Engineer, software designer, blogger, actuary – these are all fascinating and rewarding career choices, but none of them are roles that every single person requires in his or her life. Not so for the financial advisor. Whether you are struggling to make ends meet monthly or are well on track to meeting all your financial and life goals, managing your financial wellness with the assistance of a financial advisor is vital. Financial planning is relevant to the life of every single adult in one way or another, and that makes it a fairly secure and rewarding career choice. Here’s everything you need to know about how to become a financial planner.

What certification is needed to be a financial advisor?

Financial planning has undergone quite an evolution globally over the last 15-20 years. Given the significant impact that advisor conduct has on financial outcomes for clients, many countries have introduced customer protection legislation to regulate advisor conduct. In addition to such legislation, several other country-specific aspects are relevant to financial advisors: tax, estate planning and corporate legislation, to name a few.

When considering a career in financial planning it is therefore imperative to understand the legislative environment you find yourself in as many of your decisions will be impacted by your location on the world map. You will also find that while many countries are at the forefront of professionalising the industry, many have also been left behind and still lack important advisor conduct legislation.

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Financial planner vs financial advisor

In the financial planning environment, terminology abounds: financial planner and financial advisor are commonly used, but you also are likely to come across the terms wealth manager, insurance broker – the list goes on. So what is the difference?

Whilst local legislation may vary, there are typically three types of financial planners:

1. The independent financial planner: can provide any financial solutions to clients, with no preference for or tie to a particular product provider. A financial planner is able to provide holistic financial planning services – more about that below. There is no conflict of interest in choosing the most suitable solutions for clients given the lack of any ties to particular product providers.
2. The financial advisor: is often more focused on providing product-specific advice. The financial advisor can be independent but can also have a contractual relationship (often as a franchisee) with a specific product provider/s. So, whilst the financial advisor is not typically employed by a large financial services company or product provider, there is a preference for using the products of a hand-picked group of product providers – independence is therefore somewhat fettered.
3. The insurance broker: is employed by a large financial services company or product provider and is usually only able to market and advise on the products of his own employer. One of the concerns from a client perspective here is that there is little or no independence and there may be a conflict of interest between the needs of the broker (having to sell products to get paid) and the needs of the client (for whom that specific product provider’s products may not necessarily be ideal).
4. The wealth manager: this is an interesting one that is used interchangeably with a financial planner in some instances. Typically, a wealth manager would not take a holistic view of a client’s financial wellness though but rather focus on investment planning aspects.

When looking into a career in financial planning it is of the utmost importance to understand how this landscape looks in your country and decide where you would like to fit in and what you would like to be able to offer clients.

How do financial planners and financial advisors get paid?

This aspect links closely to the type of financial planner as discussed above. Until the recent shift towards professionalising the industry globally, there was one remuneration model only: commission. This means that a person ‘selling’ a financial product is paid a commission by the product provider itself. This commission amount is calculated into the premium that the client pays in respect of the product. No product sale in this instance means no income. Insurance brokers almost exclusively earn commission, and in many countries this remains the main form of remuneration.

As we move towards professionalising the industry, the reality has become clear: not all financial advice involves the sale of a product. What if I assist a client with budgeting and financial decision-making? Assist with managing behavioural biases? Advice on suitable debt-management strategies? This advice may be life-changing for a client, whilst involving no financial product at all.

The reality is that many financial solutions do not involve financial products – but the professional know-how of the planner. This has led to the shift towards fee-based financial services. Think about a visit to your doctor: you pay him for his professional knowledge and the fee is an hourly one for professional services. Whether he gives you a prescription or not is irrelevant. Medication is paid for separately. In the same way, professional fee-based planners may charge professional fees. These are typically based on one of the following:

• An hourly professional fee
• An annual retainer fee (either paid annually or monthly)
• A fee based on assets under management (AUM) in the case of investment products

A percentage fee would be agreed upon and the actual fee value based on the value of the investment portfolio managed on behalf of the client. One can see here that the application does seem limited – what about the whole range of other client needs that may need to be addressed? Might a planner be inclined to focus on investment planning only, to the exclusion of other important areas, because that is how his fees are generated? Therefore, again, it is vital that as a prospective financial planner, you not only understand the type of planner you want to be but how your remuneration model will work.

In the Upskillist online financial planning course, we discuss these aspects in detail, highlighting the pros and cons of the various planner and remuneration types.

What does a financial planner or financial advisor do?

Financial planning incorporates the total financial wellness of clients, including:

• retirement planning
• investment planning
• risk planning
• estate planning
• tax planning
• budgeting and cash-flow management
• financial management and debt planning
• financial coaching, which includes assisting with financial decision-making and managing behavioural biases.

Each of these is a distinct planning area. Planners may offer holistic services in all these areas or may prefer to specialise in any one of these. For instance, planners may specialise in retirement and investment planning as these two areas complement and impact each other, as do estate and risk planning.

What skills do planners need?

This is an interesting question and an area where much research and development has happened in recent years.

Of course, there are non-negotiable skills: good analytical and mathematical skills, interpersonal and networking skills – in most positions you will be required to source new clients. Effective communications skills (written and verbal) and resilience are also important.

Based on more recent research, it has become clear that clients value different skills in their planners: personalisation and empathy – clients want to know that their planners have taken the time to know them, their lives, their hopes, and dreams – rather than trying to sell them a product. They don’t want a one-size-fits all financial plan, but one that acknowledges their personal and unique goals.

Excellent listening skills are virtually the most important in this role: clients often struggle to articulate their goals and dreams. Because they have become used to goals being framed as financial in nature clients often fail to mention relevant ones (for example, ‘I would love to have this experience or further my own education later in life’). The ability to listen to what clients say and, importantly, what they don’t say, is absolutely vital as a planner.

Coaching skills have become critical to professional planners. As mentioned, many clients don’t need another product. What they need is a sounding board in dealing with financial decisions, discussing concerns and ideas relating to their general financial wellness and lives. The role of the financial coach has developed as a distinct role-player over the last five years or so. Many planners have shifted their focus exclusively to providing financial coaching.

How to become a financial advisor in 4 steps

In my financial planning course, I reiterate a decision-making mantra again and again: better awareness leads to better decisions, which in turn leads to better outcomes. 

This equally applies here.

1. Start with awareness

Understand very clearly what the financial planning environment in your country looks like. Most countries have a professional financial planning body that governs all or some aspects. Contact your professional body and gather all the information you need. The international Financial Planning Standards Board is the global industry body and has affiliate professional bodies in 26 countries at present. Find out whether your country has an affiliate body.

2. Complete a financial planning qualification

Almost all countries have a qualification requirement for planners/advisors/brokers wanting to provide financial services to clients. Once you have established the requirements in step 1, you must set about gaining the necessary qualification.

The Shaw Academy Professional Diploma in Financial Planning is a fantastic basis for any prospective or current financial planner. The course is completely unique: financial planning courses are almost exclusively based on country-specific requirements such as legislation, specific product offerings, rules, processes. In the Shaw Academy course, we take a country-agnostic approach – focusing rather on aspects that are universally true and relevant to financial planners (and clients). As a new planner you will start off on the right footing with your new career, and as an existing planner, you will likely gain new insight into traditional financial planning concepts.

3. Gain experience

The best way to start building day-to-day skills and experiencing the financial planning work environment first-hand is to take up a position within a planning practice or with a product provider. You may need to do this on an intern basis or in a basic admin role at first, but nothing gives you better insight into the environment than working within it. Contact your professional body again as available roles are often marketed there. Take the initiative, make an appointment, and speak to a variety of financial planners to get first-hand insight into their day-to-day working lives.

4. Keep learning.

Even if you have the minimum qualification requirements in the bag, financial planning is an environment where one keeps learning every day. Stay at the forefront of developments, read about new research. In a fast-evolving industry, you want to stay at the cutting edge.

Therefore, even if you are an existing financial planner, the Professional Diploma in Financial Planning will challenge your thinking in many areas. It is the best way to implement this step.

At a minimum, consume as much of the content of the website of the Financial Planning Standards Board as possible, and follow influential thinkers on social media: Michael Kitces (@MichaelKitces), Carl Richards (@behaviorgap), Kates Holmes (@Kate_Holmes) would be a good starting point.

What are the benefits of being a financial planner?

Successful financial planners enjoy significant financial rewards, but apart from that the benefits are so rewarding on a personal level: seeing a graduation photo of a client with her son, after assisting her for years to accumulate the funds for his studies; having a client say that for the first time in years he is sleeping well because his anxiety about his finances is gone – those are the benefits that money cannot buy. As a professional planner myself, those are the benefits that keep me in this role – making that real difference in people’s lives. As a planner, one must constantly ask yourself: ‘Are my clients sleeping peacefully at night?’ Providing clients with peace of mind – that is the real goal.

Want to learn more about financial planning?

Upskillist’s online financial planning course is relevant to every single one of us, regardless of what life stage we are in, our current financial position or our very own life goals.

Every single individual is impacted by financial planning-related aspects in their lives virtually daily. The course will help you to take charge of your own financial wellbeing, and it will lay the foundations for you to start your career in wealth management.