Four Paths to Becoming a Financial Planner

By Mark Helm, CFP®

Most aspiring financial planners have one thing on their minds: Pass the CFP® exam. The test looms so large that many can’t look past the exam to what comes next. But the time to start thinking about your life after the CFP® exam is now, not a month after you’ve passed.

Though literally thousands of firms offer financial planning services, when you look into the opportunities, you’ll find that there are really only four career paths open to the newly minted CFP® certificant:

1. Work for a wirehouse

2. Land a job with a boutique, fee-only firm

3. Open your own practice with no help

4. Open your own practice using a proven business model

Each choice has its pros and cons depending on your situation and goals.

Work for a Wirehouse

By far the largest segment of the investment advice business, the major brokerage firms such as Ameriprise and Morgan Stanley, are always on the look-out for new advisors. And for the CFP® certificant with good sales skills and the willingness to make a lot of calls, this career path can offer a lucrative future.

But for many certificants, the downsides to the wirehouses are many. To start, you will be a salesperson first and advisor second. That your title says “investment advisor” doesn’t change the fact that you get paid by commission and thus are a salesperson. Like all salespeople, you will be under pressure to perform each month, either to maintain your salary or to meet the company’s sales goals. You also will be limited in the offerings available to your clients and, therefore, may not be able to offer them the best tools to accomplish their goals.

Land a Job with a Boutique Firm

For those CFP® certificants looking to work in the fee-only field, there are hundreds of smaller “boutique” firms that typically cater to high net worth clients. Most often clients pay them a fee based on the assets managed by the firm - usually 1% of the investments. Because they don’t rely on commissions, these firms can truly be called investment advisors. Working for such a firm allows you to build closer relationships with clients and use all of the tools available to help them achieve their investment goals.

Unfortunately, since there are far fewer boutique firms compared to the wirehouses, finding a job can be more difficult. Also, if you do find a job at such a firm, you likely will spend several years working as a paraplanner where you may have little to no contact with clients. If you hope to start your own financial planning firm someday, this means that you may not get the experience you need to make that a reality for some time. In addition, because you are starting as a paraplanner instead of investment advisor, you salary will be on the low end.

Open Your Own Practice with No Help

Opening your own financial planning firm offers many opportunities and pitfalls. Your own firm allows you to create the kind of business that you want and serve your clients in the way that you feel best helps them. You also can structure your work life to accommodate your personal life. If successful, you will reap the benefits rather than sending the profits to someone else.

But the downsides can be devastating. If your business falters, you may endanger your and your family’s future. It’s not just the financial strain; the stress of running a struggling business often seeps into other relationships, putting strains on everyone. In addition, if you don’t control it, the business can end up taking over your life. In essence, you may become the worst boss that you’ve ever had. Unfortunately, without experience or help, your odds of failing increase dramatically. Early missteps cost valuable time and money, two things in short supply when you start a business.

Open Your Own Practice Using a Proven Business Model

Opening your own firm using a proven business model offers a hybrid of working for a boutique firm and opening your own firm with no experience. By adopting a proven business model and joining a group of planners that use that model, you get the experience and help needed to increase your odds of creating a successful business.

The model allows you to avoid “rookie” mistakes and to save the time required to reinvent the wheel. And because the model has proven successful, you have the comfort of knowing that if you work at implementing that model, you have a very high chance of success. Also, access to members of the group allows you to tap into the knowledge of dozens of planners running your system.

But adopting a proven model isn’t for everyone. In particular, the model may not fit your vision of the firm that you would like to create. In addition, these models and membership in the groups aren’t free. You must weigh the costs of joining with the benefits of membership.