How Much Do Financial Advisors Make?
Posted by Frank Gogol in Work & Income | Updated on June 20, 2023
When it comes to the earning potential of various careers, jobs in finance tend to be higher paying than similar roles in other industries. Among these is the job of a financial advisor. An important factor to consider when starting or changing careers is the average salary you can expect. If you are wondering how much do financial advisors make, read on for a detailed breakdown.
What is a Financial Advisor?
A financial advisor is a licensed professional who gives financial guidance to people in exchange for payment. The services offered by different advisors vary widely. Financial advisors guide their customers on investment, estate planning, tax planning, and even insurance.
Generally, financial advisors identify themselves differently depending on what area they specialize in. For example, as an investment manager, tax planner, or personal banker.
How Do Financial Advisors Earn Money?
Financial advisors are paid directly for their services. This is similar to how you might pay a lawyer for legal advice. In addition to this, some financial advisors also earn commissions from selling various financial products to their clients.
As you can imagine, earning commissions on the products they sell to their clients can potentially lead to a conflict of interest for financial advisors. That is, there might be a situation in which the financial advice which is best for the client would earn the advisor less in commissions than guiding the customer towards a particular product.
For this reason, the federal government created a class of financial advisors with a fiduciary responsibility towards their clients.
You can think of the difference between a fiduciary and a non-fiduciary financial advisor as similar to the difference between a salesperson and a nurse or doctor. Although the salesperson may choose to act in your best interest rather than convincing you to buy their product, a medical practitioner is legally required to look after the best interests of your health.
In short, financial advisors earn money in one or both of two ways; from fees (salary) or commissions (sales). Some advisors who work for companies may earn performance bonuses instead of commissions.
10 Best States for Financial Advisor Salaries
The list below outlines the 10 best states to work in as a financial advisor, in order from best to worst.
- New York
- District of Columbia
- Rhode Island
- New Mexico
- New Jersey
- North Carolina
10 Worst States for Financial Advisor Salaries
The list below outlines the 10 worst states to work in as a financial advisor from worst at the top to best at the bottom.
- South Dakota
- West Virginia
Financial Advisor Salaries by State
To give you a wider view of financial advisor salaries across the country, the list below shows the average annual salaries for financial advisors in all 50 states and the District of Columbia in 2017.
- Alabama – $124,240
- Alaska – $99,910
- Arizona – $103,130
- Arkansas – $103,880
- California – $141,100
- Colorado – $118,470
- Connecticut – $137,120
- Delaware – $124,480
- District of Columbia – $135,770
- Florida – $126,700
- Georgia – $115,880
- Hawaii – $84,390
- Idaho – $104,890
- Illinois – $121,750
- Indiana – $107,000
- Iowa – $91,880
- Kansas – $100,730
- Kentucky – $91,760
- Louisiana – $93,600
- Maine – $134,380
- Maryland – $105,150
- Massachusetts – $109,370
- Michigan – $114,210
- Minnesota – $109,250
- Mississippi – $100,280
- Missouri – $89,710
- Montana – $103,890
- Nebraska – $92,340
- Nevada – $116,300
- New Hampshire – $114,190
- New Jersey – $127,220
- New Mexico – $127,350
- New York – $166,100
- North Carolina – $125,240
- North Dakota – $93,890
- Ohio – $109,640
- Oklahoma – $82,750
- Oregon – $114,150
- Pennsylvania – $117,510
- Rhode Island – $132,990
- South Carolina – $94,090
- South Dakota – $83,530
- Tennessee – $97,650
- Texas – $111,640
- Utah – $95,980
- Vermont – $76,050
- Virginia – $123,730
- Washington – $106,370
- West Virginia – $88,120
- Wisconsin – $106,250
- Wyoming – $118,620
Please note that the list is in alphabetical order, not in order of the average salary.
As you can see, the answer to how much do financial advisors make can be quite different depending on the state you work in; from less than $80,000 to well over $160,000.
In addition, your level of experience makes a significant difference, as well as the kind of clients you serve. However, taking all this variation into account, the national median salary of a financial advisor was $89,330 in 2021.
How to Become a Financial Advisor
The process of becoming a financial advisor depends heavily on what type of financial advisor you want to become i.e. what field you want to specialize in. There are also some differences between the process for becoming a fiduciary vs. a non-fiduciary financial advisor.
All financial advisors must have at least a bachelor’s degree. It does not have to be in economics, but that can be helpful.
You can start by working for a financial services company, or you can work as an independent financial advisor.
Working for a company has the benefit that the company may be willing to pay the costs for you to get various specialized licenses. However, you don’t have to go this route. You can pay for the process of getting licensed yourself as an independent financial advisor.
The types of licensing you will need to have depends on what type of advice you will specialize in (investment, tax, estate planning, etc). All financial advisors must be licensed in the field in which they specialize. This process is generally overseen at the state level by a professional association or state body.
You must also decide whether you will work under the strict fiduciary standard of service. Fiduciary financial advisors tend to attract more clients because they are considered much more trustworthy.
To work as a fiduciary financial advisor, you must register with the Securities and Exchange Commission as a Registered Investment Advisor (RIA).
Once you have your license or licenses you can start working as a financial advisor.
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The question of how much do financial advisors make has different answers depending on various factors. One of the most important is location. You can expect to earn very different salaries depending on which state you work in as a financial advisor. The fiduciary standard you operate under also affects the average salary you can expect. Nationally, the median salary for a financial advisor was $89,330 in 2021.