Financial advising and planning has been a hot business for many years and this trend will continue. Factors including an aging population, social security uncertainty, fewer company pension plans, and ongoing global economic issues create a need and desire for personal financial planning. Though both advisers (advisor) and planners are briefly addressed here, Homepreneurs recommends the certified financial planner position.
A financial adviser and a certified financial planner are different. Virtually anyone can call themselves an adviser or planner. A financial adviser is like a life coach, but for your money. Advisers help clients figure out how to budget, save for retirement, pay off debt, and invest; they make money via sales commissions or fee or both. On the other hand, certified financial planners will look at the entire financial picture and help map a strategy to achieve short-term and long-term goals, including insurance, education expenses, and retirement. The biggest differences between the two are experience, education, and certification. Financial planners often hold the CFP® certification and have documented education and experience. Financial planners recommend investments to match clients’ goals and invest clients’ money based on the clients’ decisions. Approximately 25% of financial advisers are self-employed and work from home offices or rented office space.
Financial advisers may have college degrees, specific education, and often have have securities licenses and make money on commission. Certified financial planners often have both a college degree and maintain the CFP® (Certified Financial Advisor™) certification. Information and details on the CFP® designation is found at www.CFP.net/become/steps.asp. Personal financial planners who directly buy or sell stocks, bonds, insurance policies, or give specific investment advice need a combination of licenses that vary based upon the products they sell. In addition to those licenses, smaller firms that manage clients’ investments must be registered with state regulators and possibly with the Securities and Exchange Commission.
According to the U.S. Bureau of Labor Statistics, employment in this field is expected to grow around 32% between 2010 and 2020, much faster than average. Median annual wages noted by the BLS were roughly $65,000 for financial advisers employed by companies. Wages vary by geographic area and for the self-employed, are unknown. Financial advisers or planners make money from fees, commissions on sales of product (stocks, mutual funds, bonds), or both.
Both advisers and planners will spend a typical day communicating or meeting with clients. Though the work schedule is flexible to a point, self-employed financial advisers or planners often work more than 40 hours per week and should be available on weeknights and weekends to meet with clients. Many planners spend a lot of time marketing their services, and they meet potential clients by giving seminars or through business and social networking.
Need to Have
A Certified Financial Planner™ must meet the CFP® board education, experience, examination requirements, and ethics standards. To meet the education requirement, a bachelor’s degree (in any discipline) is required. Three years relevant, practical work experience, adherence to the CFP® board code-of-ethics, and demonstrated competence on the CFP® exam satisfy the other requirements. “CFP® certification also requires you to agree to adhere to CFP® Board’s Code of Ethics and Professional Responsibility, Rules of Conduct and Financial Planning Practice Standards, and acknowledge CFP® Board’s right to enforce them through its Disciplinary Rules and Procedures.”[i]
CFP®s are required to have ongoing approved and relevant education; 30 hours every two years is typical. An annual certification renewal fee must be paid to the CFP® board as well.
A newer computer, high-speed – and reliable – Internet connection, printer, scanner, fax, and a separate business phone line. Multiple monitors for client and planner meetings are often desirable. An office software suite with word processing and spreadsheet programs is necessary, and planners may use a database or client relationship software. A personal accounting package for billing and invoicing is appropriate for any home business. Reliable backup and security solutions are strongly encouraged and recommended.
If the home is used for meeting with clients, a separate area should be designated for business. This area of the home must be clean, well-maintained, comfortable, and have adequate space for meeting with multiple people. Parking – on street or in driveway –should be available, and the office may be subject to federal or state American with Disabilities Act requirements.
College degrees in financial fields and especially graduate degrees are good for marketing purposes. CFP®s must have either three years work experience or two years apprenticeship experience. Contacts made during these years may become future clients. The CFP® designation is highly respected in the financial industry and demonstrates a level of financial planning competence. Many financial planners also give free or low-cost seminars on investing and planning topics at community colleges or other area organizations. Both advisers and planners may maintain websites with current, topical information, while others distribute newsletters, or commonly, use both. Both planners and advisers may write articles for financial magazines or newspaper columns as part of the marketing effort.
The financial advising and planning field is growing significantly. Continuous changes in available investments and products, and demographic changes create numerous opportunities. A financial adviser or planner that speaks more than one language can market to specific segments of the population. Financial planners may also specialize in assisting people with chronic illness or the retired. Others market directly to small and home businesses and the employees.
By Dion D. Shaw
Dion D. Shaw is the founder and owner of Homepreneurs
Homepreneurs. New Day. New Opportunity.
Homepreneurs does not represent itself as financial professionals or have any specific expertise in financial planning or investing. Homepreneurs does not endorse nor have any relationships with any of the services listed. Homepreneurs receives no compensation or consideration for its suggestions. Homepreneurs strongly urges all interested parties to conduct research and accepts no responsibility for any losses incurred.
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