A Career in Financial Planning

Daniel Yerger About the Firm Leave a Comment

This week I’m taking a step back from the usual general education content to write specifically on the topic of careers in financial planning. This piece is specifically for financial planners (either aspiring or firm owning), so if you are part of the general public and have no interest in financial planning careers and business models, this is a good place to hop off and save yourself a few minutes. That said, if you’re interested in both how to find a financial planning job and what compensation packages should typically look like, enjoy the show!

Finding The Job

I could write an entirely separate piece on finding a job in financial planning, but let’s just put this down in the order of priority:

  1. Join the Financial Planning Association and National Association of Personal Financial Advisors and get involved. Participate in their Facebook communities, volunteer for local chapter events, and get your name out there. There is no such thing as doing this too soon. Even as a sophomore in college, you could spend the next three years networking, ideally arriving at an internship and a potential job throughout the course of the experience.
  2. Apply to New Planner Recruiting and read Caleb Brown’s book before you do. New Planner Recruiting is the NFL Draft for new financial planners. If you are looking to be placed in a firm offering strong compensation and benefits for staff financial planners, rather than a sales job, this is the place to do it if item one didn’t work for you. Their screening process is difficult, but if you succeed, you will almost certainly be placed in a financial planning firm as a financial planner.
  3. CFP, FPA, NAPFA, and Simply Paraplanner Job Boards. These rank lower than networking and New Planner Recruiting because at this point you’re transitioning from an area of strong control to low control. These jobs will be many and all over the country, but because these are cold postings for applicants to try, they ultimately represent tough paths to getting the job. Here, a well-refined resume and cover letter can get you to the interview. The interview itself is likely to be tougher to gauge because there’s more exploration of who you are as an applicant and what this firm is since you likely haven’t interacted.
  4. The Job Fair is the last bastion of hope, and all ye who enter here are in for a tough time. Every job fair you ever attend (public, college, etc.) is going to have a sales-based firm recruiting at it. These firms represent the end of the career opportunities spectrum where phrases like “build your own business” and “unlimited earning potential” are the selling point. Ultimately, you can absolutely, 100% get a job with these firms, but understand that rather than learning financial planning and then how to help people with it, what you’ll learn is how to sell people financial products and perhaps down the road a ways you can learn how to do financial planning.

Job Responsibilities and Types of Financial Planning Jobs

Financial planning is a very large knowledge domain with an even larger range of job tasks. You will find yourself in one of two camps: Either specialist or generalist. As a specialist financial planner, you’ll be responsible for some key components of the financial planning process. Acquiring clients, onboarding clients, developing financial plans for clients, or maintaining clients. Most likely as a new specialist, you’ll end up in one of the latter two categories, either developing financial plans to build your skillset or being responsible for the upkeep of a client’s financial plan. In some instances you’ll be asked to do business development out of the gate; these jobs typically will pay more based on client relationship development and the sale of services or products. If you’re hired on as a generalist, you’re likely part of a smaller firm and will carry some responsibility for each facet of financial planning, supporting a lead advisor with their existing clients and new clients until there are enough new clients that you can start taking the lead on their relationships. Regardless of where you land, total compensation is unlikely to vary significantly, but you may find that the ratio of base compensation to incentive compensation tells you about the firm’s priorities for your work.

Compensation

There are a number of great resources on what financial planners are paid and what you should expect. The center for financial planning released a guide to compensation in 2019 and organizations like New Planner Recruiting often publish benchmarking figures for different regions and levels of experience. Fundamentally as a starting financial planner, there are three core components to compensation and then a large list of variables you should look for or consider when looking for a position.

  • Core Compensation:
    • Base Salary & Incentive Pay: The salary base can range anywhere from $24,000-$75,000 a year starting, largely based both on geography and the focus of the role. If the role is largely in plan development and maintenance, then base salary should predictably be higher while incentive pay should be lower. Conversely, if your primary responsibility is new client development, expect a low base and a higher incentive pay structure.
    • Retirement Plan: The stock and trade of financial planners at this level is a 401(k) plan offering a safe harbor match (either 3% of your compensation whether you contribute or not, or up to 4% if you’re putting in 5%.) Some smaller firms will opt for a Simple IRA, which is also likely sufficient for your personal retirement saving needs. However, be aware that as the firm grows and your compensation increases, a SIMPLE IRA may not be sufficient for the amount you want to save, or may not offer the Roth contribution option you’re looking for.
    • Health Insurance: This is a no-brainer, but a firm that doesn’t offer you health insurance is effectively paying you $300-$600 less per month than their offer implies. Simply put, health insurance is expensive, and firms not offering it are likely uninvested in retaining you if you come aboard. Alongside health insurance, you should typically expect dental and vision to be included.
  • Additional Compensation:
    • Life Insurance is often offered up to 1 year of salary by firms with an option to purchase more. Whether the firm gives you life insurance or not is less important than if it’s available. Due to health conditions, you may currently or in the future be ineligible for life insurance individually, so having an option available through work guarantees some level of insurability.
    • Disability Insurance is much like life insurance. You should be less concerned about whether your employer gives it to you for free and more that it’s available. Remember that if you pay for the premiums the benefits will be tax-free, whereas if your employer is paying for them, the benefits are taxable.
    • Holidays and Vacations: Pay close attention to this item. A firm that offers no holidays or vacation time is rare, but how aggressively they track and measure the benefit says a lot about their culture. Financial planning is a very flexible career path with regard to work-life balance; you can be just as effective performing business development at your local chamber of commerce as you are in a cycling club. If the firm doesn’t offer an unlimited vacation and flexible time benefit, that likely indicates a desire to make sure you are “visible”, which signals trust issues. However, many firms do limit holidays and vacations to a reasonable extent, so this is a good area of conversation during the interview process.
    • Leave Policies: Much like vacation and holiday, this is an area to get clarity on. While some firms are generous in this area, others may say that time you need for various activities is on your own time. You may find it beneficial to forgo some level of compensation in favor of greater flexibility around things like medical or parental leave.
    • Development and Education: Ultimately, a company should want to keep you around for a long time, and as such should be invested in growing you as an employee. With that in mind, some form of a fixed budget for continuing education, classes, or conferences is a good area to negotiate on. If a firm steadfastly indicates that your growth is a personal expense, you may want to keep that in mind though-out your work. An old quote on this comes from Microsoft: “What if we spend money on these employee’s education and they leave?” “What if we don’t and they stay?”

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