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What Does It Take To Become a Financial Advisor | Common Sense Investing with Ben Felix - YouTube
Channel: Ben Felix
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Have you ever wondered what qualifies someone
to use the title Financial Advisor?
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The short answer is nothing - financial advisor
is not a regulated title.
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Anyone is free to use it.
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Most of the people that do use the financial
advisor title are licensed by a provincial
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regulator to sell certain financial products.
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They might be licensed to sell insurance,
mutual funds, or stocks and bonds.
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The licensing process differs depending on
the products that the advisor is able to give
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advice on.
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Some licenses are easier to obtain than others,
and it鈥檚 not always easy to tell who is
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licensed to sell what.
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I鈥檓 Ben Felix, Associate Portfolio Manager
at PWL Capital.
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In this episode of Common Sense Investing,
I鈥檓 going to tell you what to look for when
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you need financial advice...
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Many so-called financial advisors are only
licensed to sell insurance products.
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For the unwitting investor, this will not
always be immediately obvious.
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An insurance agent is usually able to sell
life and health insurance, segregated funds,
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and annuities.
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Some of these products can be sold as investments,
but they come with hefty fees, and will often
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result in penalties if you want your money
back.
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An insurance agent gets paid when you buy
an insurance product, so they are motivated
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to sell insurance products.
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Getting an insurance license requires completing
a training course, passing one closed book exam,
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and obtaining sponsorship from an insurance
company.
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There is nothing wrong with being licensed
to sell insurance.
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But when you are seeking financial advice,
you might want to know that your advisor has
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more qualifications than a license to sell
you insurance.
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Another common license that a so-called financial
advisor might have is a license to sell mutual
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funds.
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Similar to an insurance license, a mutual
funds license limits the advisor鈥檚 tool
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box.
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Mutual funds can be great in some cases, but
the vast majority of the mutual funds sold
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in Canada have high fees and, on average,
returns that trail the market.
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Obtaining a mutual funds license involves one
exam, and a period of supervised activity.
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The licensing process for mutual fund salespeople
is fine, but it is important to understand
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that the license is for selling mutual funds,
and that鈥檚 it.
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If you are seeking out financial advice, a
license to sell mutual funds may not be a
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sufficient qualification.
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The most challenging form of financial licensing
to obtain is the securities license.
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This license permits giving advice on mutual
funds, stocks, bonds, and ETFs.
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Obtaining this license requires passing three
exams, undergoing a period of supervised training,
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and completing a 30 month proficiency course
on wealth management.
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This is a little bit more robust, but it is
still just a license to sell securities.
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Someone who is licensed to sell securities
can take their registration a level higher
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by becoming a portfolio manager.
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Unlike financial advisor, portfolio manager
is a regulated title it can鈥檛 be used by
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just anyone.
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A portfolio manager has to meet a 5-year experience
requirement, and have earned either the Chartered
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Investment Manager or Chartered Financial
Analyst designation.
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Both of these designations require hundreds
of hours of study in order to pass multiple
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exams.
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Between the experience and education requirements,
the portfolio manager is actually in a position
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to offer financial advice, rather than just
sell products.
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They are also legally required to act in the
best interest of their clients, which is not
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the case for the other licensing categories
that I have mentioned.
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Separate from a license to sell or recommend
any type of product, a Certified Financial
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Planner is someone who has passed multiple
exams and met a professional experience requirement.
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Many Certified Financial Planners may also
be licensed to sell some type of financial
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products, but it is not a requirement of the designation.
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So, what does it take to be a financial advisor?
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Technically, nothing.
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But if you are a person seeking financial
advice, it鈥檚 a good idea to look for a Portfolio
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Manager, or someone who has earned the Chartered
Investment Manager, Chartered Financial Analyst,
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or Certified Financial Planner designation.
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Join me in my next video where I will tell
you how a financial advisor might decide how
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to invest your money.
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My name is Ben Felix of PWL Capital and this
is Common Sense Investing.
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I鈥檒l be talking about this and many other
common sense investing topics in this series,
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so subscribe and click the bell for updates.
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I鈥檇 also love to hear from you as to what
topics you鈥檇 like me to cover.
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