Financial Advisor Career: Pros and Cons

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Financial Advisor Career: An Overview

As millions of Americans grapple with retirement planning, investment strategies, and wealth management in a rapidly changing world, financial advisors stand at the forefront, offering guidance through the fiscal fog.

Yet, for those considering this career path, the profession promises intellectual stimulation, the chance to make a tangible difference in clients’ lives, and potentially lucrative rewards. However, it also comes with its share of hurdles: stringent regulations, the pressure of managing others’ financial futures, and an industry still grappling with issues of diversity and inclusion. It also takes considerable time and effort to build a clientele and is considered a high-stress job by many, even in the best of times.

We spoke with some of the best in financial advising to give you important information on the pros and cons of the profession.

Key Takeaways

The benefits of becoming an advisor include earning potential, a flexible work schedule, and the ability to tailor one’s practice.
The drawbacks include high stress, the hard work needed to build a clientele, and the ongoing need to follow regulations.
This is a lucrative career, but it’s one with a high burnout rate.
Women and minorities report having additional hurdles in the industry.

State of the Financial Advising Sector

The financial advising sector has grown significantly in recent years while undergoing transformations from technological and demographic changes. The industry has seen steady expansion, with the number of SEC-registered independent advisers (RIAs) increasing by about 14% from 2019 to 2023, reaching 15,396 RIAs. This growth is mirrored in the sector’s workforce, which has expanded from 871,971 employees in 2019 to over a million in 2023, an 11.5% increase.

The U.S. Bureau of Labor Statistics publishes data on personal financial advisors, which includes financial planners and advisors of all sorts, including many who work at RIAs, broker-dealers, and for their own firms. Below is the data, including expected growth, in the sector’s employment since 2000.

In addition, the number of clients served by financial advisors has grown substantially, rising from 51.9 million in 2019 to 64.1 million in 2023. This represents an average annual growth rate of 8.5% over the previous six years. Assets under management have seen a similar upward trajectory, increasing from $97.2 trillion in 2019 to $128.4 trillion in 2023.

It’s crucial to know that the industry is made up of relatively few major firms (often called “wirehouses”) like Charles Schwab Corporation (SCHW) and Fidelity (FIS), with most of the other SEC-registered advisory firms (about 93%), employing 100 or fewer, highlighting the prevalence of boutique and independent practices in the industry. There are many different careers as a financial advisor, and we’ve mentioned data for the growth in some of them already:

Demographic Challenges

While the sector is growing, it’s also aging rapidly. J.D. Power estimates the average age of financial advisors at 56 years, with 20% of the workforce looking to retire in the next five years. This demographic shift presents both challenges in terms of succession planning and opportunities for new entrants to the field.

When discussing the pros and cons of setting off on a financial advising career, it’s notable the barriers that women and minorities frequently report—often through major lawsuits that have cost the industry many millions in recent years. The field remains far less diverse than other parts of the economy. As of 2024, Hispanic or Latino CFPs accounted for only 3.1% of the industry total, with Asian or Pacific Islanders and Black planners at 4.2% and 2.0%, respectively.

Kimberly Foss, founder and president of Empyrion Wealth Management in Roseville, California, told Investopedia that the lack of diversity skews industry practices and norms away from the realities of the larger society.

“If we want a body of professionals who can understand and empathize with a changing American society and culture,” Foss said, recruiting underrepresented groups in far greater numbers is critical.

The needs are evident. Since 2015, there has been a 9% increase among Black investors, a 6% increase among Hispanic or Latino investors, and a 7% point increase among Asian or Pacific Islander investors. Meanwhile, the percentage of white investors has largely plateaued over the last decade.

Chloe McKenzie, founder and CEO of BlackFem, Inc., a nonprofit focused on creating opportunities for women and girls of color, told Investopedia that the industry has a problem recruiting and maintaining women and people of color. “I think a lot of women, people of color, and women of color are not going into the industry because there’s such a large amount of distrust of the financial sector from communities of color and women,” she said.

The gender pay gap in financial advising has proved stubborn, as seen below in different parts of the financial advising sector, where women fare worse than overall nationally:

Future Outlook

The future appears promising for the financial advisory profession. The U.S. Bureau of Labor Statistics (BLS) projects a 13% growth rate for the sector over the decade leading up to 2032, significantly outpacing most other industries. This forecast suggests continued opportunities for those entering or advancing in financial advising.

272,190

Number of financial advisors in the U.S. in 2023, according to the BLS.

Pros of a Financial Advisor Career

A successful financial advisor is well compensated. The mean annual income for those in the field nationwide was almost $150,000 as of May 2023, though the median salary is just under $100,000. Below are the BLS-reported median annual wages for personal financial advisors. Lower on the page is a chart of the real wage growth year to year since 2000.

The benefits of advising go well beyond compensation. Here are some of them:

Offering Meaningful Advice

The chance to offer meaningful advice may not be the top reason young people begin their careers as financial advisors. But it can become the aspect of the job that is the most rewarding.

Consumers are often overwhelmed by the choices of investments or insurance vehicles available to them and unable to determine which are appropriate for them and their families. They frequently look to trusted financial advisors to help them understand their options.

Peter Lazaroff, an Investopedia top-10 financial advisor, spoke with us about the changes he sees in the field. “The evolution of financial advice is fascinating. Fees haven’t compressed much because advisors are offering more services for their fees, and the nature of the advice has changed significantly,” he said.

Often, advisors are among the few who (people) feel they can talk to about what’s most meaningful in their lives. “The best advisors these days resemble therapists more than number crunchers,” Lazaroff said. “Being a good advisor is about connecting with people, helping them solve their problems, and making life simpler. It’s not all about spreadsheets; people have wants in addition to needs, and addressing those requires listening and empathy.”

The greatest role a financial advisor plays is to help clients make suitable decisions for a financially healthy future. The successes of their clients are the successes of their financial advisors.

“The best advice I received … was not to focus on making my friends and family my clients but, instead, to focus on making my clients my friends and family,” Valerie R. Leonard, one of Investopedia’s top 100 financial advisors and CEO of EverThrive Financial Group in Birmingham, Alabama, told Investopedia. “I’m a firm believer that the money will come if you do right by your clients, and that has been true throughout my career.”

Income Potential

The earning potential of most financial advisors is limited only by their appetite to take on more clients and more work.

Financial advisors may be either fee-based, commission-based, or a combination of both. Their incomes are based on the amount of new business they take on and the recurring revenue they create each year in commissions or fees. While pay structures differ, advisors have the ability to earn as much, or as little as they are able.

Work Schedule Flexibility

Finding a balance between work and personal life can be a challenge when starting any new career, and financial advisors are no different. However, once an advisor establishes a clientele, the career lends itself to flexible work hours.

Experienced advisors have the advantage of scheduling client meetings around their personal calendars and, over time, can work a schedule different than the typical 40-hour work week.

Creativity in Making Your Practice

Financial advisors can be creative in building their clientele. Some focus on specific generations, tailoring their practice to baby boomers or millennials. Others focus on particular aspects of personal finance, such as investment management, retirement planning, or estate planning. Many advisors, too, specialize in advising doctors, lawyers, or entrepreneurs.

This is often a way for advisors to advance in the industry. “Some of the most successful advisors specialize in specific strategies or planning techniques,” Ashley Folkes, a certified financial planner in Hoover, Alabama, told Investopedia. “Prospecting can be challenging, but being recognized as the best in a particular area will attract prospects to you.”

For this and other reasons, advising caters to those who always want to learn something new.

“Portfolio management has become a cheap commodity due to technology. Eventually other services such as financial planning will follow suit. Clients increasingly are looking for one place to handle everything so being capable of offering tax and estate planning is imperative,” Brian M. Schmehil, CFP and managing director of wealth management at the Mather Group, told Investopedia about changes he sees in the role of advisor in the coming years. “That being said, the desire will always be there to have a human being assist you making sense of everything and ensuring you don’t let your emotions get the best of you. “

Cons of a Financial Advisor Career

Whether working on their own or for a financial services firm, financial advisors face many challenges, particularly when they’re first getting established.

High-Stress Industry

The financial advising industry, like the economy as a whole, is cyclical and entangled with the performance of domestic and global markets. The ups and downs of a financial advisor tend to parallel those of the financial markets.

According to a 2022 Financial Planning Review study, financial planners burn out at a higher rate than other careers, given the long work hours and the fact the job can spread into personal and family time. Interestingly, the study also showed that those working at smaller firms have higher satisfaction with their work-life balance, though that’s balanced out by a “lower sense of accomplishment.”

In addition, financial advisors are constantly managing their clients’ fears and emotions during market downturns. “Your client’s financial stresses are not yours. You are their guide, not their keeper,” Brian M. Schmehil of the Mather Group advised. “If you take on all your clients’ financial issues and stresses, you’re going to have a tough time being an advisor. That doesn’t mean you shouldn’t have empathy.”

According to 2022 Financial Planning Review study, 71% of advisors admit to being stressed out, and 44% said they were more stressed than they were five years earlier.

Continuous Prospecting

Many financial advising firms have sales quotas to meet each month. Self-employed advisors may not have quotas, but their need for business is at least as urgent.

Until they establish a robust clientele, advisors are constantly marketing themselves and their skills in their search for new prospects.

Advisors who leave the financial services industry often describe the stress caused by the amount of time and money spent creating and maintaining profitable prospecting systems. For new advisors with a small personal network, building a book of business is the most challenging aspect of the career.

Regulatory and Compliance Requirements

Financial advisors must be licensed to provide advice or sell products to clients. The process to get those licenses requires time and study.

They must also complete a certain number of continuing education courses each year to keep their licenses in good standing, and they must carry errors and omissions insurance coverage throughout their careers.

Keeping up with regulations helps protect clients from malpractice, but it is a costly and time-consuming endeavor for a financial advisor.

How Does Someone Become a Financial Advisor?

First, you need a bachelor’s degree, preferably in finance or economics.

Your next goal is to get an entry-level job at a financial institution that will sponsor you as you work to obtain the necessary Financial Industry Regulatory Authority licenses to practice in the field. (You can do it on your own, but that’s harder. And in any case, you can use the professional experience and contacts you’ll gain on the job.)

Meanwhile, you can consider which aspect or aspects of the profession you might like to specialize in. Financial advisors help their clients with investing, retirement planning, estate planning, and tax strategies, among other areas of specialization.

Where Can Financial Advisors Find Support?

All professional certification groups have some level of support to help financial advisors balance multiple roles. These groups have forums, local chapters, advisors, or communication channels to express concerns.

Is it Worth it to Pay for a Financial Advisor?

The answer depends on your finances, your investment knowledge and the time you have to manage your own finances. The more complex your finances, the more likely a financial advisor may be invaluable. But even those with more simple finances may still find hiring a financial advisor to be worthwhile.

The Bottom Line

A career as a financial advisor blends opportunities and challenges. On the positive side, the profession provides the potential for significant personal and monetary rewards, including the satisfaction of helping clients achieve their financial goals, intellectual stimulation from navigating complex markets, and the possibility of lucrative compensation. The industry’s steady growth, increasing number of clients, and projected future expansion all point to continued demand for skilled financial advisors.

However, prospective advisors must also weigh these benefits against substantial challenges. The high turnover rate, especially among new entrants, underscores the difficulties of establishing oneself in the field. The pressure to build a clientele quickly, master complex financial products, and navigate regulations can be overwhelming. For those who can overcome these hurdles, a career in financial advising can be both personally fulfilling and financially rewarding, but it’s crucial to enter the field with a clear understanding of its promises and pitfalls.

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