Personal Finance Consulting

[shultice24]

My question is probably in the legal realm- but I'll ask it anyway and see if anyone knows much about it.

I'm interested in slowly building a side-income off of personal finance consulting. Thing is, I do not necessarily want to be a certified financial planner. I don't want to sell equities, insurance, or annuities- my income would be completely free of conflict-of-interest commissions.

Instead, I would sit down with a client- come up with a financial action plan that fits their situation- then leave. It would be entirely up to them to put their plan in place. I wouldn't manage a dime of their money for them, nor try to sell anything whatsoever (except my time).

Would this require any special certification? I'm hoping it would be a case where a disclaimer would suffice ("You are paying me for advice only- you take responsibility for what you actually do with it.". I don't see how it's much different than financial bloggers providing advice and having a clear disclaimer.

Thanks in advance for any insights.

-Blake

[kork13]

The problem I see there is that anybody seeking financial advice should look for the CFP certification. If a friend of mine was looking at paying a financial adviser for help, I would try to dissuade them from going to anyone that does not have that certification. It's just the smart thing to do.

Just because you've earned your CFP rating, it doesn't automatically mean you have to become a salesman, pushing certain investment products or whatever. You can charge a flat fee, earning no commission. There are also companies out there that follow the same business model -- flat fees only, no commissions (i.e., no salesmen). If you really do want to do this, earn your CFP, then go into your private business venture. Not only will you gain MUCH more credibility and clientele, but in the process of earning the CFP, you'll also learn a great deal about the types of products out there, enabling you to give much better, more detailed, and more fine-tuned advice to your clients. Except for the cost/work involved in earning your CFP, there is no downside to getting it. Plus, having earned it could open doors for you in the future.

[jIM_Ohio]

It depends on what kind of advice you want to give...

If its budget advice only, you can do it without a license
If you are analyzing if they have enough insurance you need an LAH (because if you suggest they need more term, you need a license to justify it, even if you do not sell them anything)
If you look at mutual funds, run them thru xray, and then suggest "buy more large cap, sell more small cap", you need a series 6 license to suggest securities. My understanding is that most of the people you call at a mutual fund company have a series 6.
FYI- if you buy and sell on others behalf, you need a series 7
if you manage people which buy and sell on others behalf you need a series 8
If you were to look at a tax return and then make suggestions on how to improve the refund, you need no license. However the title to represent a person before the IRS is
a) a lawyer
b) a CPA
c) an enrolled agent

If you get a CFP designation, it is combining aspects of the EA. Series 6, LAH and a few other professions into one license. I have been told the following by people in various professions:

1) the father of a kid I coached in soccer is a broker with a series 7, in his office they have one CFP... that CFP said the CFP was the hardest test he took in his life
2) I took the HR block tax course last fall, with a person which used to work for Fidelity. He said if you are selling advice (such as if insurance is enough), there is 10X more money in selling the insurance than selling the advice... so the customers you lose for not being "objective" is more than made up for with customers which buy a product. This person was the one which explained the series 6-7-8 to me. He also said the work to get the 6 and 7 is about the same (more on the 7) and if you get one, might as well go for the 7.

I did look into this a few years ago, but a career change in that regard was not in my cards- takes too long to build up a client base.

If and when I choose to do a consulting path, I will do the following
1) go for the tax return business first. Its seasonal, and everyone needs to do it. In addition, that is the one time of year everyone opens their finances up.
2) go for LAH second. My wife has an LAH (she needs an LAH to enroll people in health insurance) and knows nothing about annuities or permanent life insurance- even though all those things were on the test. If she can pass that, so can I.
3) go for the CFP. I have been told by the CFP above if you get the CFP, they give you a series 6 by default, making it "legal" for me to profit from suggesting people get one mutual fund over another.

[jIM_Ohio]

The problem I see there is that anybody seeking financial advice should look for the CFP certification. If a friend of mine was looking at paying a financial adviser for help, I would try to dissuade them from going to anyone that does not have that certification. It's just the smart thing to do.

Just because you've earned your CFP rating, it doesn't automatically mean you have to become a salesman, pushing certain investment products or whatever. You can charge a flat fee, earning no commission. There are also companies out there that follow the same business model -- flat fees only, no commissions (i.e., no salesmen). If you really do want to do this, earn your CFP, then go into your private business venture. Not only will you gain MUCH more credibility and clientele, but in the process of earning the CFP, you'll also learn a great deal about the types of products out there, enabling you to give much better, more detailed, and more fine-tuned advice to your clients. Except for the cost/work involved in earning your CFP, there is no downside to getting it. Plus, having earned it could open doors for you in the future.

I think this is a decent opinion. I know several people in financial industry without CFP which give good advice when we talk at parties or at bars... someone does not need the CFP to have credibility if they have friends and clients which can refer them and vouch for their abilities. The purpose of the CFP, as best I understand it, was to level the playing field between annuities and mutual funds and similar- there needed to be one financial designation which suggested someone knew about both options before suggesting one or the other. Just because the person has a CFP does not mean they will give objective advice... its possible your insurance rep has a CFP to give the illusion they give objective advice when they sell you that annuity.

[creditcardfree]

Just a piece of information. I obtained my series 6 license when I worked for a mutual fund company. It was not required, but highly encouraged. I passed the first time with 88%. You only need to get 70% of the questions correct.

To keep a series 6, you need to be sponsored by a licensed financial institution, so once I quit the license was void. Although, if I had moved to another job that could sponsor me with in a certain period of time, it would still be valid.

So, there is no possibility to be independent and have a true Series 6, although I'm not doubting the CFP information posted previously.

Great question by the way. I would love to help people financially, without selling a product. I guess that's why I'm here! I will say the pay leaves something to be desired.

[minnie1928]

Great question by the way. I would love to help people financially, without selling a product. I guess that's why I'm here! I will say the pay leaves something to be desired.

I work here too...perhaps we can petition for a pay raise.

Honestly, I would love to have a job like that.

[jIM_Ohio]

I put some thought into this, and 12 months ago almost started it on the side... life interfered... what you need to remember is objective is relative... just because you are not selling anything does not make you
a) right
b) objective
for a given situation... meaning if someone pays for my advice, they only know if the advice is good if they took it, and even if they did take it, there is still no guarantee of success.

I have someone run tax questions by me once in a while and I realize I have a long way to go before people would pay me for the advice.

[jefffou]

My question is probably in the legal realm- but I'll ask it anyway and see if anyone knows much about it.

I'm interested in slowly building a side-income off of personal finance consulting. Thing is, I do not necessarily want to be a certified financial planner. I don't want to sell equities, insurance, or annuities- my income would be completely free of conflict-of-interest commissions.

Instead, I would sit down with a client- come up with a financial action plan that fits their situation- then leave. It would be entirely up to them to put their plan in place. I wouldn't manage a dime of their money for them, nor try to sell anything whatsoever (except my time).

Would this require any special certification? I'm hoping it would be a case where a disclaimer would suffice ("You are paying me for advice only- you take responsibility for what you actually do with it.". I don't see how it's much different than financial bloggers providing advice and having a clear disclaimer.

Thanks in advance for any insights.

-Blake

From a market demand point of view, I'm not sure if it's do-able or not. More on that below. But from a licensing requirement point of view, it may be easier than you think.

The one recommendation I have is to sit for the series 65. I understand you don't want to manage money, but I would DEFINITELY want to be licensed here. This is the exam that is designed to qualify candidates as investment adviser representatives. Good news is, it's not that hard.

Here's the deal. If you sit down with John and Jane Doe, the topic of investment advice will eventually be breached. Whether you manage money or not, you will eventually find yourself dispensing investment advice. And when, not if, you ever enter into this area, you will want to make sure you are licensed.

In my state you may make very general life insurance presentations, and not be a licensed agent. For example, "here's how much life insurance you would need to...." and so forth. The insurance sale is easily referred to an agent that can do the heavy lifting.

I believe you can supply IRS.gov printed rules and regs. and still be fine without certification. If you find yourself over your head, you can refer the tax component as well. I don't see a problem here either.

However in my opinion, the investment component is the easiest one to get in trouble with. And therefore, the greatest need for proper licensing, in my opinion.

Now, to whether it's do-able from a "side income" point of view. Many times, Blake, the trigger that prompts potential clients to request your services comes from their need for money to be moved. 401k to IRA. Mother to beneficiary son. CD Rates are not providing enough income to meet one's needs. Parents planning college for their children. These events necessitate the need for someone to do more than offer advice. These people want someone to manage these shifts of funds for them , and manage their risk right thru the process. They want someone to make the most of their situation. They will want you take care of their needs completely. Understand that this function may be outsourced, but you will need licensing regardless.

Now, with a series 65, you won't ever be able to receive a commission. But you may charge by the hour, by the job, or you can attach a fee to the assets being managed.

I believe this is the way to go, Blake.

Jeff

[shultice24]

No time for much of a reply at the moment- but just wanted to extend a huge thank you to all who have replied. I was hoping for a helpful answer or two, but this is incredible. Thanks again to all the people on these forums who make this such a great place to learn.

[jIM_Ohio]

From a market demand point of view, I'm not sure if it's do-able or not. More on that below. But from a licensing requirement point of view, it may be easier than you think.

The one recommendation I have is to sit for the series 65. I understand you don't want to manage money, but I would DEFINITELY want to be licensed here. This is the exam that is designed to qualify candidates as investment adviser representatives. Good news is, it's not that hard.

Here's the deal. If you sit down with John and Jane Doe, the topic of investment advice will eventually be breached. Whether you manage money or not, you will eventually find yourself dispensing investment advice. And when, not if, you ever enter into this area, you will want to make sure you are licensed.

In my state you may make very general life insurance presentations, and not be a licensed agent. For example, "here's how much life insurance you would need to...." and so forth. The insurance sale is easily referred to an agent that can do the heavy lifting.

I believe you can supply IRS.gov printed rules and regs. and still be fine without certification. If you find yourself over your head, you can refer the tax component as well. I don't see a problem here either.

However in my opinion, the investment component is the easiest one to get in trouble with. And therefore, the greatest need for proper licensing, in my opinion.

Now, to whether it's do-able from a "side income" point of view. Many times, Blake, the trigger that prompts potential clients to request your services comes from their need for money to be moved. 401k to IRA. Mother to beneficiary son. CD Rates are not providing enough income to meet one's needs. Parents planning college for their children. These events necessitate the need for someone to do more than offer advice. These people want someone to do it manage these shifts of funds for them , and manage their risk right thru the process. They want someone to make the most of their situation. They will want you take care of their needs completely. Understand that this function may be outsourced, but you will need licensing regardless.

Now, with a series 65, you won't ever be able to receive a commission. But you may charge by the hour, by the job, or you can attach a fee to the assets being managed.

I believe this is the way to go, Blake.

Jeff
401k Advice

Jeff- good info, learned a thing or two... some questions...

series 65 vs series 63- what is difference? In my conversations series 6 and 63 came up. Can you tell me what differences are?

have you done any of this yourself?

what state?

[jefffou]

Jeff- good info, learned a thing or two... some questions...

series 65 vs series 63- what is difference? In my conversations series 6 and 63 came up. Can you tell me what differences are?

have you done any of this yourself?

what state?

Jim, thanks for the kind words.

Here is some info directly from Finra....

Uniform Securities Agent State Law Examination - (Series 63) (NASAA) - 60 multiple choice questions; 1 hour and 15 minutes testing time. The Series 63 is designed to qualify candidates as securities agents. The examination covers the principles of state securities regulation reflected in the Uniform Securities Act.

Uniform Investment Adviser Law Examination - (Series 65) (NASAA) - 130 multiple choice questions; 3 hours testing time. The Series 65 is designed to qualify candidates as investment adviser representatives.

Uniform Combined State Law Examination - (Series 66) (NASAA) - 100 multiple choice questions; 2 hours and 30 minutes testing time. The Series 66 is designed to qualify candidates as both securities agents and investment adviser representatives. The Series 7 is a corequisite exam that needs to be successfully completed in addition to the Series 66 exam before a candidate can register with a state

I believe that some states require the individual to have passed the 66 (which is some sort of combination of the series 65 and the series 63.) My particular state (Arkansas) requires the series 65 instead.

The series 6 is a Finra exam. required for those who want to sell mutual funds or variable annuities for a commission.

Blake, it appears, wouldn't want to take the series 6 or series 7 route, which would enable him to receive commissions. Instead, I believe either the series 65 or series 66 would be more appropriate. This would depend on his state requirements. However, it may be possible that none of this would be required. My opinion is that it would be very difficult to avoid dispensing investment advice in the course of personal financial planning.

Jim, I did pass the series 65 in the state of Arkansas. It wasn't extremely difficult, but it does require a certain amount of preparation (as any exam does). From my experience, none of these exams are extremely difficult if one logs the study hours needed to get the job done.

Jeff