What Does It Take To Become a Financial Advisor | Common Sense Investing with Ben Felix

TL;DR

Technically, becoming a financial advisor requires nothing because the title is not regulated and anyone may use it. Product licenses vary: a securities license requires three exams, supervised training, and a 30-month wealth-management proficiency course, while portfolio managers must meet a five-year experience requirement. Look for a Portfolio Manager or someone with a Chartered Investment Manager, Chartered Financial Analyst, or Certified Financial Planner designation. Read on to compare these qualifications.

Transcript

Have you ever wondered what qualifies someone to use the title Financial Advisor? The short answer is nothing - financial advisor is not a regulated title. Anyone is free to use it. Most of the people that do use the financial advisor title are licensed by a provincial regulator to sell certain financial products. They might be licensed to sell ins... Read More

Key Insights

• 😒 "Financial Advisor" is not a regulated title, allowing anyone to use it without specific qualifications.
• 🥅 Many advisors are only licensed to sell insurance products, which may not align with your financial goals.
• ❓ Advisors with a mutual funds license have limitations and may not provide comprehensive financial advice.
• 👻 Obtaining a securities license allows advisors to give advice on a broader range of financial products.
• ❓ Portfolio managers have stricter requirements, including experience and specific designations.
• 🧭 Certified Financial Planners have passed exams and met professional experience requirements.
• ❓ Consider seeking advice from advisors with additional qualifications to ensure comprehensive financial guidance.

Questions & Answers

Q: What does it take to become a financial advisor?

Technically, nothing: “financial advisor” is not a regulated title, so anyone may use it. Many people using the title are nevertheless licensed by a provincial regulator to sell insurance, mutual funds, stocks, or bonds.

Q: What qualifications should you look for in a financial advisor?

Look for a Portfolio Manager or someone who has earned the Chartered Investment Manager, Chartered Financial Analyst, or Certified Financial Planner designation. These credentials indicate additional education, examinations, or professional experience beyond simply using the financial advisor title.

Q: What can an insurance-licensed financial advisor sell?

An insurance agent can usually sell life and health insurance, segregated funds, and annuities. Some of these products may be presented as investments, but they can carry hefty fees and penalties when investors want their money back.

Q: What is required to obtain an insurance license?

Obtaining an insurance license requires completing a training course, passing one closed-book exam, and securing sponsorship from an insurance company. The license qualifies someone to sell insurance, but it does not by itself establish broader financial-advice expertise.

Q: Is a mutual fund license sufficient for comprehensive financial advice?

A mutual fund license may not be sufficient because it qualifies an advisor to sell mutual funds and limits the advisor’s toolbox. Obtaining it involves one exam and a period of supervised activity.

Q: What does a securities license allow an advisor to do?

A securities license permits advice on mutual funds, stocks, bonds, and ETFs. It requires three exams, supervised training, and a 30-month proficiency course on wealth management, but it remains a license to sell securities.

Q: What is required to become a portfolio manager?

Unlike financial advisor, Portfolio Manager is a regulated title. A portfolio manager must meet a five-year experience requirement and earn either the Chartered Investment Manager or Chartered Financial Analyst designation, each of which requires hundreds of study hours and multiple exams.

Q: How does a Certified Financial Planner differ from a product-licensed advisor?

A Certified Financial Planner has passed multiple exams and met a professional experience requirement. The designation is separate from licenses to sell or recommend products, although many Certified Financial Planners also hold a financial-product license.

Summary & Key Takeaways

• The title of "Financial Advisor" is not regulated, allowing anyone to use it.

• Many financial advisors are only licensed to sell insurance products, which may not always be disclosed.

• Some advisors have licenses to sell mutual funds, but this may not be a sufficient qualification for comprehensive financial advice.

• The most robust qualifications for financial advice include licenses to sell securities, becoming a portfolio manager, or obtaining the Certified Financial Planner designation.