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How does one become a financial advisor?

Posted: Fri Aug 03, 2018 10:22 am
by JC565
At the lowest level, how to you get to the point you can legally offer financial advice? does it require a degree? Could you get a brokers license and open your own shop? Lets just say you want to do it part time and help your family and friends (i know.. i know..)

At the highest level, could you build your own funds, and put your customers in them after people walk into the shop you opened? What kind of capital would it take to do it seriously?

Re: How does one become a financial advisor?

Posted: Fri Aug 03, 2018 10:50 am
by Teague
Unfortunately I'm not qualified to offer advice about being qualified to offer advice. But you might start with this FINRA website for an overview of the types of professionals:

http://www.finra.org/investors/choosing ... ofessional

Re: How does one become a financial advisor?

Posted: Fri Aug 03, 2018 10:51 am
by Silk McCue
There have been some previous threads that have feedback. Searching Bogleheads for a question you have is usually the best place to start. Then you can tailor your question to what information you still need.

I found these threads and others that were applicable by searching "become a financial advisor" in the search bar.

viewtopic.php?t=167029

viewtopic.php?t=234612

Cheers

Re: How does one become a financial advisor?

Posted: Fri Aug 03, 2018 7:37 pm
by Funancials
JC565 wrote:
Fri Aug 03, 2018 10:22 am
At the lowest level, how to you get to the point you can legally offer financial advice? does it require a degree? Could you get a brokers license and open your own shop? Lets just say you want to do it part time and help your family and friends (i know.. i know..)

At the highest level, could you build your own funds, and put your customers in them after people walk into the shop you opened? What kind of capital would it take to do it seriously?
At the “lowest level,” you can offer financial advice in a retail finance company selling high-rate personal loans or secured/auto loans.

The next step up would be as a Personal Banker working in a retail bank branch. They can open checking, savings, CDs in addition to closing loans, mortgages and opening credit cards.

Insurance sales people, while on a similar level, have to pass a test to sell insurance so I would consider that the next step. I am hesitant to take financial advice from someone who can only help by selling insurance.

Then, someone can take their Series 6/63 test in order to sell mutual funds and annuities.

A slightly more difficult test is the Series 7/65 which allows you to sell stocks as well.

Next, you can become a Certified Financial Planner (CFP) who takes additional tests/courses focused on taxes, insurance, estate planning and investing.

Lastly, the highest rung IMO, is to become a Certified Financial Analyst (CFA) where you become the one who manages investments for institutions. The study/tests spans over 3 years generally.

Funny story, my friend studied for a full year for one leg of the CFA exam, showed up on test day and his drivers license was expired. He had to wait a full year to take it again.

Re: How does one become a financial advisor?

Posted: Fri Aug 03, 2018 11:28 pm
by mega317
JC565 wrote:
Fri Aug 03, 2018 10:22 am
Could you get a brokers license and open your own shop? Lets just say you want to do it part time and help your family and friends (i know.. i know..)
These questions have especially been answered in prior threads.
1. If you want to open your own shop you have to be first and foremost a sales(wo)man. How are you going to convince people to put their life savings with you and pay you a fee to manage it?
2. Aside from being a bad idea in the sense that when the stock market crashes you're going to lose some friends and family, you also would be doing this as charity since you can't and don't want to charge enough money to live off them.

Re: How does one become a financial advisor?

Posted: Fri Aug 03, 2018 11:34 pm
by livesoft
My impression is that for friends and family who would not pay you, all you have to do to become a financial advisor is to give financial advice.

Re: How does one become a financial advisor?

Posted: Fri Aug 03, 2018 11:38 pm
by triceratop
Fortunately, at the lowest level, one can do such things on a site called bogleheads.org.

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 2:08 am
by gostars
The Obama administration passed something called the fiduciary rule, that required financial advisors to act in the best interests of their clients. The Trump administration killed his rule by refusing to implement it and refusing to respond to the lawsuits brought against it by scammers who didn't like the new law because it might interrupt their scamming. I believe the current legal requirement to call yourself a financial advisor is just to call yourself a financial advisor.

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 7:52 am
by Silk McCue
gostars wrote:
Sat Aug 04, 2018 2:08 am
... Political comment removed ... I believe the current legal requirement to call yourself a financial advisor is just to call yourself a financial advisor.
Your statement is incorrect. The legal requirement for being a financial advisor has not changed.

https://www.learnhowtobecome.org/financial-advisor/

Many large companies changed the way they do business to comply with the proposed fiduciary rule, including Edward Jones. They just now tell you that they are a fiduciary and charge you a high AUM fee which will destroy your returns over 30 years. Lipstick on a pig.

Cheers

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 8:09 am
by JC565
Im curious about the fund building process. Lets say that I have passed the series 7. Lets also say that personally, I have my assets spread across a balanced mix of index funds, dividend stocks, precious metals, etc. How does one go about bundling that into a product that I can take to aunt Jemima and say "hey look, your getting ripped off here, and if you would of bought my fund 10 years ago, you would have this much now, even with my fee." I'm sorry but I really don't even know enough about this type of thing to really even know what to search for. :mrgreen: is something like that even possible?

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 8:13 am
by aristotelian
Do be a CFP you also have to work 3 years in the field under another CFP.

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 8:17 am
by Silk McCue
JC565 wrote:
Sat Aug 04, 2018 8:09 am
Im curious about the fund building process. Lets say that I have passed the series 7. Lets also say that personally, I have my assets spread across a balanced mix of index funds, dividend stocks, precious metals, etc. How does one go about bundling that into a product that I can take to aunt Jemima and say "hey look, your getting ripped off here, and if you would of bought my fund 10 years ago, you would have this much now, even with my fee." I'm sorry but I really don't even know enough about this type of thing to really even know what to search for. :mrgreen: is something like that even possible?
Sorry but I don't believe any Boglehead would invest with someone proposing this approach, nor would they advise a friend or family member to do so. I would not consider such a person a true Fiduciary.

Cheers

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 8:18 am
by PFInterest
along the lines of being a boglehead, do you need a series 6, etc. to tell someone "hey you have vtsax and vtblx in your 401k, use that. and then put vtiax in your rIRA" and charge them lets say $100?

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 8:41 am
by Silk McCue
PFInterest wrote:
Sat Aug 04, 2018 8:18 am
along the lines of being a boglehead, do you need a series 6, etc. to tell someone "hey you have vtsax and vtblx in your 401k, use that. and then put vtiax in your rIRA" and charge them lets say $100?
If you aren't properly licensed it is illegal to charge, or accept chickens or goats, for financial advice.

Cheers

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 8:58 am
by PFInterest
Silk McCue wrote:
Sat Aug 04, 2018 8:41 am
PFInterest wrote:
Sat Aug 04, 2018 8:18 am
along the lines of being a boglehead, do you need a series 6, etc. to tell someone "hey you have vtsax and vtblx in your 401k, use that. and then put vtiax in your rIRA" and charge them lets say $100?
If you aren't properly licensed it is illegal to charge, or accept chickens or goats, for financial advice.

Cheers
pigs are fine though right.....????

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 8:58 am
by JC565
Silk McCue wrote:
Sat Aug 04, 2018 8:17 am
JC565 wrote:
Sat Aug 04, 2018 8:09 am
Im curious about the fund building process. Lets say that I have passed the series 7. Lets also say that personally, I have my assets spread across a balanced mix of index funds, dividend stocks, precious metals, etc. How does one go about bundling that into a product that I can take to aunt Jemima and say "hey look, your getting ripped off here, and if you would of bought my fund 10 years ago, you would have this much now, even with my fee." I'm sorry but I really don't even know enough about this type of thing to really even know what to search for. :mrgreen: is something like that even possible?
Sorry but I don't believe any Boglehead would invest with someone proposing this approach, nor would they advise a friend or family member to do so. I would not consider such a person a true Fiduciary.

Cheers
I wasnt asking you to invest in anything. I was asking if its possible.

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 9:00 am
by Gill
Funancials wrote:
Fri Aug 03, 2018 7:37 pm
Funny story, my friend studied for a full year for one leg of the CFA exam, showed up on test day and his drivers license was expired. He had to wait a full year to take it again.
Funny? Makes me sick!
Gill

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 9:04 am
by TheNightsToCome
Funancials wrote:
Fri Aug 03, 2018 7:37 pm
JC565 wrote:
Fri Aug 03, 2018 10:22 am
At the lowest level, how to you get to the point you can legally offer financial advice? does it require a degree? Could you get a brokers license and open your own shop? Lets just say you want to do it part time and help your family and friends (i know.. i know..)

At the highest level, could you build your own funds, and put your customers in them after people walk into the shop you opened? What kind of capital would it take to do it seriously?
At the “lowest level,” you can offer financial advice in a retail finance company selling high-rate personal loans or secured/auto loans.

The next step up would be as a Personal Banker working in a retail bank branch. They can open checking, savings, CDs in addition to closing loans, mortgages and opening credit cards.

Insurance sales people, while on a similar level, have to pass a test to sell insurance so I would consider that the next step. I am hesitant to take financial advice from someone who can only help by selling insurance.

Then, someone can take their Series 6/63 test in order to sell mutual funds and annuities.

A slightly more difficult test is the Series 7/65 which allows you to sell stocks as well.

Next, you can become a Certified Financial Planner (CFP) who takes additional tests/courses focused on taxes, insurance, estate planning and investing.

Lastly, the highest rung IMO, is to become a Certified Financial Analyst (CFA) where you become the one who manages investments for institutions. The study/tests spans over 3 years generally.

Funny story, my friend studied for a full year for one leg of the CFA exam, showed up on test day and his drivers license was expired. He had to wait a full year to take it again.
"Certified Financial Analyst (CFA)"

It's actually Chartered Financial Analyst, rather than Certified ...

The exams are difficult, comparable to the internal medicine and cardiovascular disease board certification exams (and with much lower pass rates).

However, you don't need a CFA (or even CFP) to offer financial advice.

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 9:06 am
by Silk McCue
PFInterest wrote:
Sat Aug 04, 2018 8:58 am
pigs are fine though right.....????
Yes, but only because the pork farmers were granted an exemption. Thus giving impetus to the term "Pork Barrel Politics".

Cheers

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 9:10 am
by TheNightsToCome
Silk McCue wrote:
Sat Aug 04, 2018 8:41 am
PFInterest wrote:
Sat Aug 04, 2018 8:18 am
along the lines of being a boglehead, do you need a series 6, etc. to tell someone "hey you have vtsax and vtblx in your 401k, use that. and then put vtiax in your rIRA" and charge them lets say $100?
If you aren't properly licensed it is illegal to charge, or accept chickens or goats, for financial advice.

Cheers
Most states have a de minimis exemption: https://www.ncsregcomp.com/register-not ... -advisers/

In my home state (back in 2009), one could take on up to 5 clients with up to $15M in assets before one was required to become a Registered Investment Adviser.

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 9:19 am
by Silk McCue
TheNightsToCome wrote:
Sat Aug 04, 2018 9:10 am
Most states have a de minimis exemption: https://www.ncsregcomp.com/register-not ... -advisers/

In my home state (back in 2009), one could take on up to 5 clients with up to $15M in assets before one was required to become a Registered Investment Adviser.
From my reading from your link the advisor must still be registered with the SEC, just not the state. The de minimis rule does not apply in TX, LA, NE no NH. Everywhere else they don't have to register with the state if they have fives clients or less. In every state you must be registered with the SEC according this source.
In addition to being registered with the SEC, the firm then must consider what states it will be doing business in. Notice Filing is the term used for filing in states when the firm is SEC registered. The firm will be required to Notice File in, at a minimum, its home state. If the firm has an office or business location in any other state, Notice Filing is also required. Many states (exception TX, LA, NE, NH) allow for firms to rely on a de minimis exemption from Notice Filing if they have five clients or less. The four states mentioned do not have a de minimus exemption for SEC registered firms. Therefore, Notice Filing is required at the time you obtain a client.
Cheers

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 9:19 am
by PFInterest
TheNightsToCome wrote:
Sat Aug 04, 2018 9:10 am
Silk McCue wrote:
Sat Aug 04, 2018 8:41 am
PFInterest wrote:
Sat Aug 04, 2018 8:18 am
along the lines of being a boglehead, do you need a series 6, etc. to tell someone "hey you have vtsax and vtblx in your 401k, use that. and then put vtiax in your rIRA" and charge them lets say $100?
If you aren't properly licensed it is illegal to charge, or accept chickens or goats, for financial advice.

Cheers
Most states have a de minimis exemption: https://www.ncsregcomp.com/register-not ... -advisers/

In my home state (back in 2009), one could take on up to 5 clients with up to $15M in assets before one was required to become a Registered Investment Adviser.
maybe im not being clear. there would be no management, no AUM, no executing trades. just pay per use, review/consulting type of info. like my example: show me your 401k options, here is the best portfolio you can make in this % based on you AA, etc, etc. thank you, that will be $100.

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 9:29 am
by Silk McCue
PFInterest wrote:
Sat Aug 04, 2018 9:19 am
maybe im not being clear. there would be no management, no AUM, no executing trades. just pay per use, review/consulting type of info. like my example: show me your 401k options, here is the best portfolio you can make in this % based on you AA, etc, etc. thank you, that will be $100.
Your intent is clear. Your approach would make you a fee only advisor and you must be licensed/credentialed to do so.

Cheers

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 9:33 am
by PFInterest
Silk McCue wrote:
Sat Aug 04, 2018 9:29 am
PFInterest wrote:
Sat Aug 04, 2018 9:19 am
maybe im not being clear. there would be no management, no AUM, no executing trades. just pay per use, review/consulting type of info. like my example: show me your 401k options, here is the best portfolio you can make in this % based on you AA, etc, etc. thank you, that will be $100.
Your intent is clear. Your approach would make you a fee only advisor and you must be licensed/credentialed to do so.

Cheers
with a series 6, 65?

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 9:34 am
by TheNightsToCome
Silk McCue wrote:
Sat Aug 04, 2018 9:19 am
TheNightsToCome wrote:
Sat Aug 04, 2018 9:10 am
Most states have a de minimis exemption: https://www.ncsregcomp.com/register-not ... -advisers/

In my home state (back in 2009), one could take on up to 5 clients with up to $15M in assets before one was required to become a Registered Investment Adviser.
From my reading from your link the advisor must still be registered with the SEC, just not the state. The de minimis rule does not apply in TX, LA, NE no NH. Everywhere else they don't have to register with the state if they have fives clients or less. In every state you must be registered with the SEC according this source.
In addition to being registered with the SEC, the firm then must consider what states it will be doing business in. Notice Filing is the term used for filing in states when the firm is SEC registered. The firm will be required to Notice File in, at a minimum, its home state. If the firm has an office or business location in any other state, Notice Filing is also required. Many states (exception TX, LA, NE, NH) allow for firms to rely on a de minimis exemption from Notice Filing if they have five clients or less. The four states mentioned do not have a de minimus exemption for SEC registered firms. Therefore, Notice Filing is required at the time you obtain a client.
Cheers
You don't have to register with the SEC unless you are a very large firm (or meet certain other criteria). From the link above:

"To be SEC registered means that the firm has determined that it has met certain criteria:

either a certain amount of assets under management ($100 million* in most instances), or
is required to be registered to conduct business in 15 or more states,
or is affiliated with another SEC registered firm,
or is the adviser to a mutual fund, to name a few."

I opened a one-person RIA years ago and was only required to register at the state level (onerous enough). This is the case for most small operations.

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 9:42 am
by TheNightsToCome
PFInterest wrote:
Sat Aug 04, 2018 9:33 am
Silk McCue wrote:
Sat Aug 04, 2018 9:29 am
PFInterest wrote:
Sat Aug 04, 2018 9:19 am
maybe im not being clear. there would be no management, no AUM, no executing trades. just pay per use, review/consulting type of info. like my example: show me your 401k options, here is the best portfolio you can make in this % based on you AA, etc, etc. thank you, that will be $100.
Your intent is clear. Your approach would make you a fee only advisor and you must be licensed/credentialed to do so.

Cheers
with a series 6, 65?
If you intend to hold yourself out to the public as an investment adviser and charge for services, then you will need to register with your state. (I'm not a lawyer, but I did hire one when I opened a small shop years ago, and that was my understanding.)

I had to pass a Series 65 (very easy test), but that is the least of the hassles. Registration and the ongoing requirements and audits are an enormous PITA.

I hired a lawyer specializing in securities regulations as well as one of the companies that help nascent advisers through the registration process (e.g., NCS in link above).

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 9:45 am
by Lyrrad
Interestingly, in Canada, there’s a difference between a financial advisor and a financial adviser.

A financial adviser has a fiduciary duty towards their client (and is a regulated term), while a financial advisor is unregulated and doesn’t have any fiduciary duty.

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 9:57 am
by tibbitts
Lyrrad wrote:
Sat Aug 04, 2018 9:45 am
Interestingly, in Canada, there’s a difference between a financial advisor and a financial adviser.

A financial adviser has a fiduciary duty towards their client (and is a regulated term), while a financial advisor is unregulated and doesn’t have any fiduciary duty.
That's the most interesting post in this thread. I'm always fighting spelling correction on the er/or issue but had no idea it would be otherwise significant.

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 9:59 am
by tibbitts
PFInterest wrote:
Sat Aug 04, 2018 9:19 am
TheNightsToCome wrote:
Sat Aug 04, 2018 9:10 am
Silk McCue wrote:
Sat Aug 04, 2018 8:41 am
PFInterest wrote:
Sat Aug 04, 2018 8:18 am
along the lines of being a boglehead, do you need a series 6, etc. to tell someone "hey you have vtsax and vtblx in your 401k, use that. and then put vtiax in your rIRA" and charge them lets say $100?
If you aren't properly licensed it is illegal to charge, or accept chickens or goats, for financial advice.

Cheers
Most states have a de minimis exemption: https://www.ncsregcomp.com/register-not ... -advisers/

In my home state (back in 2009), one could take on up to 5 clients with up to $15M in assets before one was required to become a Registered Investment Adviser.
maybe im not being clear. there would be no management, no AUM, no executing trades. just pay per use, review/consulting type of info. like my example: show me your 401k options, here is the best portfolio you can make in this % based on you AA, etc, etc. thank you, that will be $100.
Sometimes when you keep asking the same question, you eventually get the answer you want. Sometimes not.

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 11:25 am
by FBN2014
If you are a bogleheads disciple then it would be very hard to make a living as a financial advisor. They make their money from commission and actively managing a portfolio. There is no golden goose to make money from after you tell the client to buy 3 or 4 index funds and maybe rebalance once a year.

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 7:43 pm
by unclescrooge
FBN2014 wrote:
Sat Aug 04, 2018 11:25 am
If you are a bogleheads disciple then it would be very hard to make a living as a financial advisor. They make their money from commission and actively managing a portfolio. There is no golden goose to make money from after you tell the client to buy 3 or 4 index funds and maybe rebalance once a year.
Not true. There are advisers who charge hourly. If your hourly rate was $250/hr you would feel well compensated.

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 8:47 pm
by tibbitts
unclescrooge wrote:
Sat Aug 04, 2018 7:43 pm
FBN2014 wrote:
Sat Aug 04, 2018 11:25 am
If you are a bogleheads disciple then it would be very hard to make a living as a financial advisor. They make their money from commission and actively managing a portfolio. There is no golden goose to make money from after you tell the client to buy 3 or 4 index funds and maybe rebalance once a year.
Not true. There are advisers who charge hourly. If your hourly rate was $250/hr you would feel well compensated.
Not really because you would have zero billable hours. The model for 99% of advisers is to become an employee of one of the evil empire providers, ruthlessly pushing inappropriate and high-commission products. Then the idea is to steal the clients you acquire from the evil empire provider. Maybe you iterate through a couple of other evil empire providers until you've stolen enough clients to strike out on your own. Then maybe you get Boglehead religion... or not.

I shouldn't make it seem quite that bad - often people genuinely believe in what they're doing throughout this process.

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 9:00 pm
by patrick013
JC565 wrote:
Fri Aug 03, 2018 10:22 am
Lets just say you want to do it part time and help your family and friends (i know.. i know..)
There is a clause where it says if you only have a handful of clients and
do not advise generally as a full time business for a fee they probably
would let you casually advise a handful of people.

But being available for a fee to advise to the general public then the license
would be req'd no doubt especially if you have an office, etc..

I'd prefer a BSFinance degree at minimum. There are MBA's and MSFinance people
advising or working as analysts or in business strategy also. The Series 65 exam
is req'd for the license and has no real educational requirement but probably
should.

Re: How does one become a financial advisor?

Posted: Sat Aug 04, 2018 10:59 pm
by venkman
PFInterest wrote:
Sat Aug 04, 2018 9:19 am
maybe im not being clear. there would be no management, no AUM, no executing trades. just pay per use, review/consulting type of info. like my example: show me your 401k options, here is the best portfolio you can make in this % based on you AA, etc, etc. thank you, that will be $100.
Series 65 and register with your state Administrator. But that isn't your main problem.

Your main problem is that your potential client base consists mostly of people who don't understand why they should pay anyone $100 to help optimize their 401k. And for the ones who DO seek out professional advice, they have a choice between you and any number of nationally branded firms with local offices and professional advertising. And those firms will happily take a client's money and invest it for them for a percentage that seems really small and the client never has to worry about anything. Bogleheads know that this is almost certainly a huge mistake and will be a massive drain on long term returns; but the clients don't know that.

If you just wanted to get paid for giving investment advice to friends and family, you probably could do that; but the start-up costs to take the test and register with the state will probably run $300+. It might be easier just to do it for free.

Re: How does one become a financial advisor?

Posted: Sun Aug 05, 2018 6:58 am
by grettman
venkman wrote:
Sat Aug 04, 2018 10:59 pm
PFInterest wrote:
Sat Aug 04, 2018 9:19 am
maybe im not being clear. there would be no management, no AUM, no executing trades. just pay per use, review/consulting type of info. like my example: show me your 401k options, here is the best portfolio you can make in this % based on you AA, etc, etc. thank you, that will be $100.

If you just wanted to get paid for giving investment advice to friends and family, you probably could do that; but the start-up costs to take the test and register with the state will probably run $300+. It might be easier just to do it for free.
+100

I thought about doing this type of work but in the end I decided that it has a greater hassle factor than it is worth.