Finding a career that offers strong earning potential along with personal fulfillment can be challenging.
Luckily, becoming a personal financial advisor allows you to guide clients towards financial freedom while building a lucrative and rewarding career for yourself.
In this article, we'll explore the attractive salary and income possibilities in the growing field of personal financial advising, including average wages, top paying regions, salary ranges based on experience level and credentials, and how assets under management can dramatically increase your income over time.
Introduction to Personal Financial Advisor Salaries
This section provides an overview of personal financial advisor salaries, including the average salary, salary range, and factors that impact earnings.
Average Personal Financial Advisor Salary
According to the U.S. Bureau of Labor Statistics, the median annual salary for personal financial advisors was $93,720 as of May 2021. The average salary tends to be higher, at around $125,080 per year.
Salary Range
Salaries can vary widely in this field. Entry-level positions often start around $60,000 per year, while advisors with extensive experience can earn over $200,000 annually. The salary range depends on several key factors.
Factors Impacting Salary
The most important factors determining a personal financial advisor's salary include:
- Experience level: More seasoned advisors earn significantly higher salaries.
- Credentials: Obtaining certifications like the CFP can boost salary potential.
- Location: Advisors working in major metropolitan areas tend to have higher earnings.
- Firm type: Salaries at large financial institutions are often higher than small independent firms.
- Assets under management: Advisors who oversee more client assets tend to have higher compensation.
- Client base size: Managing more client relationships correlates to higher pay.
- Sales results: Advisors with greater assets brought in from new clients get paid more.
An advisor's specific salary within the range depends largely on their book of business, performance results, and experience level in the field.
Salary by Experience Level
Entry Level Salaries
Those just starting out as personal financial advisors typically earn between $60,000 and $80,000 per year on average. New advisors often begin their careers as associates supporting more senior advisors before taking on their own clients. This allows them to gain valuable on-the-job training and experience in financial planning while earning a salary.
Mid-Career Salaries
After 5-10 years in the field, many personal financial advisors have gathered enough expertise and connections to begin managing their own book of clients more independently. At the mid-career level, salaries usually range from $80,000 to $120,000 annually as advisors take on more responsibility and generate revenues from their growing roster of clients.
Experienced Advisors
Personal financial advisors with over 10 years of experience tend to earn the highest salaries - often over $150,000 per year. At this senior level, they have acquired extensive knowledge across all areas of personal finance and built up a large base of clients through referrals and networking. Their compensation reflects their status as veterans in the industry along with their ability to manage complex client portfolios and provide specialized financial guidance.
Earning Potential by Credentials
Obtaining professional credentials can significantly increase an advisor's salary potential over their career.
CFP Certification Impact
Becoming a CERTIFIED FINANCIAL PLANNERTM allows advisors to command $20K higher salary on average versus non-certified peers. The CFP designation is globally recognized as the pinnacle for personal financial planning expertise. Achieving CFP certification signals mastery of financial planning competencies like retirement planning, estate planning, insurance, investments, tax planning, and more. Employers highly value CFP designees for their comprehensive skillsets, specialized knowledge, and commitment to fiduciary standards. According to compensation surveys, certified advisors earn nearly 20% higher median pay across experience levels.
CPA License Benefits
Having a Certified Public Accountant license enables providing tax preparation services, which have higher billing rates. CPAs typically charge between $200-500 per hour for tax planning and preparation services due to their expertise in navigating complex tax codes and filings. The ability to offer tax services in addition to financial planning allows CPAs to increase their income potential and capture more client wallet share. Becoming a licensed CPA requires passing a rigorous 4-part national exam plus meeting experience requirements, but the effort pays dividends via substantially higher earning ability over one's career.
Other Credentials
Extra qualifications like the CFA, ChFC, CIC, etc. signal expertise in specialty areas like investments and insurance. While less recognized than the CFP mark, other designations demonstrate competency in specific planning disciplines. For example, a Chartered Financial Analyst (CFA) charter conveys deep investment analysis skills. A Chartered Financial Consultant (ChFC) is trained to provide holistic financial advice. Industry credentials allow advisors to showcase niche capabilities that clients may specifically seek out. Specializing with credentials can enable charging higher fees or landing more business in one's domain of expertise.
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Geographic Differences in Salary
Salaries for personal financial advisors can vary significantly depending on the state and city where they practice. Major metropolitan areas typically offer much higher salaries compared to rural areas.
Top-Paying Metropolitan Areas
The highest salaries for personal financial advisors are found in major cities like:
- San Francisco, CA - Average salary of $163,490
- New York, NY - Average salary of $161,410
- Los Angeles, CA - Average salary of $160,760
These cities have abundant high net worth individuals and businesses that require sophisticated financial planning and investment advisory services. The high cost of living and demand for services allows top advisors to command very high compensation.
National Variation
There is considerable variation in average salaries by state, according to Bureau of Labor Statistics data:
- Lowest average salaries are found in Iowa ($95,670), West Virginia ($98,970), and Kentucky ($99,200).
- Highest average salaries are in Connecticut ($155,620), Massachusetts ($153,460), and New York ($152,410).
More rural states with lower costs of living tend to be on the lower end of salary range. In high income states like Connecticut, New York and California, there is greater client wealth and ability to pay for financial advisory services allowing advisors to earn more.
The difference between the lowest and highest paying states is over $60,000 on average. So geography can have a major influence on earning potential in the personal financial advisor profession.
Salary by Type of Firm
Financial advisors can earn widely varying salaries depending on the type of firm they work for. Each firm structure has its own pros and cons in terms of compensation models and career advancement opportunities.
Wirehouse Firms
Working for a major Wall Street brokerage firm or "wirehouse" like Morgan Stanley or Merrill Lynch provides advisors with strong brand resources, cutting-edge technology, access to proprietary research and products, and extensive training programs. However, the pay structure often involves lower payouts, with the firm keeping up to 50% of generated revenues.
Advisors at wirehouses typically earn a base salary plus bonuses based on assets under management (AUM) growth and sales goals. Total pay packages generally range from $100k for junior advisors up to $300-500k for senior advisors managing over $100 million in AUM. However, the firm captures a large share of profits.
Boutique RIA Firms
Joining an independent Registered Investment Advisor (RIA) boutique firm allows advisors to keep 85-100% of generated revenues, but they take on more overhead costs for compliance, technology, marketing and office space.
Pay is often based entirely on assets under management, without a salary safety net. Compensation ranges widely based on an advisor's book of business and negotiation, but top earners bring in $500k to over $1 million at leading RIA firms. Owners can also profit from firm equity.
Insurance Companies
Insurance companies like Northwestern Mutual offer advisors without industry experience a lower barrier to entry, but with product sales-focused roles that cap upside earnings potential.
Base salaries tend to start around $50-60k, with bonuses bringing total compensation to $75-150k. While less than independent RIAs, insurance sales roles provide extensive training and clients upfront. But commissioned product sales limit long-term earning capability versus fee-based Registered Investment Advisors.
Impact of Assets Under Management
As advisors grow their book of business, they earn higher income through asset-based fees. Most advisors charge 1% or more on client assets, so more assets under management (AUM) translates to higher dollar fees.
Fee Structures
- Financial advisors typically charge an annual fee based on a percentage of assets under management (AUM), often between 1-2%.
- The more assets a client has invested with the advisor, the more the advisor earns in fees.
- Advisors may also charge fixed or hourly fees for financial planning and other services. But AUM fees make up the majority of an advisor's compensation.
Average AUM
- The average advisor manages between $100 million to $200 million in assets, according to industry research.
- More experienced advisors who have been in business for 10+ years often have over $200 million AUM.
- Building up assets takes time. New advisors usually start with less than $50 million AUM.
Top Performers
- The top 10% of financial advisors manage over $500 million in client assets.
- Advisors with over $1 billion AUM are considered extremely successful. Their annual compensation can exceed $1 million.
- These "elite" advisors have usually been in business for decades and acquired high-net-worth clients early on.
In summary, an advisor's income potential correlates strongly with assets under management. While new advisors start small, the earning potential over time is quite significant for those who are able to continually grow their book of business.
Conclusion and Summary
In summary, personal financial advisor salaries average six figures but vary based on several key factors:
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Experience level: More seasoned advisors tend to earn higher salaries. Entry-level salaries tend to start around $60,000, while advisors with over 20 years of experience can earn $200,000 or more.
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Credentials: Obtaining advanced designations like the CFP (Certified Financial Planner) or CFA (Chartered Financial Analyst) can boost salary potential.
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Location: Salaries tend to be higher in major metropolitan and financial hub cities like New York and San Francisco.
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Firm type: Advisors at large wirehouse brokerage firms tend to have higher earning potential than independent RIAs.
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Assets under management: As advisors build up more client assets and relationships over time, their salaries rise accordingly.
So in summary, the highest salaries go to those who put in the time to build up decades of expertise combined with a large book of business. Obtaining credentials, working for a major firm, being based in a major city, and focusing on asset gathering can all contribute to higher long-term compensation.
