What kind of training does a Financial Advisor have?

[Midpack]

I know the answer (often nowhere near enough), but thought I'd share a recent scary experience.

Had a beer with 3 people I've known for more than 15 years, one a good friend, the others acquaintances. One of the others just started as a Financial Advisor for a very well known national firm, I am leaving the name out deliberately (though if you recognize the attachment below...wink-wink). She is the only FA in her office, and tells me that's typical for that firm.

She got a BA in Business in the late 80's, but none of her previous work experience was even remotely related to finance or investing (she was mostly underemployed). She was telling us how much she's enjoying the new job, and how she constructs portfolios for clients for example - "it's really interesting, just like putting together pieces of a puzzle." She also talked about helping people plan for retirement, before and after.

I was the only DIY investor at the table, and I don't claim to be an expert - but it was clear she had very little knowledge of her new job. I'm convinced they've given her plug-n-chug software and/or contacts in a central office that are providing whatever expertise they may have to offer. Unfortunately you could learn more from the bogleheads wiki than she knows.

It was an eye opening evening. We'll remain friends, but we won't ever do business together.

The services she offers:

 

[Big_Hitter]

Most of the reputable advisors I know are CFAs

 

[Walt34]

This does not surprise me at all. I had a niece (since passed away) who at the time I retired worked for Ameriprise. She often spoke of how she was helping people get their finances in order. Her preparation for this new job? About ten years managing a small pet store.

When I mentioned that the house was paid off before I retired she was astonished, apparently having never heard of anyone doing that before. She asked how I did it - I told her that every time I got a pay increase I put one third in savings, one third toward the house principal, and one third to spending (there was inflation going on after all) and periodically/sporadically made extra principal payments, like when I worked overtime. There was a moment of silence and her next response was "Do you know how RARE that is?"

At the time I had no idea, it being well before joining this board. It just seemed the prudent thing to do since the retirement numbers didn't work if I had a house payment.

 

[dd564]

They should almost have a law against calling these salespeople "financial advisors".

Other than for fee-only advisors of course.

 

[Texas Proud]

It is funny who can call themselves an FA...

A friend of my wife... her husband is a FA (or so claims to be).... I did not talk to him about financial advice or anything else... he works from home and has his clients... they live in a nice house and drive nice cars...

One day when he was over he started to talk about how people talk bad about annuities and life insurance... and how he could shoot any of those arguments down... I kept my mouth shut and played stupid....

Well, he has filed for divorce and his wife brought some financial info over to me to take a look at and advise her... I told her, get a lawyer.... but she still wanted me to look... found out that he has very little equity in the house... leases both cars... has about $100K in personal loans and $30K in CC debt... very few assets at all....

So I was wondering how he could think of himself as a FA when his finances are in such bad shape.... at best all I would call his is an insurance salesman... and he gets paid by others to handle their money...

 

[prose3589]

I actually looked into being a CFA. As an attorney you don't need any additional education. You take a test and then working under a supervising CFA. I looked at a sample test. Most everyone who contributed on this forum would ace the test. Makes me very nervous since most of the attorneys I work with are certainly not financial gurus or numbers people.


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[Cobra9777]

I had a VERY brief stint as a "financial advisor" back in the early 1980s. It ended as soon as I realized that I was a salesman, not a financial advisor. (Be nice... I was young). You had to have a bachelors degree (any field) and pass two licensing exams, which I recall were fairly easy. Beyond that, it was really just a way for the firm to gain access to my network of people and their money. Obviously, it went nowhere career-wise, but certainly helped me learn the truth about "financial advisors" at a very early age.

 

[2017ish]

I actually looked into being a CFA. As an attorney you don't need any additional education. You take a test and then working under a supervising CFA. I looked at a sample test. Most everyone who contributed on this forum would ace the test. Makes me very nervous since most of the attorneys I work with are certainly not financial gurus or numbers people.

Based on my experience, most of our fellow lawyers would not pass the test without a lot of study. (Back in the dark ages, before I started doing securities-related defense work, my personal working example of an unsophisticated investor was the typical attorney at my multinational big firm; I was wrong on that, but there was reason for the mistake.)

 

[target2019]

Once upon a time an FA from ML took me to a very nice dinner. I was surprised that he was once the owner of the local video rental store (not a very enticing place). When that went out of business he became a bank VP, Financial Advisor. Something went wrong there, and he went to ML. [FONT=&quot]He is now a Vice President, or[/FONT] Financial Advisor or PIA Portfolio Manager, depending on which email I view. But there are no credentials to be found.

 

[Options]

Could be worse. Could be someone like the nephew I saw over the holidays who, even without an advisor, has been "playing the stock market." His father, my older brother, is even talking about giving him money to "invest." I tried to educate over dinner but the conversation went nowhere. Sigh.

 

[clifp]

A number of years ago I signed up for online CFP (certified financial planner) I only completed one course and started the 2nd before I decided it was more work than I wanted to put into it. The amount of he course devoted to insurance product was particular daunted.

Overall the amount of worked required to complete of CFP was roughly equivalent to getting my MBA. And the pass rate on the test is not much over 50%. I know a former boss of my failed her first test and passed the second, and she is a smart lady.

CFA is more about being a stock analyst than helping an individual with their portfolio. If I was looking for credentials I'd be looking for CFP+CPA. The Schwab advisers I've meet with either CFP or CFA credential I've found to as knowlegable as most of the long time forum members.

Most everybody else that calls themselves financial advisers are just sales people with superficial knowledge

 

[Big_Hitter]

Most everyone who contributed on this forum would ace the test.

ORLY?

I seriously, seriously doubt it. There are 3 tests, the first one is easier, the second two not so much.

 

[ERD50]

... how she constructs portfolios for clients for example - "it's really interesting, just like putting together pieces of a puzzle."

... I'm convinced they've given her plug-n-chug software ...

Agree that most people probably assume that an "FA" has some level of training, but according to this:

A financial advisor may also be called a financial planner. While there may be no official requirements for financial advisors, most employers prefer those who have a college education.

I'd guess that the puzzle fitting is more along the lines of "how can I convince this person they need me?".

The plug-and-chug software is probably overkill as well. A couch-potato formula would do it.


CFP and CPA are different, those have real requirements, in case there's any confusion in this thread.

-ERD50

 

[JoeWras]

CFP and CPA are different, those have real requirements, in case there's any confusion in this thread.

-ERD50

Exactly. There may be confusion here.

In my industry, anyone can call themselves an "engineer". However, to get the "P.E." after their name is a true accomplishment. Not easy.

Back to the topic at hand. It reminds me of one of my friends who is now an "adviser". Nice guy. Was never into sales in his past life. But now that he's an "adviser," he's drunk on this and is a pain in the arse.

I'll say it again: "Friends don't let friends sell annuities."

 

[Livin Large in MT]

UGH, this brings back my own FA memories... something I did for a little while. I was in a great partnership of women who really cared about their clients and about doing a good, sensible job. In the end I quit because even with all that, I could not justify the amazing pay we all received for just giving people common sense advice. The idea that FA's know the market and funds and investments better than the people on this board is inaccurate. The idea that your FA can find ways for you to make more money than you could make as a DIY using low cost funds or just investing in dividend paying stocks is also inaccurate. FA's are a little like exercise coaches. Some people will pay for that so that they actually exercise or in this case invest. But if you need that, just pay for a fee only FA who can look over your portfolio and give you an independent analysis. Not a bad thing to do every couple years and shouldn't cost more than a couple hundred rather than the thousands that get skimmed off when you use a full service broker.

 

[FireBug]

OMG, this is the perfect post. Thank you OP.

We have friends through my wife's work. My wife's co-worker is a lovely lady but she has had her fair share of trials. Her son left high school prior to graduation. Guess what, he is now going to 'training' to be an FA with yes, Eddie J. The son has convinced his mom that, she too should become a FA to get some additional income. So, she (the mom) has signed up for training as well. Of course she has to pay for it... and a trip to Las Vegas to suddenly become qualified Financial Advisor.

Remember right before real estate collapse how everyone wanted to be a real estate agent?

 

[M Paquette]

There's tests, and there's tests.

Most of the folks hanging a Financial Planner shingle got it by working somewhere that would sponsor them for the FINRA Series 6 or 7 exam. These toughies have to be passed before one can [-]sell variable annuities[/-] advise and assist people in selecting the proper financial instruments.

The Series 6 exam consists of 100 questions that cover six areas:

• Evaluation of customers
• Marketing, prospecting, and sales presentation
• Opening and servicing customer accounts
• Product information (investment company securities and variable contracts)
• Securities markets, investment securities, and economic factors
• Securities and tax regulation

The Series 7 exam contains 250 questions covering an even broader range of security-related topics including:

• Corporate securities
• Municipal fund securities
• Municipal securities
• Options
• Direct participation programs
• Variable contracts

Applying to take a registered representative exam requires the sponsorship of a FINRA-member broker-dealer firm. Usually, the sponsor is an employer. Agents can prepare for the Series 6, 7, or other exams through self-study or by taking courses from a variety of online and offline sources.

These wouldn't be much of a challenge for many E-R members.

Financial Advisors may have get through some additional hoops depending on the state they live in, as many states attach some specific rules to someone claiming the specific title of Financial Advisor, typically limiting it to an investment advisor registered with the SEC or state Securities Division, and requiring some additional tests and training.

The tougher ones are things like Certified Financial Planner (CFP) conferred by the Certified Financial Planner Board of Standards, Inc.

There are the sound-alikes including Chartered Financial Consultant (ChFC) conferred by the American College, used by life insurance salesmen and much easier to get than CFP.

Then there's random junk with no certification or backing, like Investment Advisor (IA) and Financial Investment Advisor (FIA), and goodies like Registered Representative (RR), which means "Woohoo! I passed the SEC Series 7 test!"

 

[bad_LNIP]

Most everyone who contributed on this forum would ace the test. Makes me very nervous since most of the attorneys I work with are certainly not financial gurus or numbers people.

Most people here would get crushed, and I mean like 90% of them on a good day. One of the smartest people I've ever met in my life is a CFA, and he might have had an easier time with it, but it is no joke. You might be thinking of a series 7 or something like that.

One of my buds was a financial adviser and it is heavy on sales.

 

[gcgang]

FAs background is all over the board. Some are attorneys or CPAs with MBAs, CFPs and CFAs. Others are ex bartenders or car or pharmaceutical salespeople.

There are no standards or requirements to be called a FA or F planner that the industry agrees upon.




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[Midpack]

FA's are a little like exercise coaches. Some people will pay for that so that they actually exercise or in this case invest. But if you need that, just pay for a fee only FA who can look over your portfolio and give you an independent analysis. Not a bad thing to do every couple years and shouldn't cost more than a couple hundred rather than the thousands that get skimmed off when you use a full service broker.

Good analogy, hadn't heard that one before.

 

[FUEGO]

I briefly looked at becoming an FA when I was in college. I remember researching Edward Jones. Here's a link if you, too, want a job with them:

Start a New Career as a Financial Advisor - Edward Jones

From this link on the training process, it looks like about 8 weeks of instruction, which appears to be rather marketing heavy. You also have to pass the series 7 and 66 exams.

My parents are currently being targeted by a financial adviser from a different firm. She's an old family friend and really really really thinks my parents need $hit tons of annuities, whole life and LTC coverage to get them through their old age. I was a little shocked given they have a COLA'd pension and 2 SS's that more than cover their needs plus a couple million worth of gravy 401k and taxable accounts. Apparently this FA vulture didn't even inquire about their actual assets, pension, likely SS amounts, and forecasted retirement expenses. Shocking. The glossy color brochures she left were certainly pretty though.

Similar story with my mom's 403b. Some FA vulture tried to switch her over to craptacular high fee funds and away from her relatively awesome state 457 plan with expense ratios in the 0.10%'s range for a diversified basket of funds. He claimed she should be heavily into fixed income investments and not 80-90% equities in the 457, and therefore should roll over into the 403b (instead of reallocating within the 457). WTF man. WTF. He never asked about the fat pension mom's about to draw or the millions of outside investments or the fact that they will be getting fat SS checks.

 

[2B]

In my industry, anyone can call themselves an "engineer". However, to get the "P.E." after their name is a true accomplishment. Not easy.

In the US state licensing of engineers "offering services to the public" keeps people from calling themselves an "engineer" unless they have a PE. The official levels are "graduate engineer" for someone from an accredited university and "engineer-in-training" for someone that has passed the first of two licensing exams. A PE is officially a "licensed professional engineer."

Private companies that don't do work for others or the Federal government can call people "engineers" but if anyone does anything to imply any sort of certification or willingness to work for others can find themselves in a lot of trouble fairly quickly. Railroad engineers are typically an exception but they just drive the train.

I'm a PE in real life.

 

[jjquantz]

...snip...
Apparently this FA vulture didn't even inquire about their actual assets, pension, likely SS amounts, and forecasted retirement expenses. Shocking. The glossy color brochures she left were certainly pretty though.

...snip... He never asked about the fat pension mom's about to draw or the millions of outside investments or the fact that they will be getting fat SS checks.

Speaking of not asking about things, (or worse) one FA put my FIL in a single life annuity after he was diagnosed with stage 4 lung cancer with a life expectancy of maybe a year. Fortunately, DW had started to monitor the finances about then and managed to get the money back.

 

[Midpack]

I just double checked and while the FA in the OP studied business for two years, her BA after four years was in Art. Yikes

 

[HFWR]

As I understand it, the CFP exam is pretty comprehensive, and difficult.

But, as others have noted, entry-level "employees" at insurance companies or places like Ameriprise are mostly sales dummies, enlisted (a) to get access to their network of friends/acquaintances, and (b) for cold-call sales of high-profit margin [-]scams[/-] products like whole life and variable annuities.

Not much investment management/advice involved...