Entering the field of financial advising can be lucrative, but earnings vary widely depending on factors like education, certification, firm, location and clientele. Experience is one of the most important drivers of financial advisor compensation, with veteran advisors typically able to bring home several times the earnings of newcomers to the field. Understanding the salary ranges and components for new advisors can help those aspiring to this career make informed decisions.
If you want to grow your client base, SmartAdvisor can help bring qualified leads to you.
Average Base Salary for New Advisors
Financial advisors are high earners compared to most workers. According to the U.S. Bureau of Labor Statistics (BLS), the median pay for personal financial advisors as of May 2022 was $94,170 per year or about $45 per hour. That hourly rate is more than twice the $22.26 average of all occupations.
However, new advisors typically start out earning more modest sums. The BLS indicates that the lowest-paid 10% of financial advisors earned less than $47,570 per year, equal to an hourly wage of $22.45 or just barely more than the average for all occupations. The lowest 25% of advisors, meanwhile, earned under $57,460. Using this BLS data, we can estimate the starting base salary for many new financial advisors to be $45,000 to $60,000 per year.
Higher Pay with Certifications
Some new financial advisors can manage to earn significantly more than the average salaries. One way starting advisors can increase their earnings potential is by obtaining professional certifications. Some of the most common certifications include:
- Certified Financial Planner (CFP): This high-level certification requires completing specific educational requirements, passing a rigorous exam and acquiring industry experience.
- Chartered Financial Analyst (CFA): Earning the CFA designation involves passing three separate six-hour exams.
- Certified Public Accountant (CPA): This professional certification is particularly helpful for tax planning also calls for passing a tough exam on tax laws and general accounting topics.
Advisors who obtain credentials like these tend to command higher salaries, possibly 30% or more.
Industry and Location Factors
The industry an advisor works in can also significantly impact earnings. The highest-paying industries for new financial advisors include:
- Securities and commodity contracts have a median salary of $150,540
- Credit intermediation activities have a median salary of $106,320
- Insurance agencies and brokerages have a median salary of $95,040
- Management of companies have a median salary of $136,600
- Accounting and tax preparation have a median salary of $91,710
Location also plays a role. Advisors in major metropolitan areas like New York, Los Angeles and San Francisco can earn over $120,000 to start. Those in smaller markets may begin at closer to $80,000-$90,000. The top-paying states include New York, New Jersey, Pennsylvania, Massachusetts and Alaska.
Other Salary Components
In addition to base salary, new advisors may earn money through commissions, bonuses and profit sharing. For example, an advisor may receive a percentage of the management fees charged to clients. They may also receive bonuses for bringing in new clients or assets under management. A first-year bonus might range from $5,000 to $20,000 in compensation on top of base salary.
Long-Term Outlook and Growth Potential
The job outlook for financial advisors is robust. The BLS has projected advisor employment to grow 15% from 2016 to 2026. That’s much faster growth than the average job outlook.
Demographics reliably drive this trend. As more baby boomers retire, demand for retirement planning advice is expected to rise. And as 401(k)s replace pensions, more individuals will seek guidance on investing in these accounts.
With a few years of experience under their belt, advisors can increase their salaries substantially. The median pay spikes to $122,968 for a Financial Advisor and $146,671 for a Senior Financial Advisor according to Glassdoor data. The top 10% of advisors earn $208,000 or more.
Just staying on the job can help, but advisors also can be proactive about increasing their earnings. In particular, attracting new clients and bringing in more assets to manage are key factors in boosting pay over time.
New financial advisors can expect to earn $45,000 to $60,000 a year when starting out. Experience, credentials, firm, industry, location and clients served all impact pay. While starting salaries may seem modest, the potential to grow earnings over time makes financial advising a lucrative long-term career choice.
Tips for Financial Advisors
- Once you become a financial advisor you may find yourself looking for new leads pretty frequently. You may benefit most by targeting your marketing spend to efforts that are likely to produce the highest return on investment, such as those that can connect you with prospects directly, so you can focus on growing your business.
- One of a financial advisor’s most useful abilities is to suggest how to allocate your funds among various asset types. SmartAsset’s asset allocation calculator lets you suggest a risk tolerance profile and then assists you in tailoring an allocation that fits your needs.
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