Interested in becoming a Financial Advisor

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Mar 9, 2011 3:30 am

I've been researching how to become a financial advisor now for a couple of weeks and I was hoping to get some clarification and also hopefully some answers to questions.

1.  As far as I can tell from my research, I think being a RIA is the thing I'd most want to do.  However, as I understand it, in order to do that you have to start with a bank or firm in order to get liscenced etc. is this true?  

2. Also I've read here and elsewhere that oftentimes you are required to push products because they pay the institution well but don't necessarily give your client the best options (i.e. annuities, or heavy fee mutual funds) is this true?

3. Assuming that the second is true, that is frustrating to me.  I don't really care about the money (at least not yet, if I get into this for several months and still haven't made sales this might change) I just love the world of finance and helping people reach their goals and would rather not spend 3 years selling someting I know is not optimal, and may even be bad for my client.  Is there any way around this?

4.  Does anyone know of anyone who opened their own practice with no previous experience?  I assume this is suicide in this business, but I'm also reading that all you do is knock doors and make cold calls anyway, which you could do on your own just as readily.  Is this even a possibility?  

5. If you are liscenced in a certain state does it preclude you from business in other states?  (thinking here of family and friends but also referrals or clients who move) 

6.  Last question, So far I've found Merrill Lynch, Edward Jones, and Chase all hire people without previous financial experience or licenses.  Anyone know of anyone else?  

Thanks all, and good luck out there.  

Mar 23, 2011 12:08 am


You ask some good questions. This is a difficult business, but it has its rewards, monetary and otherwise.  Your questions revolve around a central point, and that is doing the right thing for your client. That is a good attitude.  

You do not need to start with a bank or a financial services firm to start an RIA. Essentially, you could take the Series 65, form a company, hang your shingle, and start doing business.  However, going to a bank or a firm will give you experience in sales, types of products, (hopefully) financial planning, the industry, compliance, etc. Whether you are independent or at a bank/firm, you need to be able to sell your ideas and recommendations. The experience will help you tremendously.

Understand, you don't make anything until something is sold. You are right, some firms have products they would like to see their advisors sell. Sometimes it is the company's named funds (e.g. Waddell & Reed, Ameriprise/River Source. Even State Farm has their own funds). Most firms have sales arrangements with a number of other funds, so it is possible to use other fund families. However, using multiple fund families in a load environment (ie, an upfront sales load) could subject the client to higher sales loads and raise eyebrows at FINRA (assuming the compliance department was asleep at the switch and allowed the sale to occur). In a fee situation this is not an issue as the client pays a percentage of assets under management. This is not to say fee models are better. In some cases they are, in others they aren't. Do a search for a Journal of Financial Planning article titled "Who's the Fairest of Them All? A Comparative Analysis of Financial Advisor Compensation Models" by Robinson.

I've seen people go the route of charging an hourly or per project fee for financial planning. The Garrett Planning Network has advisors that charge hourly or per project. They require their members hold  a CFP(r) (which amongst other things requires 3 years planning experience) or be in process of obtaining their CFP(r). They do have some advisors that do AUM business, but they have limits on that part of the business if they want to stay in the network. However, I would say it is a harder slog for someone without experience to make it as an independent. It's hard for someone with experience to make it.

Even if you are licensed in one state, you can do some business in most other states under what is called the de minimis rule. Most states allow up to five clients in a state before you need to register. There are two states (I believe Texas is one and I don't remember the other) that require registration even if you have one client in their state. Understand, this is a general rule. If you are with a B/D, they may require you obtain a license even if you have one client in a state.

There are a number of firms that will hire unlicensed people. In addition to the ones you mentioned there is Waddell & Reed, Ameriprise (though I heard from an MP they are focusing more on experience brokers at this time), and many of the larger insurance companies (NYL, AXA, MetLife, etc). My suggestion is to interview with a number of firms. Don't just go with the first one that offers you a gig.

If you really want to stay in a fee based or fee only environment, seek out an independent firm and see if they will take you as an IAR. Regardless of how you enter the business, be prepared to work long and hard hours at first. You will have a lot to learn. This will put you closer to an environment you feel may be a better fit for you, improve your odds of success, and help you learn about the industry and determine if you like the work without making the investments necessary to start your own firm.

Good luck!

Mar 23, 2011 12:56 pm

1. Mostly true

2. yes

3. meds, alcohol, or the road less traveled that is steep and perilous

4. no

5. no, you just buy a license there

6. There are tons of crappy firms to hire and train you...

Mar 23, 2011 3:31 pm

It's usually analytical advisors and lousey prospects that focus on things like fees, commission, proprietary products and the like.

When you go to get your car fixed, or yourself fixed, you want the best, who need to be well paid.

Don't try to think your way into discovering a new invention called the wheel. Go with the flow.

I got into this business by attending some financial planning seminars at work and going to see an advisor. I was such a lousey client, I became an advisor. The permanent insurance policy that I bought fifteen years ago and hated for twelve, is now one of my favorite holdings. Who would have guessed how my original attitudes and perceptions would change. If I had to start all over again, I would try to be a better soldier.

Mar 23, 2011 6:06 pm


I'm sorry but I really don't know what your point is.  Are you saying that it is better to get into this business selling crap to people who don't need it than getting into it with people's best interest in mind?  I'm not trying to invent the wheel, but rather trying to find a way to use goodyear instead of a wagon wheel.  Does that make sense?  If i misunderstood you please clarify.


Thank you very much for your well thought our response, it helped significantly  

Mar 23, 2011 10:02 pm

I'm just suggesting you learn the business from someone who knows, and stay open-minded. 

Mar 24, 2011 12:34 am

Minaman, how much money do you have to start a business. Also, what kind of educational/and or educational background do you have that pertains to this field of business?

I have lots of experience and wiling to help you. But, if you're some dork with no money and no experience/education, I'd tell you to do some dishes at the local IHOP instead.

So fella, let's hear it.

Mar 24, 2011 1:20 am

when I first wrote this I was beginning to realize that starting out as a independant RIA on my own right out of the gate without experience would not be possible.  That since has been further reinforced, and I now know that I need experience first.  I have money to start a business, assuming that I don't need to go crazy with expenses.  What I don't have is experience.  I have been looking at indy advisors for the last couple of weeks and have 2 offers to come on as a junior advisor and learn the ropes.  I think that may be my best bet at getting into this business doing what I want to do with it.  So yeah, no experience = no starting business right out of the gate, though I've found a lot of willingness to take on junior advisors among independant RIA's.  They like to expound knowledge to the unlearned :) and they like to mold poeple just how they want.  At least that is the impression I keep getting.   

That said, if you are willing to help someone with one of the two things you mentioned above, I'd love to hear from you.  PM me or respond here.  If not and you really only want to help people with both education/experience and money (which is totally understandable) then I appreciate the response anyway.  

Mar 24, 2011 11:34 am

For anybody thinking about getting into this profession here is a great video that sums up "A day in the life of a FA"

Watch and enjoy- really funny...

Mar 24, 2011 11:07 am

Minaman, good, you sound quite sensible. An absolutely CRUCIAL element on what you are going to pursue, is having a legally binding contract. Don't be like others that come to RR Forum after the fact, when the handshake agreement falls apart. Now, you can't draft a legal agreement, until you know all the facts, and the decent opportunity presents itself, so just keep that on the back burner. 

In order to create your search, start with the internet using Google and such. I'd imagine, that a RIA would be registered with the State you live in, so digging through state websites and such might make sense too. Be picky, and know what you're looking for. Ideally, you want a person that wants to grow, and/or work their book better.  Make sure the guy is clean, and has an established profitable business. 

Inventory your skills. Sales? Marketing? Admin? Make a very good resume, put some good work into that. Then, have some other professionals, review it. I'd be willing to help there too.

Maybe most important, is to make SURE that this business is for you, and that you got the skills for it. Be honest with yourself. Because, otherwise, you might just waste 2-3 yrs of your life for not. Kind of like the 18 yr old that gets a college degree in something, that they later realize doesn't appeal to them. We all know that is quite common. 

Good luck. 

Mar 24, 2011 1:38 pm

I'm under the impression that job offers get stinky real fast (from the employer's point of view). I'd be jumping on that fresh fish.

Mar 24, 2011 1:06 pm

We just brought on a junior for one of the bigger producers in my office. I think the comp package for the kid is 24k + 1% of senior’s gdc + 20% for junior’s new business. He is basically the senior’s assistant until junior has a book big enough to support himself.

I only share this to help you get an idea of one option out there. I am sure there are better and most definitely worse.

Good luck, it’s a tough business.

Mar 24, 2011 1:32 pm

That seems fair. I would be interested in taking on a JR - but how do you find someone who knows that arrangement you described is a good deal. And there are too many layers of fees, taxes, regulations and restrictions. Better to cut costs and max profits.

Mar 24, 2011 3:42 pm

So lets see...24K + 10K (saying that they advisor is amazing and makes 1 mil a year) is 34k so for the advisor to get to 100k he needs 66k which means he needs to bill 330K which means he needs a book of 33 million.  I'm assuming about a 1% fee based system, I guess if you have a B/D commission or some structure like that these numbers would be way way off.  However 33 million seems like it would take like 4-5 years to get to right?  Am I pretty close?  At what point would he make is own money (and what % would he get once he does)?  Just wondering as the 2 offers I've had are no salary, no % of the senior advisors gdc, and about 50-60% of my new business.  So all very different. 

Mar 24, 2011 6:14 pm

This is where you have to be creative, and have a little faith. Put yourself in the owner's postion.

If I'm your potential employer, what is my motivation to take the risk of hiring you, and bring you into my business? At some point, I need a JR just for succession planning (maybe). Maybe I want to grow the business; you are still a huge risk.

I'm sitting here netting 200k or whatever after expenses with a part-time assistant. Are you asking what's in it for me - if you are thinking out loud, put some meat on the table.

I'm going to guess the reason that some people are still trying to start by cold calling and making lists of their relatives and friends is they have been promised quick money, and don't realize the value or cost of learning the secret recipe in real conditions.

Don't overthink it.

Mar 25, 2011 12:48 am

I have lots of experience and wiling to help you. But, if you're some dork with no money and no experience/education, I'd tell you to do some dishes at the local IHOP instead.

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Mar 25, 2011 9:57 pm

Thank you very much for your well thought our response, it helped significantly  

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Mar 26, 2011 11:11 am

If the kid could even come close to 300k it would be obvious and he would not need a salary. On the other hand if he has other circumstances like no savings or call reluctance or lack of industry knowledge/experience then the salary is more important than maximizing your potential income from day one.

Mar 26, 2011 12:38 pm

yeah you are absolutly right and I didn't mean to make it sound like I thought it was a bad deal.  My only question really was what would be the next step (meaning would he go out on his own or would the senior advisor give him a much more favorable percentage after the first 1-2 years).  And and what point would the book be big enough that he wouldn't need the salary (which i guess is about 10 mil at a 1% fee based system).  Anyway thanks everyone for your help.  I have a couple of offers on the table and I'm hoping the logistics work out that I can get a start as an RIA.  keep your fingers crossed.