Career Options in the Financial Industry

Financial advisors, (also known as financial planners or stock brokers) are licensed to manage the investments and offer investment advice to their clients. Clients range from widowed retirees and twenty-something’s just starting to invest. Each one of these clients has different investment goals and financial advisors must develop strategies that monitor risk, tax implications.

Depending on a number of licenses and/or educational background, financial planners execute transactions for their clients, sell other investment products such as insurance products and manage (take custody) of their assets. Sometimes they simply offer advisory services. An increasing trend for financial advisors, usually after some experience, is going independent as a Registered Independent Advisor (RIA). There is often more money and less hassle.

Most financial advisors compensation come from a wrap fee tied to total assets under management, but there are also ancillary revenue streams such as commissions on different investment products, portfolio lending, and other fees. Advisors must adhere to the client’s risk tolerances and avoid conflicts of interest the best they can.

Median annual compensation for financial advisors is about $90,000 with some making less and some making many multiples of that.² Given the positive demographics and attractive compensation, there is strong forecasted demand for brokers which are expected to grow 30% over the next few years.³

With the low-interest rate environment of recent years and a large generation of Americans approaching retirement, the demand for various insurance products has been strong. The products are designed to protect families against catastrophic events including death, fire, and floods but also to endure a stream of income in retirement.

Insurance brokers (also referred to as insurance agents) are licensed to sell insurance products to a variety of customers, including individuals as well as businesses. Sometimes, their products overlap with financial advisors, and they can sell certain types of each. People need insurance products for almost every stage of their lives; auto, health, and homeowners insurance are required, so the strong demand isn’t expected to slow.

Average annual income for insurance brokers is $70,000 ⁴ but increases to $87,000 for independent insurance agents.⁵The main difference is ‘brokers’ sell products from one particular insurer while the more independent ‘agent’ sells products from several different insurers.

Bankers (sometimes called retail bankers, private bankers or commercial bankers) provide a variety of services to individuals and small businesses ranging from basic banking services such as deposits and checking accounts to mortgages and merchant services. Private bankers rely more on walk-in traffic to the branch.

Investment Bankers essentially raise money for companies or provide advice on specific transactions. Traditional and commercial banks service individuals and small businesses while investment banks advise on transactions for larger corporations. The job involves plenty of networking to be successful.

Bankers in a branch office make a lot less than you might expect, despite the prestigious title of banker. Personal or retail bankers (that you might encounter in your bank’s local branch), have median pay of just $35,613.⁶ Banking is a margin business, so they do not overpay for these services. One bright spot is the hours, typically 9-4.  Not surprisingly, personal bankers typically don’t remain in these positions long-term; they usually transition to either financial advisor or branch manager.

On the other hand, investment bankers enjoy an average salary of $100,000, but their employment is more cyclical and lower-level employees often endure 60-90 hour work weeks.⁷

Ever-changing tax laws and a code that is over 70,000 pages long should provide accountants plenty of work in the future.⁸ Given the slew of regulations facing companies today and the strong penalties for transgressions, accounting is one area in finance seeing strong demand.

Accountants prepare, file and examine financial statements and taxes for clients. Individuals (often wealthy) require the services of accountants when dealing with more complicated accounting. There are significant academic requirements to become an accountant, but you can work in the field of accounting with a bachelor’s degree. Continuing forward with a Master’s degree is a popular option as many degree programs are designed to help students prepare for the CPA (Certified Public Accountant) exam as part of the curriculum.

But the rigorous training for accountants pays off. The median income for an accountant is $65,080, but accountants with Master’s degrees and/or CPAs earn substantially more.⁹ Another benefit is added job security since accountants have a very low unemployment rate of 3.6%.¹⁰

Forensic accounting is a specialized type of accounting with the goal of detecting, stopping and deterring fraud. This is an exciting career path where special agents or investigators track cyber criminals, organized crime, money launderers, white collar criminals and embezzlers. Sometimes this is done from afar analyzing financial record, and sometimes this is done intuitively through interview and interrogation techniques. Auditors try and find evidence of accounting fraud before there’s the potential to wipe out all stakeholders, as in the case of Enron or WorldCom.

Many financial service companies are willing to pay for these risk management professionals since 45% of them are victims of economic crime.¹¹ The median pay for a forensic accountant is $74,624.¹² Many fraud investigators go on to earn the Certified Fraud Examiner (CFE) designation. Some Master’s programs curriculum prepares students for the exam which bumps pay up to $90,634.¹³

The term financial analyst can apply to several different job descriptions. Some work in the corporate finance department and examining capital budgets and operating efficiency. Others analyze securities for a brokerage or a buy-side fund. Equity analysts rate stocks and credit analysts rate the debt of corporations or governments. They are well paid, with the median compensation of $76,950 according to the BLS.¹⁴ Analysts working for Wall Street, a hedge fund or private equity firm can make much more. For example, the average pay for professionals in the hedge fund industry is $409,826.¹⁵

Economists use economic data and variables to forecast trends that affect various entities. These parties could be taxpayers, shareholders, the community or even a rogue nation. Economists often work either in the public sector for government or organizations like the Federal Reserve Bank or International Monetary Fund. Banks also employ economists to try and forecast interest rate moves while consumer products companies rely on economists to forecast trends that will translate into sales.

Like accounting, economics requires significant academic credentials, typically a Master’s degree at least. Economists enjoy high median annual pay at $91,860.¹⁶

Traders buy and sell items for profit. ‘Buy low and sell high’ is the adage. These professionals trade everything from stocks and bonds to gold and cocoa. They often have a set amount of money they can trade for their book and sometimes use leverage to make bigger bets on anticipated price movements.

If you’re looking for job security or a stress-free work environment, think twice about becoming a trader. Traders can have one bad year and be fired. On the other hand, profitable traders get reputations around ‘The Street’ quickly and are often courted by other shops that try and lure them away with incentives such as signing bonuses. The national average compensation for traders is $91,730 according to Glassdoor but depending on how your firm does for the year, can be much more.¹⁷

Operations professionals are the behind the scenes employees that make a financial firm run smoothly. They handle the administrative work for accounts, locate stocks for short-selling, ensure payments between parties, settle trades, extend and retract margin loans and monitor activity to meet regulatory compliance. If it sounds mundane, it’s because it can be.

An experienced operations professional is critical to a firm, yet they experience mediocre pay with the average of $66,883.¹⁸ While there is better than average job security, upward mobility is typically limited.

The financial crisis highlighted the importance of managing risk for businesses. Properly identifying and assigning an accurate probability to events, even extreme outliers, can mean the difference between surviving an economic shock and bankruptcy.

Actuaries are business professionals who help companies manage risk, utilizing sophisticated math and statistical analysis. Actuaries must have an interest in, and aptitude for, mathematics since much of the work is math and statistics based.

Today, actuaries predominantly work in the insurance industry or for pension funds. But they can be found in some areas including private corporations, the government, labor unions, banks, colleges, rating bureaus and consulting.¹Actuaries even assist corporations in determining employee benefits packages.

But make no mistake about it-actuary is a finance career. Purdue University describes it as a “business career with a mathematical basis”.² They go on to note that actuaries are better represented by women and minority groups. Unfortunately, this isn’t always the case in finance.

Despite a misconception of being bookish, actuaries must be able to work well in teams and communicate their findings effectively to a variety of clients. Combining these softer skills with sharp analytics makes a successful actuary that is often well-compensated.

CareerCast.com placed ‘actuary’ in the top spot in their ‘10 Best Jobs of 2015’ list, citing mid-level income of $94,209.³If you are looking for a lucrative and recession-proof career, consider starting your journey to become an actuary today.

You’ve probably never wondered how securities transactions are handled. You click a button and your buy or sell order is filled, and a price displayed on your screen. But there is much more behind the scenes, a battle to fill your order.

A market maker is a trader that stands ready to buy or sell a security at a particular price. They typically display both a bid, a price they are willing to buy and an offer, a price they are willing to sell. They facilitate trading and are essential to our financial system, especially during volatile times. Market makers profit from buying and selling customer orders and making the spread.

While high-frequency trading, decimalization and new rules involving inventory limits have somewhat hindered market maker profits in recent years, they can enjoy generous profits for themselves and their firm. This is especially true in markets with low liquidity or the absence of published quotes. This means a wider bid-ask spread and more profit potential for market makers.

This is true for more exotic derivatives like swaps and swaptions as well as many corporate bonds which are still traded over the phone without public quotes. Don’t forget; the stock market is a tiny cousin to the giant global bond markets.

If you are looking for a fast-paced job with enviable work hours in finance (can be done by 4 PM in equities) apply to a broker-dealer with market making operations. Learn the ropes as an order clerk, and then see if you can become a trader’s assistant.

Not all financial advisors are created equal. Despite a standard exam to get a license to sell securities to the public (Series 7) the truth is there’s a huge disparity in talent. Luckily, there is the CFP, Certified Financial Planner, program designed to hold financial professionals to a higher standard. Ethics and professional conduct are emphasized throughout the program which is crucial when dealing with client’s retirement, typically one’s life savings.

The CFP program has been in existence since 1985, long before the DOL’s fiduciary rules. By the end of 2016, there were 76,760 CFP professionals worldwide who have completed a rigorous training program.⁴ This involves passing three difficult exams covering topics from wealth management and alternative investments to business succession planning and Social Security benefits. Upon completion of all requirements, the financial professional is allowed to use the letters, CFP following their name.

Financial planning needs have gotten so complex that an advisor can no longer just be a stock broker, focusing on a single asset class. Today’s customers have more complicated needs including insurance needs, hedging strategies, tax, estate and retirement planning.

Only 1 in 5 financial advisors has earned the CFP designation. But it’s worth going the extra mile. According got the CFP Board, earning the designation results in a 26% increase in compensation.⁵ And according to Salary Expert, the average CFP earns $117,514 annually in the United States.⁶ 63% of CFPs have earned a bachelor’s degree, and 28% have also obtained a Master’s degree (presumably an MBA or Masters in Finance).⁷

A stock broker is a term used to describe a licensed representative from a brokerage firm who solicits, buys and sells stocks for clients on commission. But the term is outdated and harkens back to the 1980s and 1990s when there was less emphasize on the assets under management model and more on commission generation.

Brokers typically stick with retail clients and are of little help for institutional investors. Today, there is so much information available on a company or stock that the input of a broker, while maybe helpful, is not necessary. Also, trades today cost just a few dollars, if not free. There was a time when you couldn’t just glance at your smartphone and see a real-time stock quote. You used to have to call your broker for a quote. Stock brokers have evolved into the more comprehensive, financial advisor.

The finance manager oversees all vehicle sales at a dealership, from giving the final word on price to arranging credit sales. They also conduct due diligence on customers to determine credit-worthiness. Riskier borrowers pay a higher rate on a loan (or longer maturity) which is more profitable for the dealer. And since there is actual collateral on the loan (the car) auto loans get more leeway.

The finance managers know that there are three main ways the car dealer makes money on a transaction. First, on the trade-in, then on the sales price of the vehicle and, finally, on the financing. They can adjust any of these sources to win a sale and any ‘deal’ from one can be compensated by the others. The finance manager’s job is to make money for the dealer-plain and simple.

Then there are the last-minute extras like GAP insurance, extended warranties and even paint protection.⁸ The managers sell additional products and services on the commission that add roughly $1,000 to the final price (it can be significantly more).⁹ These extras can be quite lucrative for the dealerships and managers. Commissions make up about 80% of finance managers pay.¹⁰ A car dealership’s finance manager is part lender and part salesperson. This is why they often worked their way up from sales floor.

This is a great time to be a finance manager. Easy credit policies have allowed auto sales to boom. Loan originators often make the loan, then sell it off to another entity that bundles the loans together. These structured products are purchased by yield-hungry institutional investors like insurance companies and pension funds. This ‘securitization,’ combined with low-interest rates, is what’s fueling the boom. As long as this trend continues, this will remain a lucrative career in finance.

Raising capital is important to any organization. In fact, their existence often depends on it. But fundraising can be a drag for many. Luckily, professional fundraising companies have sprung up to handle this task. These companies take care of all the duties and take a cut of the money they raise, often around 50%. This allows your school, foundation or church the ability to keep existing resources focused on core efforts.

Outside sales representatives are the likely starting position in this field. The job involves hustling and networking to gain business. You will become comfortable asking for money! After you get your feet wet in a sales role, you may move onto a more supervisory position, known as development director. This is where you want to be, overseeing the capital raising activity for an entire, non-profit organization. It should be noted that over three-quarters of these directors are women who enjoy high job satisfaction with the potential for impressive earnings.¹¹