How To Become A Financial Adviser
I get asked at least once per week for advice on how to become a financial adviser, and for ages, I’ve thought that I really should sit down and deal with the subject definitively so that in future I can just reply to these good people with a link! Today I’m going to consider everything you need to know and everything you need to do if you fancy a career in financial advice.
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How To Become A Financial Adviser in the UK
I find it extremely encouraging that so many people ask me about how to become a financial adviser. Many of them tell me that I have evangelised for the profession so much that I make it sound attractive. I do love what I do, notwithstanding the occasional thing that sends me off on a rant, see session 270 for an example. It is a great role, and a deeply rewarding one, but as we’ll see, not an easy one to get into…
Everything you need to KNOW
1 – Becoming a financial adviser is difficult
When I became an adviser, I followed the classic career path at the time, and one that had served the industry very well up to that point. I joined an insurance company’s direct sales force, in my case the CIS, going door-to-door to existing customers, collecting life insurance premiums, and also car and house insurance renewals. I had a four-week round and collected premiums often in cash, marked people’s books and then brought the premiums into the office for an accounting every couple of weeks. Incredible really – I used to walk around some pretty ropey parts of South Wales with £1,500 in cash some days!
These days, hardly any insurance companies have their own sales forces. As commission has gradually been replaced with fees paid directly by clients, the insurance companies just couldn’t make it work. I once heard that there used to 300,000 financial advisers (for which read insurance salespeople) in the UK. There are now about 30,000 people using that title so the opportunities have been quite literally decimated.
The benefit of this route into the profession was that my qualifications were all paid-for by the company. I remember going on seven (count ‘em) residential courses in hotels in my first year with the CIS. I passed all the exams easily (they were NOT challenging) because the training was great.
There are a few insurance companies experimenting with creating their own sales forces again, but it’s early days, and the route I took into the profession is essentially closed.
2 – The qualification framework
When I passed those exams, the qualification was called the Financial Planning Certificate, which is odd because there was basically no element of financial planning in the curriculum. Instead it was a basic but thorough grounding in all the various products available to UK advisers, as well as the UK tax system within which those products operated.
These days there are qualifications at four levels:
- Level 2, Award level – great for new-starter administrates in financial services
- Level 3, Certificate level – ideal for those looking to develop perhaps into more technical roles such as senior administrators and junior paraplanner roles (more on roles win a minute)
- Level 4, Diploma level – this is the minimum standard for client-facing advisers
- Level 6, Advanced Diploma level – I believe that this should be and eventually will be the minimum standard for advisers, though probably not for a while yet.
It isn’t necessary to be working in the field to sit and pass these exams, but it helps.
There are a few providers of qualifications: The Chartered Insurance Institute (CII), the Chartered Institute For Securities and Investment (CISI) and the London Institute for Banking and Finance (LIBF). I’ve linked all their qualification pages in the shownotes.
You need a good grasp of English and maths to be a financial adviser, I would say, but don’t need to be able to do complex algebra. Which is a good job, because I failed my electronics degree because of the maths. And the fact that I hardly ever went to lectures.
3 – The many roles in the financial advice process
The role of financial adviser is just one among many moving parts in your typical financial advice business.
Starting at the bottom you have administrators. I only say that this is the bottom in terms of barrier to entry; certainly administrators are absolutely invaluable for the smooth running of any practice of any size. I know that here at Jacksons we’d be scuppered without them. And I’m not just saying that in case they listen. An administrator will have all kinds of duties: They deal with the day-to-day queries that come in from clients and raise these queries with the advisers and the providers of financial products. They will help prepare annual reviews, prepare files for new clients and the onboarding process, answer the phone, filing, photocopying al the necessary stuff that keeps most businesses running. Generally, anything which doesn’t require the input of a financially qualified person, is handled by the admin team.
Once you have achieved some level of financial services qualification, the role of paraplanner can open up to you. Paraplanners are qualified individuals who may or may not have direct client contact. They usually have direct input into the advice process itself. They will undertake research about a client’s existing arrangements and proposed new solutions. They will often write the recommendation reports that are presented to clients to back up the advice being given. Crucially, they will often challenge the adviser with whom they are working, acting as a useful check and balance to make sure the advice given is the best it can be. Often, paraplanners are more qualified and more technically minded than the advisers they work with. Paraplanning is a high-calibre, high-impact role in the financial advice process – it’s a worthy career choice in itself, and doesn’t ‘just’ need to be a stepping stone to the advisory role.
Advisers themselves are client-facing, are responsible for the advice they give to their clients and are usually the point-people in the relationship with the client. Generally they are the ones who know the clients best, though not always.
4 – Qualifications are a small part of what the job entails
Usually, advisers are good people-people, if you see what I mean. They are personable and good at building relationships. The best advisers have a knack for pulling together the many threads of a client’s personal and financial lives, and can weave them together into a plan to achieve their goals.
Empathy is an essential skill for a successful financial adviser. Disappointingly, many advisers are good at feigning empathy in order to win business, but a truly empathetic adviser will be successful in building solid client relationships.
The ability to listen well is essential and it helps if you’re a good judge of character. Something that comes with time is the ability to hear what a client is really saying, even if the words coming out of their mouths say something else entirely. For instance, it’s not unusual to have a client confirm that they’re happy with a given level of risk in one breath, and with the next breath ask all kinds of questions about the short-term performance of their portfolio.
Coaching skills are useful, essential some would say, to be a truly excellent financial adviser. Building wealth is a long-term process, and the adviser-client relationship can last decades. Coming alongside the client to encourage them to stick to the plans they have made, and not to be diverted by distractions is part of the role that is hard to quantify, but which clients find invaluable.
The ability to communicate clearly is also a prerequisite. Advisers have to explain sometimes complex abstract concepts to clients in such a way that the client feels able to take action in the present.
So while you have to have the exams to understand how the personal finance system works, you also need great people skills to make sure that you can apply that system to the best advantage of the client.
5 – The crucial distinction of advice and planning
Before I look at what you need to do to move forward and become a financial adviser, let me just take a minute to clarify the difference between being a financial adviser and a financial planner. In one sense this is just semantics; certainly there are lots of overlaps between the two disciplines.
In my mind, financial advice is the process of identifying the best financial product for a given client’s current and future needs. Financial planning is an additional process which informs the advice. It requires establishing a clear picture of the client’s current situation and helping them identify and vocalise their goals and the ideal timescales for reaching those goals. Then we need to work out the path to get from here to there in the most tax-efficient, cost-efficient and time-efficient manner. Only then can this inform the choice of product, if any, that can help with this. But the product is the last link in the chain, and not the whole point. Indeed, sometimes a product doesn’t feature at all…
In these days is internet disintermediation, the value of financial advice is diminishing, whereas the value of lifestyle financial planning is only increasing.
OK, so bearing all that in mind, what do you actually need to do to become a financial adviser or planner? Let’s take a look:
Everything you need to DO
1 – Pick a diploma
There is no getting around the fact that you cannot become a financial advisor without becoming qualified. This means that you must achieve a minimum of the level 4 qualification, otherwise known as diploma level.
As I mentioned earlier, there are several providers of diploma qualifications. I think that I am right in saying that most potential employers would prefer to take on an adviser with the CII Diploma in Regulated Financial Planning. There is a link in the show notes to that particular qualification.
That is not to say that the other diploma routes are inferior. I just believe that before too long the minimum standard will be the level six qualification, and that the most recognisable professional mark will be that of Chartered Financial Planner, and this title can only be conferred by the CII. If you achieve your diploma through a provider other than the CII, then you may have to sit at least one extra exam before you can even embark on the chartered level exams.
It is important that anyone considering being a financial adviser is prepared to continue past the diploma level and pursue chartered status. It might be several years off, but I am convinced that this will become the minimum standard eventually.
Longtime listeners will remember that I used to extol the virtues of certified financial planners. This is a different kind of qualification altogether – it is an internationally recognised standard for financial planning and it is the only mark that can be legitimately shortened to CFP. Whenever you see the CFP mark, you can be assured that the adviser that you are dealing with has been assessed in his or her ability to deliver a truly holistic financial plan.
But I have just revoked my certified financial planner license. Why? In short because I believe that the chartered financial planner mark carries more weight here in the UK, and is more recognisable. I have to pay a lot of money each year to maintain the CFP license, and I don't really see the benefit any more. Until a few years ago the UK custodian of the CFP mark was the Institute of Financial Planning. But this was subsumed into the Chartered Institute of Securities and Investments, and in my not so humble opinion this latter body has not delivered on its promises to maintain and promote the CFP mark.
There is now a greater emphasis on holistic financial planning within the chartered financial planner qualification route, so having a separate assessment and qualification seems unnecessary.
So if you are a new entrance to this glorious profession, you are going to need to qualify to diploma level pretty quickly, and I would begin work on this before you start approaching potential employers. A good firm will help you to qualify, but showing willing by embarking on the process under your own steam can only stand you in good stead.
2 – Pick your discipline
It's fair to say that the world of financial advice is pretty varied. While I am convinced that holistic financial planning is the gold standard in my world, there are financial advice professionals who choose to specialise in particular areas of advice, which is an equally worthy calling.
Mortgage advice is a rewarding and challenging career choice, with a lower barrier to entry in terms of qualifications. Excellence comes with experience of course, and mortgage advice at its best is far more than being able to use a computer system to source the right deals. Matching borrowers to lenders requires an intimate knowledge of underwriting requirements and potential pitfalls before an application even begins.
The same goes for protection only advisers. My friends Kathryn and Alan Knowles of Cura are award-winning protection advisers. Kathryn does excellent videos explaining how you can improve your chances of getting life insurance if you have various medical conditions or if you are transgender or if you have visited exotic countries in the recent past. This is specialist knowledge that I can't even begin to understand.
So do some homework, and think about which discipline you might want to focus on. You can always change later on, so you could begin with mortgage work to refine your client-facing skills, and then move on to holistic financial planning in due course. Or the reverse.
3 – Reach out to local firms
By far the biggest hurdle is going to be finding an employer willing to take a punt a new, untested adviser. If you are coming into the industry green, you will be a pure cost to that business until you are up and running and can begin earning fees in your own right.
Still far too many employers consider financial advice to be a purely sales game and think of their advisers as income-producers only. So if you don't have a ready-made client bank that can produce an income for you, you will find many employers will not even consider taking you on.
But an increasing number of firms, I'm pleased to say, are establishing proper training programs that can take new entrance to the industry and provide them with a career path. The challenge is finding these firms.
Some will take on people interested in becoming advisers but start them off in admin roles. This is actually a really good idea, as it will help you to understand the day-to-day workings of the financial advice process. It's a little bit like how all managers for McDonald's start off learning how to make burgers.
As you progress, all the while sitting more exams and becoming more highly qualified, you might progress to become a paraplanner, which as I mentioned is a worthy goal in itself and not just a stepping stone to full advice. Paraplanners are often more highly qualified than the advisers they work with. You may find that you prefer the technical nature of paraplanning, to the client-facing nature of advising. A good employer will provide opportunities for you to see advisers at work to see if that environment is attractive to you.
How do you find a good local firm. There are comparison websites such as Unbiased, VouchedFor and Adviserbook. You can search for a chartered financial planners using the CII directory and for certified financial planners on a site called Wayfinder – links to all these in the show notes.
And then you just need to reach out. Ask to speak to one of the directors, say that you are interested in becoming an adviser and ask them for help. Most advisers will be happy to give you five or 10 minutes on the phone to help further your career. And you never know one of them might offer you some work experience or even an interview.
If you are drawn towards the financial planning side of advice, I would urge you to get to know the guys at NextGen Planners. They are doing some great work equipping and encouraging an up-and-coming generation of financial planning professionals. Again, link in the notes.
4 – Prepare for a pay cut
I get quite a few emails from 20-year veteran professionals like engineers and project management specialists; people who have achieved a certain level in their chosen profession but who feel a call towards financial planning.
Clearly you are not going to shift from 20 years of experience in one profession to zero experience in another, and expect to maintain the same salary. If you think that you can you probably should not be a financial adviser!
It is hard, if not impossible for me to suggest salary levels for administrators, paraplanners and financial advisers. There are just too many regional and professional variations to make it meaningful. A senior paraplanner in a London wealth management firm might earn £60,000 per year or more, whereas someone doing the same job in Cornwall, might earn £25,000 per year.
A financial adviser who is paid a proportion of the fees she generates has potentially no upper limit on her earnings, and if you end up owning your own financial advice firm then the sky is the limit, although speaking personally I am a long way from the sky!
If you are serious about becoming a financial adviser, and if by doing so you will take a pay cut, then you will need to be prepared. You will need to get used to living on a lower income, so budget carefully and salt away reserves that you can draw from while you are building back up. You need to plan financially to become a financial planner – which is kind of poetic…
5 – Document your journey
One left-field piece of advice. The financial advice profession is still not trusted as a whole. And not without good reason. People might ask why you would want to join a profession with a tainted reputation.
So why not document your journey? Consider writing blog posts about the decisions you make and experiences you have as you study, gain experience, make mistakes and celebrate victories. As you learn and progress you will gain insights into the industry and into the human psyche which will serve you well in your new future, but from which others could benefit.
If you don't like writing why not start a podcast or a video series? Believe me you will never be short of things to write or talk about, and the learning process will be compelling reading, viewing or listening.
As your career develops you will be able to point people to this material and engender trust in yourself and your burgeoning expertise. You could build an audience who could then become clients – I am living proof that this works.
One of my Internet heroes Gary Vaynerchuk encourages people to ‘document, don't create’ – in other words share the story of your development rather than thinking of stuff to talk about. People will identify with and warm to your story and believe me there is nothing like consistent, honest sharing of the journey to win people to your cause.
I am bound to have missed out all kinds of things from this, but I think I've got down everything that I wanted to say. I pledge to update this post as developments happen and things change in the industry. So maybe bookmark it if you are serious about becoming a financial adviser.
Finally, if I can help you pursue your dream of becoming a financial adviser, then get in touch.
Resources mentioned in this episode
…are all linked in the text above – find 'em!
Website: Meaningful Academy
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