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How Much Do Financial Advisors Make?

SmartAsset: How Much Do Financial Advisors Make?

The Bureau of Labor Statistics (BLS) says that the median salary for a financial advisor in 2021 is $94,170, which is well above the national average. However, pay can vary widely by state, city and level of experience. The profile of an advisor’s clientele can have an effect on salary as well. If you’re on the lookout for a financial advisor who can help you manage your money, check out SmartAsset’s free matching tool.

What Is a Financial Advisor?

A financial advisor meets with clients and makes recommendations on how they can improve aspects of their financial life. This can include guiding clients through everything from creating budgets to retirement planning. You may also manage investment portfolios on behalf of individuals. However, most advisors choose to specialize in one area such as taxes or estate planning.

In fact, the term financial advisor doesn’t apply to just one profession. It’s more of a blanket term that includes financial planners, insurance agents, stock brokers, tax professionals and even some bankers.

Financial Advisor Salaries

BLS data shows that the median annual wage for financial advisor in 2021 was $94,170, which shatters the national average. But there is a big difference between the highest- and lowest-earning financial advisors. Here’s a breakdown of the hourly and annual wages of the highest- and lowest-earning financial advisors:

National Financial Advisor Salaries in 2021

Percentile10th25th50th (Median)75th90th
Hourly Wage$22.87$29.42$45.27$76,39≥$100.00
Annual Wage$47,570$61,200$94,170$158,890≥$208,000

As you can see above, the lowest 10th percentile of financial advisors earned just $44,100. Meanwhile, the top 10th percentile made over $208,000, or about five times as much.

One factor that drives this gap is industry concentration, as financial advisors often wear many different hats. Below, take a look at the top earning industries within the financial advisor space, according to 2021 BLS data:

  • Financial managers: $131,710
  • Financial analysts: $95,570
  • Budget analyst: $79,940
  • Insurance underwriters: $76,390
  • Securities, commodity contracts, and financial services sales agents: $62,910
  • Real estate brokers and sales agents: $48,770

How Do Financial Advisors Make Money?

When it comes to pay, there are a few main ways that financial advisors can earn money. Fee-only advisors charge typical management and planning fees to clients. Fee-based advisors do the same. These charges can come in the form of hourly fees, fixed fees or fees based on overall assets under management (AUM).

As an example, let’s say a financial advisor charges a 2% annual fee on a client’s AUM. If the advisor handles $10,000 of their assets, then they will pay a fee of $200 each year.

Fee-only and fee-based financial advisors begin to differ when it comes to non-client-based compensation, which fee-only advisors completely avoid. On the other hand, a fee-based advisor could earn commissions for selling specific securities, insurance products or more. From a consumer’s perspective, fee-only advisors are looked on as the more favorable choice, as they make money solely based on the services they’re asked to provide.

However, earning money based on commissions can open an advisor to potential conflicts of interest. For example, they may encounter an incentive to recommend a specific product over another because it makes them more money. It’s not very common for a financial advisor to earn their pay strictly off of commissions, though.

Some financial advisors earn a salary. This is most common with an advisor who works for a bank or a different financial institution. Salaried advisors may also earn a bonus or commission for selling certain products.

Industry Outlook for Financial Advisors

The BLS projects the employment of financial advisors will jump by 15% between 2016 and 2026. The climb paces much higher than the average for all occupations in the country. The government ties this growth to an aging population that will soon demand advice around retirement planning. In particular, the BLS sites the shift to individual retirement accounts (IRAs) and 401(k) plans from traditional pensions as a main driver behind the demand for financial advice.

It also notes that the rise of robo-advisors may temporarily lessen demand for financial advisors. But it also notes that “the impact of this technology should be limited as consumers continue turning to human advisors for more complex and specialized investment advice over the next 10 years.”

But if you’re interested in becoming a financial advisor, note that some states offer more opportunities than others. The latest BLS data shows that California ranks among the highest in terms of financial advisor employment. More than 28,000 people serve in the profession as “personal financial advisors” in the Golden State. We detail some of the the main points below:

States With the Most Financial Advisors in 2020

StateEmploymentHourly Mean WageAnnual Mean Wage
New York22,770$81.40$169,310

How to Become a Financial Advisor

At the most basic level, a financial advisor needs to have financial expertise. Most have at least a bachelor’s degree but the exact degree could be in finance, business or economics. Some universities offer a specific degree for something like financial planning.

Because a financial advisor needs to work closely with and understand clients, individuals from non-finance backgrounds, like psychology, might also find success. Having a sales background can help because many advisors work off commission.

Financial advisors will also need to earn certain certifications or licenses depending on the fields they want to work in. Each certification program will have its own requirements. These requirement could include a specific degree, coursework, a certain amount of experience or passing exams.

To get a better idea of what attaining a certification is like, consider a few common examples:

  • Certified financial planner (CFP): In order to become a CFP, you need to first meet certain educational requirements and have a few years of experience in the industry. Only then will you be able to take the CFP exam, which you’d obviously have to pass to earn this designation.
  • Chartered financial analyst (CFA): This is one of the most popular and respected certifications an advisor can have. For starters, you need to have a bachelor’s degree and four years of advising experience. You then must pass three six-hour exams in order to receive certification.
  • Certified public accountant (CPA): If you want to specialize in taxes and tax planning, becoming a CPA is the universal starting point. This distinct certification requires specific coursework, two years of experience and the passing of an exam.

Bottom Line

SmartAsset: How Much Do Financial Advisors Make?

Financial advisors are typically experts in certain areas of finance, and they use that expertise to help clients make wise financial decisions. The term financial advisor actually covers a number of different professions, with each focusing on a slightly different area of financial management and/or planning.

If you want to build a career as a financial advisor, you’ll likely need a bachelor’s degree plus at least one certification that relates specifically to what you want to do. It can take years of hard work to earn certification, but it’s probably a worthwhile investment considering the median salary for an advisor is $89,330. Many financial advisors say it isn’t just about the money, though. They find their jobs fulfilling because every day they get to help people take control of their financial lives.

Tips for Choosing a Financial Advisor

  • There are many ways a financial advisor can help you, as they often have substantial experience in dealing with various types of financial issues. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • As you search for an advisor, look for someone who has the proper certifications. Take a look over these top 10 financial certifications to get prepared beforehand. If you’re looking for help with your taxes, you might want to find a CPA. For anyone getting a divorce, a certified divorce financial analyst (CDFA) could be helpful.

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