How Much Do Experienced Financial Advisors Earn? This is what we will be discussing today in this blog post. In all my years as a Coach for Financial Advisors, Finance Career Coach, and Finance Executive Coach, I have seen variations in finance career earnings depending upon how long the client has been in business (or in the profession) AND their ability to market their unique value proposition.
There were around384,000 financial advisorsin the US in 2021. The advice offered covers everything from personal wealth management to how best to utilize that large inheritance from your recently deceased uncle you’ve never met.
These hardworking financial advisors guide clients of all demographics toward fiscally responsible decisions based on data, and sound money decisions, plus they provide tailored insights based on their investment experience.
All said and done, that is a massive responsibility. While more and more people are entering the financial advisor industry at the entry level, an experienced financial advisor can make all the difference in the world when it comes to achieving personal financial goals.
Your time as a financial advisor is highly valuable. Clients will rely on you for many tasks, and as such, my firm belief is that you should be fairly compensated.
With only a couple of years’ experience, you can expect toearn $100,000+ annually, but there are many ways to grow this revenue. Let’s look a little deeper into a financial advisor’s role and earnings potential.
How Do Financial Advisors Make Money?
Most financial advisors fall into one of three earning categories below.
- Fee-Based:Earn a percentage of the AUM (assets under management) from a client, as well as commissions on certain products they recommend.
- Fee-Only: The revenue earned comes solely from the client as project-based work (like financial planning) or in assets managed, usually a percentage of the assets under management.
- Salary plus bonus: Most commonly a financial advisor working for an institution like a bank or investment firm.
In general, fee-only financial advisors are perceived as having the most favorable business model for the general public because their compensation is paid only by the client. This is also because they are perceived as not being incentivized to upsell or promote specific products. Decisions they make are seen as win-win because the more the client earns, the more the advisor earns.
This does not mean that advisors who are fee-based are not doing their fiduciary duty for their clients: The best advisors are those who work according to a set of values and morals that help them do what is genuinely in the clients’ best interests.
How Much Do Different Financial Advisors Make?
There is a stark difference between a “newbie” financial advisor and someone with experience. This article is about advisors with experience! After around five years of experience, your earnings will fall somewhere into one of three categories listed below, according to my experience working with advisors since 2004. This information is not to be considered a scientific survey, but rather my own experience, living and breathing the industry for many years.
Let’s take a look at the 3 levels of financial advisor income as expressed in net income after operating expenses. The section titled “What it takes” is by no means an exhaustive list of strategies for how to get there, but simply a few notes about personal and/or business tactics needed to get to that level of income.
Level 1 Financial Advisor – earns $100K-$300K
Around 60%, or the majority, of financial advisors with more than five years of experience will earn over $100,000 annually and up to $300,000.
At the higher end, $300,000, puts the advisor in the top 10% of household income in the United States, which is not bad at all. Many of these advisors have earned professional designations that allow them to offer more services and expertise to their clients.
What it Takes:
- Hard Work:Don’t expect a pat on the back. You will have to put in the effort to uncover the best possible situation for each individual client you work with. Their referrals will propel your career forward.
- Long Hours:This is not a 30-35 hours per week side hustle. At times, you will put in long days, nights, and weekends to create a pipeline of consistent cashflow, offering you a peak at an affluent lifestyle ahead.
- Prospecting Campaigns:To even scratch the surface of $100K (let alone $300K), you’ll need to cultivate a list of high-value prospective clients willing to work with you. Then, devise a strategic campaign to touch these prospects on a regular basis.
Level 2 Financial Advisor – earns $300K-$749K
The next stage in revenue is Level 2. This is about 30% of the remaining financial advisors who have shown how to maintain and service a long list of happy clients. They know what it means to build long-lasting relationships and therefore wealth. You will see specialization begin at this level as well, where advisors tend to gravitate to a particular clientele based on a target market strategy.
What it Takes:
- Branding:Hard work is not enough. Now, you need to “sell” your services by developing a personal brand that provides a sense of credibility. Is your message clear? What is the benefit your client receives from working with you? What is your Value Proposition?
- High-Level Connections:Do you have a Chicken List? You know, people in your network that you have not yet leveraged for connections. Knowing a millionaire does not a connection make. You want to seek out referrals to HNW clients by growing relationships with “Centers of Influence” who will personally recommend you to friends, family, peers, and communities.
- Marketing and Prospecting:Don’t confuse this with branding. Your brand is what your customers see and the emotions they feel about the work you do for them. Marketing and prospecting means to actively seek out customers with a well-thought-out plan to find and connect with your target market, where they spend their time. This could be through business networking, social media, or even leading public speaking events.
Level 3 Financial Advisor – earns $750K and Above
Only the top 10% of financial advisors earn over $750,000 annually, which puts them in the top 1% of Americans in terms of household income! These are the rockstars who have learned not only how to manage money in a sophisticated way, but also how to carry themselves with confidence and ease.
We’re talking about fully committed and determined financial advisors who are highly motivated to target high net worth clients that are the tipping point to numerous others behind them.
What it Takes:
- Confidence:You have to exude that you know what you’re doing based on the years and success stories you’ve collected. That experience and confidence is precisely what attracts your target market.
- High-Level Business Networking:You are looking for businesses and organizations or those individuals that have vast wealth. To earn enough to reach this level, you must be advising clients on their portfolios with a total worth well into the double digits of millions and beyond. The locations you frequent could be the country club, charity organizations, or homes of the high net worth.
- High Social Intelligence:An essential skill you’re likely to develop is the ability to read and understand the actions and motivations behind why people do what they do. Learning to be comfortable in almost any social or business setting becomes part of who you are. To put it simply – you have a finely tuned gut instinct based on the learning you have acquired and the actions of previous clients.
Of course, there will always be outliers. You can come across the young upstart with a book of clients in the half billion based on family connections or someone completely from left field specializing in blue collar or union workers. However, the above are the basics you’ll find in most high income financial advisors.
What is the Financial Advice Industry Outlook?
There is a significant demand for experienced financial advisors. This sector is anticipated to grow roughly13% over the next 10-15 years. A big reason for this is the increase in an aging population.
It’s important to note that there is an increase in “robo-advisors” gaining a foothold in the industry. This is still relatively new, and it will take time to see how well they perform compared to personal financial advice, but it should be mentioned as you explore the revenue potential for this field.
How to Maximize Your Earnings as a Financial Advisor
Everyone wants to know how to eclipse that $100,000 threshold and start earning “real money.” Sorry to say, there is no 100% effective way to do this. It will take a combination of many different strategies and efforts to achieve success.
That being said, you should start by:
- Business Networking:The lifeblood of your business as a financial advisor is your network. You need to cultivate a substantial list of Centers of Influence within your target demographic and earnings range.
- Self-Investment:You are your best asset. The more you learn about your role and how to expand your offerings, the better you serve your clients and gain notoriety.
- Prospect Follow-Up:A mistake many newer financial advisors make is to not follow up with warm leads at least 5-12 times! Have a system in place to maintain communication, and you’ll naturally grow your business. If you give up after 1-2 touches, you will lose out on many potential opportunities.
- Marketing:You cannot succeed as a financial advisor without getting the word out about your services. The online world has grown and is helpful for word of mouth referrals. Sometimes this means marketing to a larger group of potential clients through speaking at your own Workshops and Seminars. Partnering with Centers of Influence can be very helpful for this tactic.
Final Thoughts
The journey of a financial advisor is marked by relentless effort, strategic thinking, and continuous learning. The financial rewards, as we have seen, vary significantly across different levels of experience and expertise.
Do yourself a favor and put in the work now. All those highly successful financial advisors you meet have honed their skills and invested in themselves in many ways over the years. Put in the work, and you’ll harvest rewards.
