Becoming a Financial Advisor – Everything from A to Z

becoming a financial advisor
Listening Time: 13:23 minutes

“What’s involved in becoming a financial advisor?”

That’s the question I hear the most in my Jumpstart community.

It’s a very legitimate one because there is so much information out there, but not all in one spot.

If you’re reading this, you’re interested in what you can do about becoming a financial professional (advisor or coach).

It’s time to get started down the path, right?

So there are a few paths on entering the business which we’ll cover today and also answer provide some guidance on the next steps for you.

Now if you want to start a firm, I’ve done another video click here to take a look at that.


Differences in Licensing…

It used to be that the gateway for entry was by a few exams. Typically the Series 6 or 7 was associated with being able to sell securities for a broker-dealer as a registered rep.

Each of these exams will test you on your understanding of how securities work.

The Series 7 exam is the more robust test and the standard requirement for most firms (for you to sell all the products they offer without restriction).

Its small sibling (Series 6) will only allow for the sale of variable products and mutual funds (excluding the universe of popular products like ETFs, stocks, bonds, etc.) The exam begins to demonstrate your potential value to the hiring firm because you can start offering their products to the public which will make the money.

Neither of these exams sits alone and requires one S63, S65 or S66 to be relevant. (more on those below) You also need a sponsoring firm to take these exams.

The Series 63 (S63) is the  Uniform Securities Agent State Law Examination and is the state law test for broker-dealer representatives.

The Series 65 (S65), Uniform Investment Adviser Law Examination, is for investment adviser representatives.

The Series 66 (S66), the Uniform Combined State Law Examination, qualifies an individual as if he or she had passed both the Series 63 and Series 65. However, to register as an investment adviser representative based on the Series 66, an individual must also have passed the FINRA Series 7 exam and the exam must be valid (i.e., not expired).

So not to confuse you the S66 is a combo of the S65 and S63. This is a catch-all if you will work for a hybrid firm that charges for financial advice (needing the IAR) and offers products that pay a commission (needing the RR).

However more recently the SIE (Securities Industry Essentials) is the gateway to the industry.  This is a fairly new exam (as of Oct 2018) and serves as a qualifier or prerequisite for “higher level” exams. It is not designed to prepare you to give financial advice.

This is not entirely bad in that this is a very natural path for most training programs you will see at big banks or brokerage houses. You will still need to eventually pass a Series 6 or 7 exam if you will be hired by that firm. It is in effect a lowering of the barrier since before existence the only way you could enter the industry was that a broker-dealer firm-sponsored you for one of the Financial Industry Regulatory Authority exams like the Series 6 or 7.

Inside the industry, this demonstrates your interest in pursuing this as a career but means nothing to the public as it doesn’t qualify you to give advice. The SIE will test fundamental securities-related knowledge, including knowledge of basic products, the structure and function of the securities industry, the regulatory, agencies and their functions and regulated and prohibited practices, whereas the revised representative-level qualification examinations will test knowledge relevant to day-to-day activities, responsibilities and job functions of representatives.


Differences between the channels

Bank (or “wirehouse”)  – A wirehouse maybe what you associate with “wall street”.

Firms like Merrill Lynch, UBS and Morgan Stanley probably come to mind.  Their brands are known primarily for investments or wealth management.

Most banks offer retail banking (the Bank of America arm of Merrill Lynch) as well as investment products or services.  The lines are often blurred.

What you need to understand is that these cultures tend to be very high performance and competitive.

There is high churn.  For every 10 advisors “entering” the number “quitting/failing out” in the first 12 months is extremely high.

To fit into this type of culture you will want to be as driven.

How much product did you sell?  How many designations you can earn? How quickly can you pass your exams?



There is nuance in the broker-dealer culture as well.

Broker-dealers are firms that are registered with FINRA and/or the SEC to offer financial products to clients (as a broker) and trade (for profit) on their behalf (as a dealer).

Essentially, anyone that wants to buy or sell securities must go through a broker-dealer firm.

You’ve heard of most of the big ones: Fidelity, Schwab, TD Ameritrade, etc.

The only difference between a broker-dealer and a bank/wirehouse is that the bank/wirehouse sells its own financial products (i.e. proprietary) and the broker-dealer can sell anyone’s products.

These have become so large it’s hard to keep track of all the lines of business they are in.

Ultimately, they are in the business of attracting assets and are more flexible (culturally) to attract new talent.

Independents and Hybrids

Firms with the most flexibility of all are independents and hybrid firms.

And for this reason, the culture I hear a lot of aspiring financial professionals clamoring to be in.

These types of firms are usually registered investment advisor firms (RIAs) or hybrids (meaning they are RIA and Hybrid).  This allows them to operate as fee-only and as a broker-dealer.  Hence the term “fee-based” describing the ability to earn a commission as well as charge fees for financial advice.

The large majority of these organizations will seem small when compared to the previous channels.

You’re more likely to see something between 4-15 people as the normal firm size.  A 50-person RIA is considered a large firm in this channel.

These cultures are far more intentional with their hiring practices since each marginal new employee may drastically affect their business.

Difference in standards (Suitability vs. Fiduciary)

The notion behind this difference in standards has to do with who you work for usually.  As a registered representative of a broker-dealer firm that sells financial products to clients, your “loyalty” is to the firm you represent not the client. However, as an employee of an independent firm, your loyalty is to that of the client.

A registered representative can always do the “right” thing by the client.   The standard is visibly lower.  You only have to think about what is suitable for the client versus what is in the client’s best interest.

But my question is always…

What if your mom or dad’s life savings depended on it? Would you want someone to give them something “suitable” or something in their best interest?

Final thoughts for becoming a financial advisor…

In summary, here are some questions to ask yourself:

  • In what way do you ultimately believe you can serve the client’s best interest?  Hint:  I think the barometer for this is always what would you do for mom or dad or grandma.
  • Could what you offer as a product/service ever be affected by how much you are paid by a firm selling that product?   Hint:  This represents a conflict of interest. You need to resolve this internally to be successful.

These (among others) are the kind of questions that you must answer.


If you’d like to learn more about how to decide your route, you can register for a free preview of my course “How to Jumpstart Your Financial Services Career” at djh-capital.com/jumpstart

Thanks for listening, reading and watching.


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