How to Become a Financial Advisor in India?

Do you want to become a financial advisor in India and make your career in the financial industry?

If yes, In this article, you will learn all that you should know about various key points related to becoming a Financial Advisor in India - who is a financial advisor, what a financial advisor does, eligibility criteria, skills required, regulatory requirements, certifications one can undertake to improve their profile and build a career in the financial industry, future career opportunities, and challenges.

Who is a Financial Advisor?

A financial advisor is a professional who gives financial advice to their clients and help them achieve their life goals. They undertake financial planning for their clients which is the process of meeting their life goals through the proper management of finances. Life goals can include buying a home, savings for your child's education, planning for retirement or estate planning. A major part of a financial advisor’s job is to make clients feel comfortable and establish trust with them. They have to keep abreast of the current happenings in the market and have to provide unbiased advice to their clients.

As with any other professional, being a financial advisor also comes with a lot of responsibility. A financial advisor manages the finances of other persons. A person having knowledge, desired passion and an ever-growing interest can be a good financial advisor. When you become a financial advisor, you're not entering into a new field or getting yourself a job, you're making a lifetime commitment with this profession.

Financial advisors help people make decisions about their finances, including investment in different financial instruments, taxation planning, insurance, debt, and other financial decisions.

"You are working with your client, towards supporting their financial goals and objectives, with no actual conflict of interest".

Financial advisors tend to be predominantly enterprising individuals, which means that they are usually quite natural leaders who thrive at influencing and persuading others. They also tend to be detail-oriented and organized, and like working in a structured environment.

“Planning is taking the future into the present so that you can plan something about it now and secure it”

The chart below can help you decide if a career as a financial planner might suit you.

What does a Financial Advisor do?

Financial advisors assess the financial needs of individuals and help them with investments (such as stocks and bonds), tax laws, and insurance decisions. They help clients plan for short-term and long-term goals, such as education expenses and retirement planning. Many also provide tax advice or suggest insurance on the basis of their requirements.

Personal financial advisors do the following:

• Establishing client-planner relationship.
• Meet with clients personally to discuss their financial goals
• Gathering all the information.
• Educating clients and answering all their questions about investment options and potential risks.
• Understanding their risk appetite and return expectations and recommend financial products
• Monitor client’s accounts on a regular basis and determine if changes are needed to improve account
• Research investment
• Provide specialized services such as tax planning, estate planning as well as retirement planning to the

Although most financial advisors offer advice on a wide range of topics, some specialize in areas such as retirement or risk management (evaluating how willing the investor is ready to take chances, and adjusting investments accordingly). After investing funds for a client, they, as well as the client, get regular reports of the investments. They monitor the client's investments and usually meet with each client regularly to update him/her on potential investments and to adjust the financial plan because of the client's changed circumstances or because of investment options have changed.

These clients can also be the institutional investors (commonly companies or organizations), and they approach investing differently from the general public.

Private bankers manages a collection of investments (known as a portfolio) for the clients with the help of resources of the bank, including teams of financial analysts, accountants, and other finance professionals.

Financial advisors spend a great part of time marketing their services. They meet potential clients by giving seminars, conferences or through business and social networking.

Process to Become a Financial Advisor

What is the scope of ‘Financial Advisory Business’ in India?

Wealth Management & Financial Advisory industry is likely expected to grow at around 15-25% yearly over the next decade looking at the current rate of population of the country and increasing disposable income of the retail as well as HNI clients.

Personal financial advisors are not just for wealthy people. Every individual can benefit from objective help to create, grow, accumulate and utilize wealth to fulfill one’s personal goals, family goals and other lifestyle objectives systematically without any anxiety. Financial planners can guide individuals to achieve their ultimate aim of spending retired life peacefully without compromising on living standards.

A qualified financial advisor provides advice on:

• Systematic savings
• Cash flow management
• Debt management
• Assets allocation for investment
• Managing risk through insurance planning
• Tax strategies to increase investible surplus
• Distribute residual wealth through estate planning.

Financial advisory is a profession for people with good communication skills combined with knowledge of how the financial service industry works. As a financial advisor, one could work for a bank, insurance company, a brokerage house or have one’s own practice.

Most important is to understand that the suitability of products you are guiding people to purchase is based on their risk appetite, age and time frame of goals and objectives.

A Financial Advisor needs to update themselves constantly on new products, services and tax laws that might be good for their clients. This is a field that requires a lifetime of continuing education. A trusted financial planner can play an important role in people’s lives, helping them to achieve dreams such as owning a home, seeing their children’s education and enjoying an active retirement.

How does a Financial Advisor make Money?

Financial Advisor Modes of Earnings in India

Difference between “Fee-only Advisor” and “Fee and Commission” Advisor

A fee-only advisor is compensated only by the fees he or she directly charges to clients and not by commissions earned from a sale of a financial product.	A “commission-based” advisor is generally compensated by commissions on the sale of financial products that may be used to implement their advice.
Fee-only advisors carry professional designations that hold them to strict codes of professional and ethical conduct.	Most fee-based advisors hold licenses that allow them to sell investment products or insurance for a commission.
Fee-only advisor has no inherent conflicts of interest and they generally provide more comprehensive advice.	A commission-based advisor has the probability of a conflict of interest between the well-being of the client and the advisor.
A fee-only financial planner suggests the best product suited for you.	A fee-based or “fee and commission” advisor sells products that pay out the highest commissions.

Eligibility Criteria for becoming a financial advisor

Fee-Only Financial Advisor

In India, not everyone can offer & charge for investment advice. They have to be registered as an Investment Adviser (RIA) with SEBI if you want to charge fees for giving investment advice.

SEBI Regulation does not fix any minimum or maximum fee to be charged by the Investment Adviser from clients. It is as per the agreement between the client and the investment adviser. So, if you want to be a ‘Fee Charging’ Financial Advisor you need to be registered with SEBI as a Registered Investment Advisor.

Read: SEBI RIA Regulations for More Details

Chartered Wealth Manager^® (CWM^®) Certification^® is accredited by NISM under the SEBI Investment Advisor Regulations 2013 as an approved certification.

Commission Only Financial Advisor:

There are different exams to be cleared based on the Financial Product a Financial Advisor promotes. These exams are conducted by the regulatory body for the specific product.

For Mutual Funds selling a financial advisor have to clear the NISM-Series-V-A: Mutual Fund Distributors Certification Examination.

For Insurance Selling a Financial Advisor has to clear IRDA Examinations for Life Insurance and General Insurance.

To become Life Insurance Agent in India, a candidate should pass IRDAI IC 38 pre-recruitment qualification exam. To become General Insurance Agent in India, a candidate should pass the IRDA IC 38 Exam.

According to Regulation 4 of IRDA 2000, 12th Pass is considered as the minimum educational qualification for urban area inhabitants while the 10th pass is considered as the minimum educational qualification for rural area inhabitants. The minimum age limit is 18 years. You cannot directly appear for IC38, you need to be an insurer first at which you have to attend 50 hours of training by IRDA to be called a Life, General or Health Insurance Agent, while for first-timers, and it is 75 hours of training.

Skills required to become a Financial Advisor

A successful Financial Planner requires a set of skills, most people expertise in a couple of areas. Here are the top 6 essential skills.

• Communications and Interpersonal Skills

A financial advisor needs to solicit new businesses, network with associated people, and maintain his or her relationship with clients. Therefore, the ability to relate to people and have common grounds is crucial. Basic skills for networking, such as telephone and email etiquette are included in this. Additionally, the financial industry is filled with jargon. The documents are often complex and confusing. A Financial Planner needs to explain everything clearly to his or her client to make an informed decision. If building a new relationship is important, then retaining one is just as important to the business.

• Ability to Handle Stress

Like most careers, stress at work is inevitable. A Financial Planner undertakes his or her clients’ financial portfolio and assist them in decisions that will have a major impact on their future. This process requires a Financial Planner to perform at an exceptionally high level and hence, it is stressful. On the other hand, the returns, when a Financial Planner helps the client to avoid financial disasters, it is more stressful.

• Energy and Persistence

This key skill is required in any profession as it serves not only in the area of prospecting and serving clients, it also becomes extremely valuable when keeping tab of the investment market, staying on top of the latest news and riding upward trends, in performance also.

• Analytical Skills for Problem Solving

Each client’s financial portfolio is unique and requires different planning. A Financial Planner has to be able to exercise patience in different situations and with little emotional attachments. A Financial Planner must have strong problem solving and mathematical skills to help his or her client make prudent financial decisions.

• Passion

Another essential skill in businesses is the enthusiasm for the job. The challenge is in finding that perfect fit. Financial Planner’s interest is in making a profound impact on the lives of others, by helping them to grow their wealth and secure an otherwise uncertain future that will make the difference.

• Organizational Skills and Attention to Details

Organizational skills can be applied for good time management. It help to grow a Financial Planner’s clientele & his or her income too. Moreover, allocating the time efficiently & effectively ensures that a Financial Planner serves his or her clients well.

Companies entrust a Financial Planner to manage their finances and risks about the same. Paying attention to all the important & relevant details leave no stones unturned and eliminates small mistakes which can sometimes be very costly to a business.

Overview

In combination with these all 6 essential skills, having the right company to work that can provide you with the right balance of support, mentorship, training and independence can make a great difference and help Financial Planner on the way to a long-lasting and successful career.

If you feel that you have the above skills or could work to develop your skills, then financial planning could be the right career for you, whether you are starting as your first job or making a career transition.

Should you become a Financial Advisor?

Besides feeling good about giving sound advice and creating a strong financial foundation for their clients, financial advisers can reap other rewards for themselves, such as higher salary, work schedule flexibility, and control over their practice. However, this career also has some disadvantages, such as a high-stress environment, difficulty in building a client base, and meeting regulatory requirements. Evaluating the pros and cons of this career will help you make an empowered decision as to whether or not this career is the right fit for you.

PROS

Giving Worthwhile Advice Giving client meaningful advice is one of the most rewarding aspects of this career. Providing education to overwhelmed and confused clients and guiding them to investments or insurance vehicles that are most suited for them is very satisfying. The financial success of a client is strongly connected to a financial adviser's success, because of the suggestions given by him/her.

Employment Options Financial advisors can work for private or public firms or can be self-employed and work from home. Managing working hours that fit best with lifestyle and household demands allows financial advisors to balance between personal and professional duties & responsibilities.

Unlimited Income Potential There is no limit on earning potential for most financial advisors, as most advisors work on the basis of commission. This means income is based on how much new business or recurring revenue is present in every passing year. Financial advisers have the ability to earn as much, or as little, as they are able to earn. It needs much work to do initially in order to build a strong client base from scratch. Over a period of time, an advisor's reputation and hard work will help him/her earn what they're worth.

Schedule Flexibility Once a financial adviser establishes a solid client base, they will have more flexibility in their work hours. Financial advisers that have been working for several years and have a solid client base have the advantage of scheduling client meetings around their personal calendars.

Low Start-Up Costs There is not much expensive fees that are associated with this career outside of the licensing requirements and regulatory costs. This makes it very feasible to start working part-time if necessary to build up a client base.

Niche Opportunities A variety of financial products and strategies are available in this career, which allows one the opportunity to craft a niche career that can be different from the other financial advisors in specific areas (for example, serving retired or millennials). Firms also provide a variety of products and services, such as investment management, life or disability insurance, retirement plans, and fee-based financial planning, which gives financial advisers full control over how they want to practice.

CONS

High-Stress Industry The financial services industry is deeply interwoven with the performance of the financial markets. Clients reach out to their financial advisers when markets do not perform and are often emotional and distraught when there is a downturn in the market. It can be very stressful to manage the emotions of clients.

Finding Clients Starting a career as a financial adviser is not easy, as most firms have sales targets that need to be met each month. Therefore, advisers are constantly in need of new prospects, and a great deal of time and money can be initially spent creating and maintaining profitable prospecting systems. Financial advisors need to be prepared to repeat their marketing efforts several times, especially when first getting started, to secure the needed client base. This aspect of the career can be the most challenging.

Concentration Having this quality is especially true for financial advisors that are self-employed and working from home. Social media distractions, talking on the phone, or running errands are all easy distractions and hinder concentration. Work has to come first, and not everyone is good at making this a priority.

Regulatory/Compliance Requirements Obtaining licenses can be lengthy. Additionally, financial advisers are required to complete certain continuing education courses each year to keep their licenses in good standing. Keeping up with these regulatory requirements can be costly and time-consuming.

Sponsorship Most licenses can only be obtained when a sponsorship from a brokerage firm is received. Since firms don't typically hand out sponsorships, the typical path is to find work at a company, work for a certain amount of time, get the license, and then strike out on one’s own after the contract has been resolved.

Long Work Weeks It is common for beginning financial advisors to put in work weeks that are 50 plus hours. There can be a lot of uncertainty in the first five years that can be difficult to deal with if there isn’t other income coming in. However, with a strong work ethic and a lot of tenacity, it is very possible to create a long-term and profitable career.

What are the products a Financial Advisor deals in?

What type of financial advisors are there?

The following are four types of financial advisors available to the public, and details on the types of services they provide:

Financial Planners

Financial advisors and financial planners are often used interchangeably. However, they are not the same thing.

Financial advisor is an umbrella term that refers to anyone who helps clients to manage their money. Financial planner, on the other hand, refers to a specific type of financial advisor that can help individuals and companies to meet their financial goals by formulating a plan.

Client goals can be anything from paying off debt, estate planning, child education, marriage or investing for retirement. Financial planners can give clients a big picture of how the financial market works, explain complex financial terms in simpler language and counsel their clients on the risks of different investments. Some financial planners only give advice, and some give advice as well as sell products.

Many financial planners decide to focus on one specialization, such as taxes, estate planning, retirement, or investments.

Hiring a financial planner isn’t cheap. However, hiring a financial planner can be worth the cost in certain situations, such as:

Wealth Management Advisors - If an individual earns a substantial amount of money, it makes sense to hire a financial planner to help with coordinating all the accounts, saving on taxes, investing wisely, and planning the estate.

Self-Employment - If an individual is a small business owner or a freelancer, it is hard to budget and to deal with issues such as quarterly tax filings, self-employment taxes, special deductions, employee pay and benefits, and retirement plans. A financial planner can help with sorting these issues out, and more.

Retirement - Individuals that are planning to retire need to sort out how much money they will need to live on, how to withdraw money from retirement accounts, and how to maximize Social Security benefits. Those who are younger and want to retire at a certain age with a certain amount of money available to them will need to know where to invest their money in, and how much they will need to put away each month in order to make that happen.

Family Planning - Individuals that are getting married and having children need to know how to combine finances, file taxes jointly, budget for their children's university expenses, purchase life insurance, and plan their estate.

Investment Advisors

There is often a bit of confusion between what a financial planner can do for a client vs what an investment advisor can do. Both are alike in that they can help their clients with managing their assets, however, the services an investment advisor provides are strictly focused on investments.

Scope of a Financial Advisor

There are a large number of job openings for financial advisors in metro cities such as Delhi, Mumbai, and Bengaluru. Employment opportunities are high in fields such as brokerages, credit counseling firms, financial consultancies, fund managing companies, investment banks, life insurance companies, health insurance companies, wealth managing firms, etc. One will find opportunities in both the public and the private sectors. Some of the top recruiting private companies are HDFC, HSBC, ICICI, and Kotak Mahindra. The public sector insurance companies such as LIC and NIACL are also providing many job opportunities for financial advisors.

A qualified financial advisor can start his/her career with a basic package of 3.5 lakhs per annum or more. They can draw over 6 lakhs per annum or more with an experience of more than three years. The financial advisors who have the industry experience of more than fifteen years make an amount of more than 12 lakhs per annum, the sky is the limit for such experienced professionals.

There are a variety of financial professionals that are trained to offer specialized financial advice.

Are there any certification or licensure requirements?

Financial advisors who directly buy or sell stocks, bonds, mutual funds, insurance policies, or specific investment advice need a combination of licenses that varies based upon the products they sell. In addition to those licenses, smaller firms that manage clients’ investments must be registered with government regulators, and larger firms must be registered with whatever federal government agency regulates these services. Some advisors help their clients by buying and trading stocks, and they'll need certain licenses. Even just giving advice related to investments requires a license. Financial advisors at insurance companies will also need licenses to sell and advise on insurance.

SEBI REGISTRATION AND GUIDELINES

In order to become a financial advisor and start your own practice, you need to register under SEBI guidelines and proceed as per the rules and regulations. Before the Securities and Exchange Board of India (SEBI) Registered Investment Advisor regulations, anyone could start working as an investment advisor without registering. But in order to protect the interests of investors, SEBI introduced the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013.

These regulations stipulate that investment advisers must register with SEBI. Once you become a Registered Investment Adviser (RIA), you can only receive compensation from the person you provide in order to prevent the conflicts of interest. These regulations clearly state that registration is mandatory for investment advisers. SEBI regulations exempt certain categories of people from registration such as insurance agents or brokers advising on insurance products, mutual fund distributors and stockbrokers.

Regulatory requirements to become a financial advisor

What are the capital adequacy requirements for opening your own practice?

An individual or partnership must have net tangible assets with a value of at least Rs.1 lakh, and a body corporate must have a net worth of at least Rs.25 lakhs.

COMPARISON CHART BETWEEN CHARTERED WEALTH MANAGER, CERTIFIED FINANCIAL PLANNER, AND CHARTERED FINANCIAL ANALYST

“It’s not how much money you make, but how much money you save, how hard it works for you, and how many generations you keep it for.”