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At cocktail parties, financial advisors usually wouldn’t attract the biggest crowd. It’s a profession that never garnered much interest before the Great Recession.
But times have changed. As retirement accounts were wiped away and market volatility took hold, investors didn’t mind a little hand-holding from a pro.
That’s where financial advisors shine. Those with certification can provide a range of financial advice from budgeting to estate planning. They are a safe haven for others who have concerns about their own portfolios, savings accounts and financial plan for the future.
Factor in the new tax law and the need for high-quality advice rises further, which all bodes well for the financial advisory business.
Consumer use of financial advisors increased significantly from 28% in 2010 to 40% in 2015 with 7 in 10 indicating they work with a certified financial planner, according to data from the CFP Board of Standards.
Advisory firms like Fidelity and Charles Schwab dramatically ramped up the number of advisors on hand to enhance their investing services for clients.
The rise in demand — and pay — lured more professionals to the field. Now, there are about 271,900 personal financial advisors in the U.S. with an annual median salary of $88,890.
“It’s a desirable position for people coming out of college because it commands a high wage,” said Kyle Kensing, online content editor at jobs site CareerCast.
This year, however, marked a sharp change in course. In fact, as of April, financial advisors notched the biggest decline in base pay among all jobs tracked by Glassdoor, down 3% year over year, to $53,196.
The explosion of less-expensive robo-advisors, which give retail investors access to automated investment strategies, is putting pressure on wages, according to Daniel Zhao, Glassdoor’s senior economist.
“Automation is not just affecting manufacturing, it is also impacting white collar jobs,” he said.
At Schwab, for example, assets in Schwab’s advisory solutions rose 9% year over year to $298 billion as of March 31. However, assets in Schwab’s digital advisory services jumped 23% from a year earlier to more than $37 billion.
Despite this “rough patch” for advisors, robo-advisors won’t replace humans anytime soon, Zhao said. Rather than competing with automated counterparts, human financial advisors can leverage that technology to improve their efficiency and still provide personalized service when working with clients, he said.
“One of the nice things about this job is that it relies much more on the human element, which does make it more resistant to automation in some ways.”
Further, those with high-level qualifications, such as CFPs and chartered financial analysts will still command significantly higher incomes as the market for financial advice expands.
“That’s a big predictor of success,” said Joe Maugeri, managing director of corporate relations at the CFP Board.
Indeed, those who obtain certification will likely have the best prospects, according to the Bureau of Labor Statistics. Industrywide, employment is projected to grow 15% from 2016 to 2026, well above average.
“That’s, in large part, due to the fact that we have a rapidly aging population, with longer life expectancies,” said Michael Carvin, co-founder and CEO of personal finance site SmartAsset.
“Plus, in the coming decades, we will encounter the largest generational transfers of wealth ever in the U.S., as baby boomers pass along approximately $48 trillion in assets to heirs and charities,” he added.