Financial Advisor Magazine reported this month an average earnings drop of over 30% this year for financial planners.* Yikes! Why is my industry suffering? Don’t people need the help of skilled advisors now more than ever? My suspicion is that these stats are reflecting changes in the industry rather than a decline in the overall popularity of professional help. In fact, the story confirms that the average lower earnings are reflective of more advisors entering the profession at younger ages, which has the effect of lowering the average earnings figures. What a relief.
According to the story, the average planner had gross earnings of $195,394, down from over $280,000 in the 2006-2007 survey. When viewed another way, a similar pyramid exists each year in which the lowest earners have been in the industry from 0-10 years, the second highest earning group has been in the industry from 11-20 years, and highest earnings group 21-30 years. We learn even more by reading further into these statistics. Most new financial planners are not people aged 20-30. They are people aged 40-60. Rather than entering the industry out of college, financial planners often work elsewhere in the financial services industry and switch into financial advising/asset management when they learn about it through related fields. I can confirm this through my own experience working towards the Certified Financial Planner designation. I was by far the youngest guy in class. Most of these people were financially established, middle-aged men making career switches.
I wonder if the main growth driver in the financial planning industry is the tough economic environment which we’re currently in. Not only are people seeking financial guidance, but the constant release of new investment products forces consumers to make more and more choices which affect their future. It’s hard for me to keep up with all that is new in this industry and I make a point of doing so. The average consumer couldn’t possibly have the time to stay on top of everything. I do like to think that new advisors working towards recognized credentials such as the CFP will ultimately help consumers navigate through the financial maze which we all grapple with. And if the average salary fluctuates a little bit, well, let’s just keep our eye on the ball.
As always, feel free to e-mail me with questions or comments.
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