Changing careers to become a financial advisor? Here's what to know

For those thinking about changing careers by breaking into wealth management and becoming a financial advisor, the opportunity is there.

Tens of thousands of advisors will retire each year over the next decade, and experts say that professionals from other fields form part of the solution to the industry's succession challenges. New kinds of training that are different from the infamous "eat what you kill" trial to generate business or find a new job can help aspiring planners gain technical skills and assist prospective employers in identifying talent. 

The problem is that getting a foothold in the profession remains very difficult, and there are still a lot of misconceptions about careers in wealth management. 

"I think, largely, people don't know what this job is," said Dominique "Dom" Henderson, the founder of Dallas-based DJH Capital Management and the Jumpstart Coaching Lab. Prospective financial professionals likely expect an environment similar to those portrayed in movies like "The Wolf of Wall Street" or "Boiler Room," Henderson said. "They don't think about having a heart-to-heart with a client about how money has affected them all of their life and in all of their closest relationships."

Dominique Henderson

Henderson often advises aspiring wealth management professionals from other fields as part of the consulting, coaching and courses offered by Jumpstart. To break into the industry, career changers will need to learn five "core skills" that Henderson described with the acronym CHAMP, which stands for: the capacity for learning, high accuracy when it comes to important details, the ability to work independently without constant supervision, mastery of a firm's technology and other operations in the workflow and professional designations and development that are relevant to the firm's client base and business models, he said.

"If you're missing one or two of these, it's going to be really hard to find a position in the industry, because that's what people are looking for," Henderson said.

READ MORE: Creating industry on-ramps as 100K advisors head toward the exit

The mixed signals for career changers

The demand for a combination of abilities that is in some ways broad and in other ways highly specific explains why there is a high barrier to entry into wealth management — despite the fact that advisors are clamoring to find successors, giants of the industry are shifting their approach to training and planners earn an attractive median compensation of $192,000 per year. The high pay for tremendously successful advisors may obscure the fact that most rookie advisors fail to establish themselves in the profession for the long term. And that compensation often proves to be a contentious topic for advisors who criticize sales-driven conflicts of interest or planners who pushed back on the portrayal of their calling as easy in a recent ad campaign by the CFP Board.

Industry statistics reflect these mixed signals. In the next 10 years, 105,887 advisors will retire and wipe out more than 37% of the industry's ranks currently managing more than 41% of total assets, according to a report this week by research and consulting firm Cerulli Associates. However, 71% of advisors coming into the industry will drop out within their first five years, and only 18% of those outgoing professionals are expecting a junior counterpart to succeed them.

"To address this, training programs, professional development and mentoring must enable new advisors to learn and transition into production roles instead of being confined to support positions," the report stated.

The profession and the industry "truly have so much to learn from our career changers" because of their "knowledge about operations, marketing, psychology and more," according to Hannah Moore, founder of advisor training firm Amplified Planning and Richardson, Texas-based Guiding Wealth. She cited Cerulli's findings about the high failure rates for rookie advisors.

"Career changers bring so much diverse talent and experience," she said in an email. "They have life experience that helps them better relate to clients, and they already have career experience and core competencies — which makes them highly valuable to firms who want capable, reliable advisors! Plus, they have networks they can tap into to increase AUM, which is something many new, young planners entering through the 'traditional track' do not usually have."

That type of networking still proves difficult for many novices coming into wealth management from other fields — even though they can look to many success stories of advisors who were once teachers, energy professionals or even journalists. 

The requirement to pass examinations and obtain professional credentials — such as the Series 7, Series 65, the "Securities Industry Essentials," the chartered financial analyst, any of those overseen by the Investments & Wealth Institute and The American College of Financial Services or the most popular and respected certification in the profession, the certified financial planner — often poses a rigorous process that only marks the beginning stage toward a sustainable career in the industry.

Peter Ankeny "really had no exposure to anything in investments until I got my first real job" as a mechanical engineer with a 401(k) retirement plan, the founder of Portsmouth, New Hampshire-based registered investment advisory firm Wolf Pine Capital noted in an interview. Reading about the work of Vanguard founder Jack Bogle brought Ankeny "to the point where I was probably talking about it too much and my friends caught onm and they started asking me questions," he said of his choice nearly 10 years ago to pick a new career.

New advisors must find a book of clients through tactics like building a social media presence, cultivating relationships with potential referral sources such as accountants, estate attorneys or insurance agents or, in the case of one of Ankeny's friends, direct mailing outreach, he said.

"I remember seeing him packing envelopes and sending those things out. So there are a lot of ways to do it, and I think a combination of a few of them is probably the right way," Ankeny said. "It's not impossible, but it's a hard, long road and I think that's where a lot of failures happen."

READ MORE: 8 ways to invest in next-gen advisors — and your firm's future

A business imperative

That's why more RIAs and wealth management firms ought to consider how they can ease the path into the field for career changes by searching outside the industry when hiring in new roles, according to Julie Genjac, vice president of applied insights for Hartford Funds, where she coaches advisor teams in practice management.

"The market for experienced and licensed team members is incredibly competitive right now, and broadening the talent pool beyond the industry can help team leaders bring on individuals who have a fresh perspective about process, procedure, marketing and more," Genjac said in an email. "Career changers tend to ask new questions and challenge the 'this is the way we've always done it' mindset in a helpful and refreshing way. They also bring life skillsets to the table. Maybe they have experienced caregiving, death or divorce or the sale of a business in their own lives, which enables them to immediately have real and genuine empathy for clients and prospects going through similar experiences. This comes without licenses and years of industry knowledge."

Unfortunately, many smaller RIAs may not have the resources to invest in training career changers over several years. That's why innovators like Henderson and Moore are trying to ramp up their own programs to bridge the gap between the firms that have the desire but not the infrastructure to train career changers and other aspiring professionals who have the desire to be planners without the industry knowledge.

At Jumpstart, Henderson just launched an "advisor growth accelerator" program with an initial group of four professionals in their first to third years in the industry. He's seeking to cut what is often a "24-month learning curve" down to 12, he said, noting that the multiyear process can entail as much as a 50% pay cut up front for those switching careers and an expensive proposition for firms seeking to hire them.

"It may not be everything you want to hear, but it will be the straightest path," said Henderson. "It's not a quick path. It was never going to be a quick path. What I'm offering is a path with less mistakes."

In November, Moore's firm launched two outsourced RIA training programs on top of existing courses such as Amplified's summer Externship. At least 41% of last summer's externs were career changers from fields like health care, engineering and the military or among a growing group of "stay-at-home moms reentering the workforce," she said.

Hannah Moore

"My first recommendation would be to know what you're looking for in this career," Moore said. "As a career changer, you have a stronger internal gauge for what you want your career to look like — listen to your gut! Take the time to think about what you want work to be and to get clear on your nonnegotiables when looking for training, jobs, etc. To make advised decisions on your career in financial planning, it's best to learn the nuances of this field and how it operates. Consider the different firm models, client niches and where you'd like to specialize so you can make decisions on training and skills development. Of course, from there, you can lean into training like the Externship I host every summer, or our CORE and CORE+ monthly learning subscriptions."

To get ahead, the aspiring wealth management professionals can think through which skills they're already developing in their current roles and how to boost them further, Genjac said.

"I'm very focused on the innate personality traits and 'soft skills' a candidate can bring to the team," she said. "Someone looking to enter the wealth management industry should have fantastic communication skills, the ability to work well with others and a clear understanding of how their role interacts with other roles on the team. Attention to detail — whether the person is in a creative or analytical role — is also important in this field. The certifications and licenses can be earned over time, but don't overlook these foundational abilities and natural skillsets."

READ MORE: How to find the right RIA successor

Getting a foot in the door

The formidable process becomes more feasible through apprenticeship-style training programs that are already planning for the transition to take several years. At some point, though, the advisors will need to find a base of clients.

Ankeny came into wealth management through a two-year training program at UBS that facilitated trainees' licensing and put them to work as planning associates with multiple teams.

"That was like the best crash course in wealth planning that I think you could get," he said. Even so, the apprentices' success "ultimately comes down to your ability to find clients," Ankeny added. "Come up with a list of 100 names of people that you think you might be able to get as a client. Then take that list and throw it away and start over. Your natural network dries up very quickly."

Prospective advisors may already be developing the skills that lend themselves well to the field, though.   

"Individuals with experience in project management typically pay close attention to detail and adhere well to timelines," Genjac said. "Those with a background in the marketing fields, maybe coming from another sector, can be extremely valuable as they think differently than our industry thinks and can truly help transform how we brand and sell our solutions. Legal professionals can be extremely value additive as their skills are tangential to our industry and can support and supplement what financial professionals do. And, those who have a rich technology background can be fantastic additions to teams that are looking to build out the team of the future by leveraging new technology."  

If outsourced training programs that apply those skills to a new profession can reduce the time it takes to get a return on the hiring investment to about 18 months from two to three years, they can address the lack of infrastructure at smaller firms and an all-too-common feeling among the aspiring professionals that "there's no direct path getting to where they want to go" in the field, Henderson said. 

That process could look much different at one firm than at another, just as he had no single answer when it comes to which former careers are best suited to wealth management.

"If you've been in a career that has fostered in you this ability to develop relationships," Henderson said. "I don't know what you would really call it. … It's the ability to see the needs of others and really put aside self-interest and say, 'I really want to help you get where you want to go,' because, as a financial professional, you're really like a guide."