How to Become a Financial Advisor

Being a financial advisor is a rewarding experience. Financial planning can deliver the variety of work that you would expect from a profession role, and the reputation and recognition of advisors is improving all the time.

The route to becoming a financial advisor has changed dramatically since the financial crisis. The financial services regulator, the FSA, has decided to take bold action to safeguard the reputation of the industry and improve professional standards. The Retail Distribution Review (RDR) carried out by the FSA produced several action points, including increasing the minimum qualifications held by financial advisors (AKA financial planners) in the UK.

The New Minimum Standard

The RDR specified that all financial advisers need to hold a QCF (Qualifications and Credit Framework) approved Level 4 qualification. As a rough indication, Level 4 is seen as ‘equivilant to a first year at degree level’. Although I can personally admit that I found the level 4 qualification that I took much harder than my first year at University.

Qualifying Qualifications (Level 4)

Diploma in Regulated Financial Planning (DipPFS®) – Chartered Insurance Institute. Our Quick Guide: Regulated Diploma in Financial Planning.

Diploma For Financial Advisers (DipFA®) – IFS School of Finance (DipFA®)

Investment Advice Advice Diploma – Chartered Institute for Securities & Investment

This is not an exhaustive list, as the FSA is ‘approving’ new qualifications as part of an ongoing process.

Diplomas that meet the RDR rules will contain over 200 hours of estimated study time. This translates to a few months of solid study, or a year or so at a more leisurely pace. The CII reports that the majority of their members complete the diploma within 18 months. Your required study time will vary greatly depending on your ability to absorb and retain information. Financial advice diplomas don’t contain many challenging concepts, but have a large volume of information that needs to be memorised to a comfortable degree.

Do I Need to Qualify Before Applying for a Job?

The simple answer is no, you don’t. Qualifying at your own expense will demonstrate pro-activity, and reduce training costs for a potential employer, and will make you a more attractive candidate. However most advisory firms are happy to put their trainees through RDR-complaint diplomas, and do not expect them to qualify upfront.

What Type of Companies Do Financial Advisors Work For?

Depending on what types of financial advisor you decide to be, you will work in very different companies. Tied advisors will typically work in Banks, Building Societies, Insurers and other high street financial institutions, recommending their providers products to customers. If you decide to become an IFA, then you may work for a dedicated firm of financial advisors, or perhaps an advisory branch of a medium sized accounting firm. So depending on the direction you choose at the outset, you could end up in a very different place to another, equally qualified advisor!

Going Into Business By Yourself

Many have the dream of one day being a self-employed financial advisor, choosing their own hours and keeping all of their revenue. I must stress that in the UK, this is only achievable after a lengthy period of work at an established financial advice firm beforehand. The main reason is the heavy regulation of the advice sector. You will learn all about this in your level 4 qualification!

If a new firm wants to provide financial advice, they must apply to the FSA and comply with an overwhelming amount of regulation from that point onwards. You must be able to demonstrate to the FSA that you are ‘Fit and Proper’ for the role, which will include having a track record as a competent advisor, and demonstrating that you can comply with the reporting and notification requirements detailed in the FSA Handbook. Of all the careers to do by yourself, advising on peoples finances is probably one of the most difficult businesses to get off the ground. However, if you can satisfy the FSA that you are an accomplished advisor, and you have the discipline and organisation skills to manage all the relevant paperwork and reports, then you will find that becoming an entrepreneur is a very satisfying and empowering experience.

Simon OatesHow to Become a Financial Advisor