It’s a great time to be a personal financial advisor, according to the latest occupational outlook statistics published by the Bureau of Labor Statistics (BLS).
All you need is a bachelor’s degree, you don’t even need job experience, or any on-the-job training, and the economy’s going to need 66,400 more of them by 2020. Oh, yes, and the median pay in 2010 for a financial advisor? $64,750.
That might sound like an easy gig, but, not so fast, according to Ellen Turf, chief executive officer of the National Association of Personal Financial Advisors (NAPFA). Government statistics just published in the 2012-2013 edition of the Occupational Outlook Handbook make it sound as though becoming a personal financial advisor is easy. That would be a mistake, Turf said.
Even if they have aced the battery of requisite Certified Financial Planner courses, advisors need to be professional communicators above all. “It’s a hard road to go,” Turf said. The typical age of students at NAPFA is 44 years old.
“We see a lot of career changers, former engineers, dentists, teachers and Realtors,” Turf said. She explained that even candidates with multiple degrees will not survive if they can’t communicate clearly and concisely. About 45 percent of NAPFA’s members are solo practitioners.
NAPFA, with about 2,500 members, is the largest membership organization representing fee-only financial planners. Financial planners are compensated either through a flat fee or retainer, an hourly fee, or a percentage of assets under management.
The compensation is something else the government report seems to be underestimating. “As far as pay goes, this doesn’t jibe with what we have. That seems incredibly low,” Turf said.
Roughly speaking, financial planners take a 1 percent fee, or $10,000, for every $1 million in assets they manage. Hourly fees range from $120 to $350, depending on where the planners work. Big city financial planners are likely to charge more than planners in a smaller market to make up for the differences in the cost of living, Turf said.
By comparison, BLS data estimates that $64,750 in annual salary comes out to $31.13 an hour.
Whatever quibbles the industry has with the BLS number crunchers, government and industry agree on the reasons for future job growth, however those numbers pan out. “As large numbers of baby boomers approach retirement age, they will seek planning advice from personal financial advisors,” the BLS said. Those predictions already are coming true.
Susan Waters, chief executive officer of the National Association of Insurance and Financial Advisors (NAIFA), said that with the decline of defined benefit pension plans provided by corporations, the role of advisors has grown. She said that role will continue to grow as companies ditch the paternalism that used to be de rigueur, even for many lucky hourly employees.
“Workplace pensions have gone the way of the dinosaur, and Americans know that Social Security will not entirely support them in retirement. Many people find themselves facing tough financial and insurance decisions,” she said, in an email to InsuranceNewsNet. “Advisors help them reach long-term goals, such as ensuring their comfortable retirements or the future well-being of their families.”
After the market crash of 2008, people hesitate to adopt do-it-yourself investing strategies. “It’s more than about money, it’s about how you want to live your life,” Turf said, pointing to the very low attrition rate among advisors.
Officially, there were 206,800 jobs classified as personal financial planners in 2010, and that number is expected to grow to 273,200, or about 32 percent by 2020, according to the BLS. This is despite the fact that advisors may not be replacing themselves at the same rate as they once did.
Financial advisors fare better than their insurance sales agent cousins working the insurance distribution chain, according to the annual BLS occupational outlook data.
The median pay for insurance agents in 2010 was $46,770 per year, or $22.48 an hour. In addition, the number of insurance agent jobs in 2010, estimated at 411,500, is expected to grow by 22 percent by 2020.
This assumes, of course, that those numbers can be taken at face value.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril can be reached at [email protected].