If you’re interested in becoming a financial adviser, this article is my attempt to provide some initial thoughts and breadcrumbs.
Background to this article
Quite a few people ask me about becoming a financial adviser. In the last couple of months, almost as many potential advisers have reached to me as prospective clients.
Based on conversations I’ve had with other advisers, more people reach out to me than most of my peers. I take that as a compliment, since I assume that means I operate in a way that many others would like to operate. (Or that I have more reach, or seem more approachable. Or something positive, I hope.)
I guess I could be concerned about “protecting my turf”, and wanting to keep competition to a minimum. But I’m not built that way. To the extent that competition comes in, that’s good for consumers: it keeps me honest, and if there’s someone who can provide a better service in a more cost-effective way, then good on them. I can always find something else to do. I also think that the more people out there who operate a business model that is similar to mine, the more that consumers might realise that this is a legitimate alternative to the traditional financial planning business model, of which I’m not a fan.
So I’m delighted when I’m asked about becoming a financial adviser. However, as time has gone on, I’ve been:
- too busy to give the amount of time I’d like to give to people who are interested in this path, and
- wary of giving off-the-cuff advice, since everyone is different in terms of their experience, presuppositions, and their goals and motivations in relation to being a financial adviser, and life in general.
So if you’re interested in reaching out, consider this a starting point. I’m happy to chat and provide breadcrumbs, if you’re prepared to read this article.
If you want to provide advice because you think it’s a path to easy riches
Look for something else. I don’t want you to be a peer. I’m in the industry to protect Kiwis from people like you. I may be idealistic, but I want this industry to consist of people who see it as an avocation. If you provide people with value, you should be able to make a living. If you’re entrepreneurial and can provide value at scale then you might make a decent amount of wealth. But I want people who care deeply about helping Kiwis achieve their lifestyle goals and help manage risks. Money vampires who are prepared to sell products and services that Kiwis don’t need, or encourage Kiwis to take on more risk than is appropriate for them, can get bent.
Start with the end in mind
What type of adviser do you want to be?
For example: what type of advice do you want to provide? How do you want to work with people? In what way do you want to improve people’s lives?
What are your beliefs about how an adviser can provide value? Do you have strong prejudices or biases that you would like to inform the way you provide advice?
What do you think?
I'd love your feedback.
To an extent, you will need to discover these things over time. You can’t know exactly what you believe or what you can realistically achieve until you’ve been in the industry for a while, and until you’ve tried a few things. Some of your views may change over time, and you don’t want to prematurely lock yourself into one perspective.
But having an idea of what you want is a good step in the right direction, and should be able to inform decisions about who to approach, what credentials to work towards, and what employment positions to apply for or entertain.
What type of adviser do you want to be?
There are many different types of “financial adviser”, as I explain here.
In the same way that I encourage clients to think hard about the type of advice they want, I’d encourage you to give significant thought regarding the type of adviser you want to be.
For example, do you want to focus on insurance advice? Lending advice? Financial planning more generally? Investment advice? If you want to focus on investments, are you sure you want to be a financial planner, or are you more interested in being an investment manager?
Some general comments:
- It tends to be much easier to get into the risk/lending side of things. If you find a small/medium-sized firm that appeals to you and you approach them in the right way, they might be quite receptive. But you need to beware that the security of your role and prospects will likely come down to how much revenue you can generate/facilitate. You might also find yourself thrown in the deep end, so it’s important to see what support etc you’ll receive. In these areas, it tends to be easier to hit the ground running.
- If you’re into investment management in a pure sense (ie, trying to buy and sell securities for portfolios/funds), that can be a tough one; lots of people want to do this, and that’s where you probably need to be more credentialed. If I wanted to go down that route exclusively (which I don’t, because I have a bias towards passive investing and think that an additional investment manager is going to have little net positive effect on the world – although as a whole it’s important), you probably want to go down the Chartered Financial Analyst (CFA) route or similar. Working towards becoming a CFA charterholder is an enormous commitment, and lots of people don’t make it through.
- Financial planning (which is basically what I do) is probably somewhere in the middle. If I were looking to get into the industry, I’d probably be looking at older practitioners who might not have succession plans in place, and perhaps approach with an eye towards eventually buying their business/book of clients. This has its own challenges, and you also need to beware that these practitioners might be set in their ways, for good and bad.
In terms of whether you want to get into investment management, and also the type of financial planner you want to become, I think it’s worth giving serious thought and research into what your views are in terms of whether you believe you can add value by helping clients invest in financial assets actively or passively. This will have a profound influence on the type of adviser you want to be.
There’s room for good-faith debate, and I’m not saying you should settle on one approach without being open to new information and perspectives. But it’s likely to be a good starting point.
Getting the qualifications is the easy bit
The New Zealand Certificate in Financial Services (Level 5) isn’t that hard, but it’s time-consuming.
I’m also fairly sceptical regarding whether the course is that beneficial in terms of becoming a good adviser, so please don’t use it as your sole source of knowledge. Consider it a starting point.
If you’re interested in going down this route, it may be worth working on the qualifications sooner than later. My suspicion is that eventually, you’ll need a degree in order to be able to provide financial advice. It would be much easier to get in while the entry requirements are lower, on the hope/expectation that you’ll be grandfathered in once the requirements increase.
If you’re more interested in becoming an investment manager, you may want to reassess whether you actually want to go down the route of becoming an adviser.
Where to find work
First up, I’m not taking on staff, and have no intentions to do so in the foreseeable future.
I also don’t actively keep track of opportunities for new advisers.
I’m reluctant to give you a definitive answer regarding where to find work. Almost everyone who is in the industry has a different story about how they got into their current role. And even if I said something was true right now, I can’t tell you what the market and opportunities will be in 12 or 24 months’ time.
My impression is that the majority of people who start out do so via a product manufacturer, such as a bank. From a number-of-opportunities perspective, this might be your best bet for getting a foot in the door. However, from a quality-of-opportunity perspective, I don’t think it’s a great first step.
Your early experiences in any domain, personally or professionally, are likely to influence the way you see things over the long-run. I may be speaking too frankly, but my view is that however you couch it, if your role is affiliated with, and in part subsidised by, product manufacturers, you will have subtle (or not-so-subtle) influences to advice on (ahem sell) their products.
Working in an institution like this can also confuse you in terms of your regulatory obligations. Large organisations tend to have more formal policies and procedures. Many of these policies and procedures are designed to help you comply with your regulatory obligations. But many of them are for other purposes, including managing risk on behalf of the organisation, and less charitably, to encourage conduct that benefits the organisation, such as having approved product lists that are heavily weighted towards their in-house products. These are usually designed by committee – and remember that a camel is a horse designed by committee.
It tends to be easier to work for yourself, or a smaller organisation, and having a proper, direct understanding of your regulatory obligations and the values and reasons behind what you should and shouldn’t be doing, and why. Once you’ve done this, it gets even harder to stomach the idea of working in a bureaucracy.
(At least, that’s my perspective. My perspective is also informed by my experience as a financial services lawyer and compliance specialist, so these factors are more likely to be second nature for me than most.)
Develop an understanding of the industry
A good first step towards finding work is to put in time to understanding the industry and the stakeholders within it, including in your local area.
Good Returns is the industry publication that most advisers I deal with check out. The comments can be insightful and colourful, but as with anything on the internet (this article included!) take them with a grain of salt; commenters tend to be a vocal minority. Good Returns has a sister publication, Asset magazine.
The largest industry association is Financial Advice NZ, although there are some others (such as SIFA) which might be worth checking out. Consider becoming a member of these groups to get access to information and events available to other advisers. It’s probably your best bet in terms of getting to know advisers if you’re prepared to take a long-term approach.
I also recommend searching for local practitioners who seem to resonate with you and reaching out to them in a tailored, respectful way.
Instead of reaching out for jobs, I recommend doing “informational interviewing”. Find out about what they do, how they do it, and what their thoughts might be. (This article, for instance, is only my view. Other perspectives may differ quite substantially.) Maybe these conversations will lead to opportunities. But they may also lead to breadcrumbs, and to you getting a better understanding of whether providing financial advice is of interest to you, and how.
If demographics is destiny, there are likely to be opportunities over the medium-term
The demographics of the financial advice industry are quite striking. A couple of people have mentioned to me that it is “male, pale, and stale”.
I say that as a pale male, who is hopefully not stale!
The “stale” refers to the fact that the vast majority of advisers are in the twilight years of their career. Many of these practitioners haven’t given much thought to succession. Reaching out to the right people at the right time might give you an opportunity to not only get started, but an opportunity to buy a practice at some point, if that is one of your goals.
Setting up on your own isn’t easy
I’ve historically tried to be as encouraging as possible about entering the financial advice industry. Most of the people who reach out to me are switched on, energetic, and have terrific values, including wanting to improve people’s lives. The more people like this in our industry, the better!
In many cases, these people were keen to set up on their own rather than join an existing advice practice.
But I’ll be honest: setting up your own financial planning business isn’t easy, especially if you want to operate in a similar way to how I operate.
I’m three years in, and I’m still not earning nearly as much as I would be elsewhere. And I’ll be upfront: I’ve had loads of advantages:
- I have lots of letters after my name. I’m not a fan of credentialism, and I think that educational requirements often act more as barriers to entry rather than providing any legitimate consumer benefit. It’s something akin to “security theatre”. But in terms of attracting clients, I think it helps.
- I had lots of relevant experience. I’d spoken to dozens of advisers in detail about their business and advice processes and I’d reviewed thousands of advice files. In fact, I don’t think I could have invented a better training ground for getting into the advice space.
- I’ve been operating the NZ Wealth & Risk blog for many years; have hundreds of articles which receive traffic from Google; and have a mailing list of readers nearing 1,000. I often have prospective clients contact me saying they’ve been reading my stuff for more than a year.
- I’ve got an ever-growing list of glowing testimonials.
- I’m at a stage of my life where I’m not too young (I have some silver in my hair), and I’m not too old (I still have hair).
- I’ve got a busy family and social life, so I don’t suffer any sense of isolation, and my identity isn’t entirely caught up with the business, which may have been the case at other times in my life. Starting a business can be brutal.
- My wife earns a good, secure income, so that there is less pressure on me to generate a significant income. In some ways, the rational thing for me at the moment is to build a business that prioritises our lifestyle as a young family rather than maximises income.
Even with all of these benefits, it’s not easy. I’m making an income, but it’s less than I’d be able to earn elsewhere. There’s probably also more risk involved than a traditional salaried role.
The first step to thriving in almost any industry (or any domain in life in general) is to survive.
The survivorship bias operates in most domains, and financial advice (and financial services in general) is a bit like this.
There’s a saying I sometimes hear repeated: “Get underpaid for five years, get overpaid for the rest of your career”. I hear this most often in the insurance space. But I think it’s true in the financial advice space more broadly.
Skills and characteristics to cultivate
Read broadly and develop perspective
I’m not inclined to give an exhaustive list of resources. The resources that are most suitable to you probably depend on your personal experiences, your current knowledge, and where you are in your intellectual journey. Something that might resonate with you now is likely to be different to what resonates with you next month, or what would have resonated a month ago.
If you read this article and want some breadcrumbs, feel free to touch base. Let me know your background and what has been influential for you. In the meantime, a couple of people worth looking out for are Michael Kitces and Carl Richards.
I also recommend being promiscuous regarding your sources of information. No single person should be your guru. Work out the biases and prejudices and weak spots of everyone. If you’re a fan of Mr Money Mustache, that’s cool, but also work out what his blind spots are. If you find some people resonate with you and others rub you the wrong way, think about why that might be: what presuppositions and incentives might drive these differences?
A good sign that you’re making progress is if you lose interest in internet forums, because you can pretty well predict what the answers will be, and some of the biases and incentives of contributors become abundantly clear. (I’m being cheeky. Kind of.)
If you think you know better than others, and you don’t feel like you can learn, then I don’t care how much experience you gain.
If you repeat the same year of experience for twenty years and don’t learn anything, then that’s twenty years of experience wasted. I’ve seen plenty of advisers who got more dangerous the more experienced they got, because all they were doing were confirming their own biases and prejudices and getting more confident and forceful in their own preconceptions.
Communication skills (including, yes, influence and persuasion)
It’s one thing to provide clients with awesome advice! It’s another to provide clients in a way so that they actually implement the advice, and that they’re happy and comfortable with. You need to be able to recommend strategies that clients don’t just implement, but also stick with.
Realistically, you need to work out how to be persuasive. I don’t mean this in the traditional used-car-salesperson sense. I mean it in the sense of working out how to get to know people, and how to tailor and communicate solutions that resonate with them.
A good litmus test is whether you can get into the industry in the first place. I have a friend who is a surgeon and he describes his career track as resembling a “conveyor-belt”. Getting into financial advice is not like that. There isn’t a prescribed path.
Do the research. Work out what you want to do and how. Approach the right people, tailor questions to them, and develop relationships. The same skills that will help you get a foot into the industry are also likely to be the skills that allow you to work with clients and provide value to them.
The work is rewarding
The work is so rewarding. At least, it is for me, the way I provide advice.
I have amazing conversations with people.
I genuinely feel like I’m making a real difference in people’s lives.
But again, this is from my vantage point. If my circumstances were different, or if I had entered into the industry during a different phase of my life, I might have a different perspective.
If I were working in a different business model, especially one that was conflicted and was essentially a sales role masquerading as advice, it would probably be soul-destroying.
The fact that I can provide advice that, in my heart of hearts, is exactly what I would do, or what I would recommend to friends or family members, makes all the difference.
Again, this is my own perspective. I am very sensitive to these things.
I enjoy providing advice and get tremendous value from it. That’s a function of how I do it, but it’s also a function of my personal interests and skills. It took me some time to work out what I like, and what likes me.
If you think it is likely to be a fit for you, I’d love for you to join the industry. Feel free to get in touch. I can’t give guarantees, and all I can say is that you will have your own path. But I hope your journey ends up being as rewarding as mine.
All the best, and let me know how you go!