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The simple answer is easy: According to the Bureau of Labor Statistics, personal financial advisors, on average, made $121,770 in 2018. Translated into an hourly figure, the typical financial advisor made $58.54 per hour, assuming a 40-hour work week.
That’s a mean average, though, which is skewed significantly higher by a few highly successful advisors at the top of the profession. The median average is much lower: $88,890 per year in 2018, or – again assuming a 40-hour work week — $42.73 per hour. “Median” means half the advisors surveyed earned more than that figure, in that year, and half of them made less.
The lowest 10% nationwide made $41,590, or $19.99 per hour – assuming a 40-hour work week. The top quartile of the profession earned $157,710.
But few of them became that successful by working a mere 40-hour work week in their early years!
Here are a few factors to consider to maximize your earning potential.
1. State and regional factors – you can make it anywhere.
Pay varies significantly by state and by region. The top-paying states for financial advisors, ranked by mean annual wage, are as follows:
New York: $164,260
District of Columbia: $158,460
Wyoming: $135,340
Maine: $135,170
North Carolina: $134,860
Wyoming’s may be very skewed upwards by a few extremely high-end advisors with wealthy clients around Jackson Hole, where more than 80% of home sales in 2019 were for $1 million or more.
Looking at the data more granularly, the metropolitan areas with the highest mean earnings for personal financial advisors may be surprising: Smaller markets dominated the rankings (on a mean basis):
Gainesville, GA: $215,840
Santa Fe, NM: $193,670
Montgomery, AL: $187,150
North Port-Sarasota-Bradenton, FL: $182,700
Elmira, NY: $180,450
Tallahassee, FL: $170,600
Utica-Rome, NY: $169,810
All of these are small markets, served by 200 personal financial advisors or fewer. New York and San Francisco follow, at $163,490 and $161,250, respectively. Which hardly compensates for the high cost of living in those markets.
Naples-Immokalee, Florida, with a similar concentration of snowbird retirees to North Port-Sarasota-Bradenton, closes out the top ten markets with mean advisor wages of $158,050 – with about 400 advisors competing in that market.
2. Living situation – you don’t have to be in a big city.
The data shows us that you don’t have to be in a big tier one city to make an excellent living as a personal financial advisor. It’s very possible to do extremely well in a “small pond.” After all, the greatest insurance agent who ever lived, Ben Feldman, made his living in East Liverpool, Ohio.
You don’t even need to be in a metropolitan area at all. Advisors in the non-metro mountain regions of North Carolina are making an average of $132,260, according to BLS data. And non-metro advisors in Massachusetts and West Central/Southwest New Hampshire are averaging $192,000 and $154,520, respectively.
So you can make it just about anywhere. Especially with today’s social media technology, which makes it much easier for advisors to pursue niches and specialties that were very difficult to make viable a generation ago.
3. Remember your soft skills – developing those is now critical.
The best predictors of advisor success have little to do with location – and a lot more to do with intangibles unique to the advisor:
- Work ethic
- Interpersonal skills
- Sales skills (prospecting, interviewing and closing)
- Optimism – the will to persevere, despite early career (and mid-career!) setbacks.
The financial planning industry is beginning to mature: Larger firms are getting much better at defining a coherent career path for young people entering the profession, compared to the more chaotic industry it was a generation or two ago.
In contrast to the broker-dealer and career insurance channels, where everyone is a sales agent from the get-go, many people are now entering the financial planning industry as analysts or paraplanners – a non-sales role responsible more for data entry, number-crunching and support for senior advisors.
Within the planning profession, paraplanners with 4 years of experience average about $65,000, with about 10% of that through bonus/performance based compensation, according to reporting from Michael Kitces.
Technical skills are the name of the game at this stage. Paraplanners and analysts must master the use of software solutions and quant-driven approaches, while learning how to work as a member of a team.
However, soft skills will take on a more and more vital role as you move up the career ladder from analyst/paraplanner to associate advisor and support advisor. Advisors who haven’t developed these soft skills will have a very difficult time.
Lead advisors – senior planners who are responsible for business development — are making an average of about $165,000, with about 20% of that compensation in the form of bonuses, and the rest in salary. (But if they don’t perform, they won’t be making that salary long!)
Large firms are paying more than small firms – except at the more junior paraplanner level.
4. Demographics are on your side.
Demographics may benefit younger advisors: The profession is skewed towards older practitioners – Boomers themselves – who are now transitioning to retirement.
While it’s still not easy to get a new practice off the ground (it takes a lot of work!), “the talent shortage of qualified advisors may finally be starting to play out,” says Kitces. Base compensation is rising as firms compete to attract and retain young talent.
Financial advisory positions ranked as one of America’s “toughest jobs to fill,” according to CareerCast.com.
4. There’s a great growth potential in the industry.
Employment for financial advisors is expected to grow by 7% between 2018 and 2028, according to the BLS – largely driven by an aging population. Recent advances in technology, such as the growth of “robo-advisors,” have resulted in some reduction in projected growth, as these low-cost alternatives to hiring a live financial advisor become more popular and viable.
Advisors who succeed will be those who can show significant value added over and above what a robot can provide, and for those who can overcome the commoditization of financial services.