Thinking About Becoming a Financial Planner? Here’s What You Need to Know.

If you’re the type of person who was born to be a financial planner, you may be surprised to learn that some people do not enjoy managing money, not even their own. The pleasure you take in creating a budget, or in figuring out how to grow assets while minimizing risk? They’d rather visit the dentist than face those decisions.

That’s why the world needs financial planners.

As a financial planner, you will help your clients develop long-term strategies to achieve their financial goals. Every client will have vastly different needs, and you’ll spend a lot of your time interacting and communicating with those clients. Those who tend to succeed in this role have both analytical and interpersonal skills.

The process to become a financial planner is pretty simple. You’ll start with a bachelor’s degree and end by earning one of the three certifications offered in the field. In this article, we’ll cover:

• What is a financial planner?
• Financial planner versus financial advisor
• Why become a financial planner
• The skills you’ll need to become a financial planner
• The educational commitment to become a financial planner
• Licenses and certifications for financial planners
• Becoming a fiduciary
• Is this the right career for you?

What is a financial planner?

Financial planning is a specialization within the field of financial advisory services. Financial planners work with people across economic strata to create plans designed to achieve their short- and long-term goals. They do this by digging deep into their clients’ circumstances and then sharing financial advice that can help those clients do things like:

• Get out of debt
• Manage and even leverage debt
• Invest money wisely for maximum growth
• Save for large purchases, such as a home or college education
• Build wealth for retirement

Many financial planners also offer other services, including income tax preparation, investment management, or estate planning.

When you become a financial planner, you may end up specializing in one or more areas of personal or family finance, like:

• Education Fund Planning: Involves setting financial goals and strategies to save for future education expenses. It encompasses estimating costs, exploring saving options like 529 plans or education savings accounts, and investing to meet the educational needs of family members.
• Retirement Planning: Focuses on preparing financially for retirement, ensuring that individuals have sufficient funds to support themselves in their post-working years. This includes assessing future financial needs, saving and investing in retirement accounts (such as 401(k)s and IRAs), and managing assets to ensure long-term financial security.
• Investment Planning: The process of identifying financial goals and managing assets to achieve those goals over time. It involves choosing the right investment vehicles (stocks, bonds, mutual funds, etc.), managing risk, and allocating resources to diversify and optimize the investment portfolio.
• Estate Planning: Entails making arrangements for the management and disposal of an individual’s estate during their life and at death. It includes drafting a will, setting up trusts, planning for taxes, and ensuring that assets are distributed according to the individual’s wishes.
• Insurance Planning: Involves assessing risk exposure and determining the right insurance products to protect against potential financial losses. This can include life insurance, health insurance, disability insurance, long-term care insurance, and property and casualty insurance.
• Philanthropic Gift Planning: The process of planning charitable donations to support causes or organizations. It involves determining the most effective ways to give, such as through direct gifts, donor-advised funds, or setting up charitable trusts, with considerations for tax benefits and personal financial goals.

Financial planner versus financial advisor

Some people use the terms financial planner and financial advisor interchangeably, but that’s not quite right. The term financial advisor refers to any professional—including certified financial planners, as well as investment advisors, wealth managers, and debt and credit counselors—who helps people manage money. What sets financial planners apart is that they help people manage their money by creating actionable roadmaps that help them achieve their financial goals. Financial planners typically focus on long-term objectives.

Why become a financial planner

Most people drawn to financial planning careers are inspired by either an interest in money and numbers or an interest in helping people. That’s because there are different types of financial planner careers. Some financial planners—often those with an affinity for math and money—will end up working for big companies, while others—the ones who feel driven to help people—may work independently with clients or for a small credit or debt counseling service.

According to the Bureau of Labor Statistics, personal financial planners earn about $88,890 per year (approximately $40 per hour). According to Indeed.com, the average financial planner earns a little over $60,000 in salary and another $45,000 per year in commissions. You might make more if you work for a bank or investment firm, or less if you work with a non-profit organization that helps people get out of debt.

The skills you’ll need to become a financial planner

Financial planners need to have a wide range of real-world accounting and personal finance knowledge, but more importantly, they need to be comfortable dealing with people. When you become a financial planner, you’ll be doing a lot of listening and educating. People can get very emotional about their finances. At times, your clients will have trouble accepting your advice. Some will be distraught over their financial circumstances.

To succeed in this career, you’ll need:

• A keen ability to focus on details while still seeing the big picture
• A talent for building and maintaining strong relationships
• An aptitude for numbers and data analysis
• The ability to explain complex ideas simply
• The confidence to advise people on critical life decisions

The educational commitment to become a financial planner

You’ll need a bachelor’s degree to become a financial planner. No specific major is required, although any of the following will undoubtedly bolster your skills and knowledge:

• Finance: Focuses on the management of money, investments, and financial institutions. In the context of financial planning, it covers topics such as investment analysis, portfolio management, financial markets, and personal financial planning, equipping students with the skills to advise individuals and organizations on how to achieve their financial goals.
• Accounting: Involves the recording, classifying, and interpreting of financial transactions. Accounting principles are crucial for financial planning as they provide a framework for tracking financial progress, assessing tax obligations, and ensuring accurate financial reporting and analysis, which are foundational for making informed financial decisions.
• Business: Offers a broad understanding of business operations and management strategies. When related to financial planning, it includes studying business finance, management principles, marketing, and organizational behavior, all of which contribute to a comprehensive approach to financial planning in both personal and business contexts.
• Economics: Studies how individuals, businesses, and governments allocate resources. Understanding economic principles is essential for financial planning, as it helps in interpreting market trends, evaluating economic policies’ impact on investments, and making informed decisions about resource allocation and financial strategy based on macroeconomic and microeconomic conditions.

These majors will also serve you well when it’s time to take your certification exams, should you choose to do so. You might also want to look for bachelor degree programs that offer electives in:

• Investing: This elective focuses on the principles and strategies behind making informed investment decisions. It covers various investment vehicles, such as stocks, bonds, mutual funds, and alternative investments, along with risk management, asset allocation, and portfolio diversification. In the context of financial planning, it equips students with the knowledge to build and manage investment portfolios that align with clients’ financial goals and risk tolerance.
• Retirement Planning: This elective delves into the comprehensive process of planning for retirement, including the assessment of retirement needs, understanding of retirement savings accounts (e.g., 401(k), IRA), and the strategies for accumulating and distributing retirement wealth. It addresses the challenges of retirement income planning, such as inflation, healthcare costs, and longevity risk, preparing students to advise individuals on achieving a financially secure retirement.
• Real Estate: In the context of financial planning, this elective explores the role of real estate investments in a diversified portfolio. It covers topics such as property valuation, real estate market analysis, financing options, property management, and tax implications. The course aims to provide students with insights into leveraging real estate as an investment tool and understanding its benefits and risks within a broader financial plan.

A few schools offer an undergraduate financial planning major. They include:

• University of Georgia
• Boston University
• Texas Tech University
• San Diego State University

In order to sit for Certified Financial Planner certification exam, you will need to have completed coursework in the following areas:

• General Principles of Financial Planning: This area covers the foundational concepts of financial planning, including the financial planning process, ethical considerations, client interactions, and the regulatory environment. It provides an overview of how to establish client-planner relationships, gather client data, analyze and evaluate the client’s financial status, develop and present financial planning recommendations, and monitor the financial plan.
• Education Planning: Focuses on strategies for saving and funding education expenses. It includes understanding various saving vehicles (like 529 plans, Coverdell ESAs), financial aid, grants, scholarships, and loan options. The exam tests the ability to integrate education planning into broader financial plans to meet clients’ educational goals.
• Risk Management and Insurance Planning: Examines the identification, analysis, and treatment of risks faced by individuals and families. It covers insurance products and solutions, including life, health, disability, long-term care insurance, and property and casualty insurance, assessing how these tools can be used to manage risk within a comprehensive financial plan.
• Investment Planning: Tests knowledge on building and managing investment portfolios. Topics include investment theory, risk and return analysis, asset allocation, and the selection of investment products (stocks, bonds, mutual funds, real estate investments). This area assesses the ability to recommend investment strategies that align with clients’ goals, time horizons, and risk tolerance.
• Tax Planning: Involves understanding the impact of taxes on personal financial planning. It covers the basics of income tax, estate tax, gift tax, and transfer tax planning, aiming to optimize clients’ tax situations through strategies such as tax-efficient investment choices, deductions, credits, and tax deferral or reduction techniques.
• Retirement Savings and Income Planning: Focuses on the accumulation and distribution phases of retirement planning. It includes knowledge of retirement savings vehicles (such as IRAs, 401(k)s, and annuities), Social Security benefits, pension plans, and income distribution strategies designed to ensure financial security in retirement.
• Estate Planning: Deals with the efficient transfer of an individual’s estate at death and the arrangements for incapacity. This includes wills, trusts, beneficiary designations, property ownership types, and gift strategies. The exam tests the ability to create estate plans that meet clients’ desires, minimize taxes, and address legal constraints.

You can find a list of CFP Board-registered undergraduate programs on their website.

A master’s degree should bolster your credentials, both with clients and potential employers. Look into Master of Science in Financial Planning (MSFP) programs like the one at Golden Gate University – San Francisco – or Master of Science in Financial Services (MSFS) programs. Don’t be surprised when you don’t find very many.

It’s more common for financial planners pursuing graduate study to opt for MBAs with a concentration in financial planning or financial management, or a Master of Finance.

Licenses and certifications for financial planners

Anyone can hang out a shingle, buy a nice paperweight, and call themselves a financial planner—you don’t technically have to be a finance expert. If you’re serious about becoming a financial planner, however, it’s a good idea to earn your Certified Financial Planner (CFP) certification.

The CFP certification is offered by the Certified Financial Planner Board and is considered the gold standard of certifications for financial planners.

Earning this certification requires:

• Three years of work experience
• Completing an education program
• Taking a certification exam
• Meeting continuing education requirements
• Abiding by the CFP code of ethics, rules of conduct, and practice standards

Certified financial planners are always fiduciaries (a term we’ll discuss more below), which means they are legally obliged to put the needs and interests of their clients ahead of their own. CFPs are qualified to help clients with everything from debt management to investing to estate planning.

There’s also the Chartered Financial Consultant (ChFC) certification offered by the American College of Financial Services. You’ll need to take nine courses focused on topics like retirement planning, estate planning, insurance, investments, and income taxes to earn this certification.

If you are already a certified public accountant and you want to branch out into financial planning, the American Institute of Certified Public Accountants (AICPA) offers a Personal Financial Specialist (PFS) certification. It’s a good certification to have if you’d like to work with clients on tax issues.

Some financial planners also sell investment products. If that’s part of your long-term career plan, you’ll need to pass certain exams given by the Financial Industry Regulatory Authority (FINRA). If you think you’ll sell any insurance products like annuities, you’ll ALSO need to have your insurance license in the state where you’ll be working.

You may also want to become a member of the National Association of Personal Financial Advisors (NAPFA). This professional association for financial advisors only accepts fee-only advisors. Members must adhere to the organization’s code of ethics and take an annual fiduciary oath. Being a part of NAPFA is an easy way to demonstrate to your clients that the advice you give is unbiased. The organization offers continuing education resources that will help you maintain your CFP certification.

Becoming a fiduciary

A fiduciary financial advisor is one who has pledged to act solely in the best interests of their clients in all situations. A fiduciary advisor may not recommend an investment or product simply because it is more profitable to the advisor. Non-fiduciary advisors are not similarly constrained, which is why many clients prefer fiduciary advisors.

Fiduciary duty minimizes the potential for conflicts of interest because fiduciaries have to:

• Seek out the best financial products for clients
• Communicate all relevant facts to clients
• Disclose all potential conflicts of interest
• Avoid using client assets to benefit themselves

There are, of course, unethical fiduciary advisors out there, but most take their professional obligations seriously. When they don’t, the regulations governing their practice make it easier for clients to take action against them.

The National Association of Certified Financial Fiduciaries is the certifying organization for financial advisors who want to demonstrate to clients and colleagues that they always put client interests first.

Is this the right career for you?

That depends. If you’re thinking about becoming a financial planner because you love numbers and money, you might want to consider becoming a wealth manager or investment manager instead. People come to financial planners with all sorts of issues—not just a desire to grow a nest egg—and so in this role, you may find yourself occasionally serving as a crisis counselor or therapist.

There’s no denying that it can be a great job; US News & World Report ranked financial advisor as the eighth-best job in 2018. However, helping people means being there for them in bad times as well as good. To succeed, you’ll need to have not only financial knowledge but also a little empathy and a whole lot of integrity.

(Updated on February 23, 2024)

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