What Is a Financial Advisor's Salary?
Articles in magazines and newspapers and on websites proclaim that financial advising is one of the hottest careers going these days. However, much of an advisor's compensation comes in forms other than salary.
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Misconceptions
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A financial advisor may derive compensation from numerous sources. Sometimes, a financial advisor's pay includes no salary whatsoever. For certain advisors who are just starting out in their career, their entire income may be salary.
Identification
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Most financial advisors derive the majority of their income through their clients, in the form of either direct payments (fees) or commissions or percentages charged on overall assets. Thus, the advisor's salary may be small compared to her other compensation.
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Types
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There are many types of financial advisors. The most basic categories are fee-only financial advisors, commission-only financial advisors and hybrid advisors who work for some combination of fees and commissions or bonuses. Financial advisors may also be categorized by employer. There are advisors who are independent and own their own practice, advisors who work for a brokerage firm, and advisors who work for banks or insurance companies.
Significance
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A financial advisor's salary is the portion of his income that is paid by an employer, regardless of the amount of sales, clients or assets the advisor has. In essence, this is the "fixed" part of an advisor's pay.
Features
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Some advisors earn a "salary" that must be paid back before additional commission payouts are made. Thus, an advisor with a salary of $3,000 per month would need to earn $3,001 in commissions to receive anything above $3,000. Such salaries are often referred to as a "draw."
Considerations
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Generally, the higher the salary a firm pays, the lower the payout rate on any commission or sales based payments. Thus, while an advisor who earns no salary may receive 80 percent of every commission dollar earned, an advisor with a $40,000 salary may receive closer to 25 percent. While there is seldom a choice of payment method within a firm, an advisor may choose between different firms based on what is more important to her: a guaranteed income or the potential for a higher income.
Warning
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Very few firms pay financial advisors a salary for their entire career. Most salaries are considered a way to help the advisor during the start-up phase of her career, and have an end date that varies between firms. Salaries that continue beyond three years are rare.
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References
- Photo Credit Making a financial plan image by Allen Stoner from Fotolia.com
