professionally AND BE COMPENSATED FOR IT?)
2 things immediately popped into my head:
I was wondering why he was asking me that question to begin with?
As it turns out he has a personal interest in possibly doing that someday. Ahh… it all makes sense now 
So I emailed him and told him, ‘if he applies the same thoughtfulness and passion he does to his blog, I’m sure he will make it a reality and he can come work with me. (Ok… enough warm and fuzzy:)
I wasn’t sure about the answer to the question, as you will see in the interview.
So I decided to do a little research and publish my results to coincide with his post. Please understand, obviously, I know my own story and how I did it, which I’m going to detail here momentarily, but a lot of years have passed since I took my Series 7, so I wasn’t comfortable being quoted at the time.
You Want To Become A Financial Advisor?
The term ‘financial advisor’ is a very generic term.
The overwhelming majority of financial advisors (like me) fall into the category of registered representatives, registered with FINRA. A much smaller group of financial advisors fall under the heading of IA’s (investment advisors), typically working for RIA’s (registered investment advisors) which are organizations registered with the SEC.
As it turns out, the way I became a financial advisory professional is still the way most people do it today. In order to keep things simple, I will talk to the way the majority of people arrive as registered representatives.
For the record, as mentioned above, there are IA’s (investment advisors) that take a different path, some registering with the SEC or the state they do business in, while others are exempt; but that is beyond the scope of this post.
So now I’ll color in some of the details of my story. If you want to skip it (I won’t be offended), just go to the bottom of the page and I’ll snap off a few cliff notes instead. You can always catch more of my story at another time.
How I became a financial advisor and eventually a CFP®
I went to work for a broker dealer that was registered at the time with the NASD/NYSE. (The NASD and NYSE recently combined forces to form one governing body called FINRA, because of this fact I had to change all my letterhead and business cards last month) I started in their sales training program, which was another way of saying, ‘make 300 phone calls a day’, aka… cold calling.
If you lasted more than 4 months (other places up to a year or longer) then you had survived their version of boot camp, and they were willing to sponsor you to take the Series 7 examination (formally known as the General Securities Representative Examination).
Once you’ve passed this exam you are licensed with FINRA and allowed to sell securities to the public and present yourself as a professional. You must be registered in the state(s) you decide to solicit business in.
Many different ‘Series’ exams
Now there are all kinds of ‘Series’ examinations; with the Series 7 being the most popular. Each ‘Series’ gives you the right to hold yourself out to the public in one capacity or another. For example, a few months ago I wrote an article about the importance of managed futures. In order to sell managed futures to the public I had to pass the Series 31 examination.
Over the years, as your professional goals change it’s a good idea to take more examinations. One of the biggie’s is the Series 24 which qualifies a registered individual to supervise or manage a branch office. In our case, since we are an independent, it made sense to pass this exam. I did. Now I manage myself and anyone in my OSJ.
Certified Financial Planner
Lastly, after adopting a planning based business model back in 1999, I knew I would eventually become a CFP (Certified Financial Planner), I just procrastinated on that one for a while. The CFP designation is owned by the Certified Financial Planner Board Of Standards. You can read more about my thoughts on being a CFP over on Moolanomy.
Here’s something you may not have known - certain degrees automatically allow you to take the certification exam. For instance, I have a good friend that’s a lawyer for the SSA (Social Security Administration) and he’s been toying with the idea of sitting for the CFP certification exam. Good luck!
Cliff notes version
- You don’t need a college degree to become a FINRA registered representative, although you probably won’t be hired by a member firm w/o a college degree.
- You do not need to be a full time employee of the member firm to sit for the Series 7
- You need to be sponsored by a FINRA member organization (i.e Merrill Lynch, Smith Barney, etc.) or an exchange, in order to take the Series 7. There are other Series exams that do not require member firm sponsorship.
- The member firm will submit an application on your behalf to take the exam.
- If you pass the exam, you are free to register with the different states you plan on transacting business in. You have to be registered in that state in order to solicit business and start advising. Currently I’m registered in 6 states.
Pinyo’s next career move
That should be enough information to get you started on the path to being a compensated financial advisor. If you play your cards right, I’ll hire you and sponsor you for the necessary exams someday:)
Tags: FINRA
Pinyo @ Moolanomy | Feb 12, 2008 | Reply
This reminds me of the movie, Pursuit of Happyness. One big barrier for me is I hate cold calling.
CHM | Feb 12, 2008 | Reply
Haha… no not really and there really isn’t much cold calling being done these days. I’d recommend 1 of 2 routes to get started on the path to becoming a financial advisor:
1- Find someone who has an established book of business and is looking for a junior partner or junior member for the team.
This way you can learn the business the right way, under the watchful of eye of a seasoned professional(s). There may be a lot of competition for these openings but they’re available, I know of someone that just landed something like this.
Good employees are hard to come by and if you’re motivated and bring a lot of enthusiasm, you should do fine.
2- Look to get into a bank program. Again start as a junior partner or even on the bank side and express interest in moving to the investment side. It’s a great way to learn the business, meet with a lot of clients and hone your skill set.
This position will probably involve some form of ‘warm’ calling, calling bank clients with high balances. It’s really not that bad:-)
CHM | Feb 12, 2008 | Reply
Also, if you speak a foreign language it may pay to specialize in helping clients of that ethnicity. It’s a good way of limiting your job competition and getting your foot in the door.
When I worked at Citibank in Whitestone, many of the most successful reps. in my area spoke Korean or Chinese (Cantonese or Mandarin) and worked predominantly with those clients and were extremely successful doing so.
Ron@TheWisdomJournal | Feb 12, 2008 | Reply
Good morning Ciaran,
I’ve heard of some financial planning teams that have one person prospect, another make the presentation, another close, another do the paperwork, and another follow up. THe theory is that everyone has a strong point and by working as a team they all play off each other’s strengths.
Ever heard of this approach?
CHM | Feb 12, 2008 | Reply
Hey Ron… thanks for dropping by.
Yes I have heard of this approach. I’ve never been a part of a team like that but I’m sure that approach (or similar hybrid versions) work very well.
From my own experience there are things about my business that I love to do and then there are things that I’m not to fond of.
Finding the right personalities to excel in the different roles is one of the keys to running any successful business.
FFB | Feb 12, 2008 | Reply
Thanks for all of the great information (as well as the stumbles).
I’ve wondered about what a CFP does and how to become one. Thank you for the info.
Your path to the series 7 involved lasting 4 months cold-calling. How is it different today and what is a good way to go about getting a series 7? How much of being a CFP is sales versus coming up with a financial plan for your client?
Thanks!
P.S. I love that fact that Queens is represented in the blogging world with Pinyo and yourself.
CHM | Feb 12, 2008 | Reply
Hey FFB,
I took the Series 7 in 1995 and a lot has changed. Back then if you made it through the first 3 months, they wanted you licensed as soon as possible to get you pitching stock to the public over the phone.
Today I think very few cold call, although some still do, but there is more of an emphasis on networking and leveraging your natural assets and existing client base for referrals.
See the comments above for getting started with the Series 7.
For me, being a CFP is all about process, specifically the financial planning process. It’s process, not product driven.
Queens is in the house:)
Mrs. Micah | Feb 12, 2008 | Reply
On the one hand, this sounds really exciting. AT the same time, I’m not sure I’d be good in that role…I don’t think I have the personality for it. Yet. We’ll see.
CHM | Feb 13, 2008 | Reply
Hi MM,
Advisors come in so many different shapes and sizes. Some of the best I’ve ever seen don’t look the part and aren’t what the public perceives to be ‘a wonderful salesman.’
They’re quiet, honest, hard working people that genuinely want to help others; and are compensated fairly.
If you have any of those qualities I’m sure, if you put your mind to it, you’d do fine:)
CJ | Feb 20, 2008 | Reply
You mention adopting a planning-based business model…what is this model and where did you get it? In about a year, I’ll be a credentialed planner and am curious about the steps involved in starting a practice.
Great blog!
-CJ
CHM | Feb 20, 2008 | Reply
There are a lot of different financial planning software programs that you can use. I used to use the Interactive Financial Foundation and moved on to Wisdom Tree Silver.
Currently I’m looking at new financial planning software, putting a premium on online ease of use. If you keep reading, I plan on reviewing what I find in the next month.
You can check out Boulevard R and let me know what you think, haven’t been able to use it yet but am interested to try it - as soon as I can find the time.
Not sure if you were asking this but… after completing a financial plan I build out client investment portfolios using ETF’s, charge somewhere in the neighborhood of 1% to manage the assets… that’s your fee based investment model. In essence, from this point the clients have me on retainer and we deal with all the other issues that arise from the plan (outside of the fee based investments)
Hope that helps… if you become a CFP a year from now, check back here as I plan on having CFP guest posts in full swing by then. Good luck!
kentuckyliz | Feb 26, 2008 | Reply
As a consumer, I’d be interested in knowing which designations carry a fiduciary responsibility to the client. I believe RIAs do. I would be suspicious of any designations that do not carry the fiduciary responsibility. I work too hard for my money to hand it over to someone who thinks it’s all about pitching stock and churning accounts for commissions to line their pockets. Sounds like the training system promotes that kind of thinking and it is counterproductive to client interests.
CHM | Feb 26, 2008 | Reply
Wow, following you around my blog here… guess you’re catching up on your Chancefavors reading:)
My story is consistent with the way things were in the mid 90’s, a lot of great financial planners came out of that culture. Coming in to the business during that time, worked well to show advisors (like me) which way they didn’t want to go with their careers, eventually many went as far away from that culture as possible.
I don’t know any commission based advisors anymore, and all the firms that operated that way are out of business.