I received an email from a regular reader, Nick, who had a question about how one knows if they are cut out for a career in the financial services sector. Basically, Nick was wondering if his hobby as a personal finance enthusiast could translate well into a career in the field.
Here’s the question:
There are obviously some regular MDJ posters & readers who
make their living in Fin. Svcs but, there are many others (like me) who see
it as a hobby but,are obviously very interested and knowledgeable about
finance. I wonder how many have ever considered a career in Fin Svcs? How
do you know whether you’re cut out for this field (and what’s involved with
making such a change), as opposed to “probably best to keep it as a hobby”?
What’s a good way to find out? I think this would be an really interesting
topic for a future post.
There was a time not too long ago where I was considering a career change into financial services due to my interest in the topic of personal finance. However, the more research I did into the field, the more I realized that it takes more than personal finance knowledge to make it in the financial services field. As “financial services” is very broad, I’m going to make the assumption that Nick is talking about becoming a financial advisor.
Lets look at the bright side
- Lucrative – A career as a financial advisor can be very lucrative. The more clients you have or the bigger your “book”, the higher your paycheck.
- Education – You get the chance to financially educate those who need/want it which can be very gratifying.
- The People – For some, having a job that involves working with people is an important aspect of day to day work. With this position, you get to help people grow their worth and plan for retirement or other financial goals.
- Passion – Most importantly for the personal finance enthusiast, you’ll be exposed to the field in a professional capacity day in day out.
Now lets look at what I consider to be drawbacks
- Conflict of Interest – To begin, for advisors who work on commission there can sometimes be a conflict of interest. Meaning, the mutual funds with the largest kickbacks are the ones with the DSC fees, front load and higher MERs. All of which we avoid as DIY investors.
- It’s a Sales Job – Depending on your personality type, sales might not be your strength. Even though the job may involve financially educating your client, at the end of the day, it’s in your best interest to sell yourself and the funds that you represent.
- Clients are Moody – The gifts and compliments are plentiful during a bull market, but close your blinds and take the phone off the hook during the bear (like now). Advisors have a lot of explaining to do when clients get their account statements that are 10% less in value than their last statement.
- Big Responsibility – To me, being responsible for someones retirement is a big deal and big business. I don’t get the feeling that being a financial advisor is a low stress role.
- Risk – For most advisor positions (like from the banks), most of your income comes from commissions which comes from the clients that you have. As you can imagine, starting out as a FA can be fairly risky if you are coming from a high paying salary job. With that said though, most banks will at least offer base pay for the first couple years.
So if you’re considering a career change into the financial services, I would recommend that you talk to people in the field to see what their days are like. That’s the only way to get a feel for what it’s really like to be a financial advisor.
I realize that there are a lot of readers who work in the financial services industry who may not agree with everything that i’ve written. I look forward to hearing your feedback!