What to Know About Starting a Financial Planning Business
Starting your own financial advisor business might seem exciting. Maybe you want to follow your passion, maybe you want to get away from your current one, or maybe you find the prestige that comes with it very appealing.
You're not alone; 36% of Americans want to own their own business. There's just a lot to like about having your own business: convenient office hours, more autonomy, recognition from peers, and much more.
Yet, as you've probably suspected, it's not as easy as you think.
There are personal challenges that you need to overcome — things like habits, and sometimes borderline spiritual questions such as “What do I really want?”
There are more than a few business-related obstacles, too — the laws, the cost, your target clients, day-to-day operations, unique challenges that come up, and more. If you don't want your advisory firm to fail, plan thoroughly and be prepared to work hard.
As you can imagine, starting your own firm might seem daunting, but what's life without taking on a few risks? In this article, we’ll discuss what you need to know about starting a financial planning business.
Why Start Your Own Financial Planning Business?
While starting your own financial planning firm and becoming self-employed is not an easy process, the perks that come with it make it worth the labor.
Yes, we're talking about things like higher income, increased job freedom, and convenient schedules. But we know that sometimes there are also other reasons to pick the self-employed route, such as to better address concerns like:
Finding that there's a problem with how financial firms pick their clients,
Feeling a lack of independence when giving financial advice. For example, some advisors feel bothered when they need to factor their employer's shareholders into account when giving advice,
Seeing a conflict of interest between the financial advisor and their client due to the business model used by your employer,
Disagreement with the fee structure your employer established,
Or maybe you just found your mission differs dramatically from the firms around you.
Whatever your reason, be it simply convenience or something deeply personal, it should be strong enough to motivate you to work hard and tide you over when you feel like giving up.
As people age, more advisors are leaving their practices, yet there are more people entering their retirement years. The changing demographic also provides new niches and widens some, like long-term care and parenthood planning for LGBTQ+ folks.
Choosing a financial planning business is a worthwhile route as there is definitely a growing demand for certified financial planners (CFPs), advisors (CFAs), and other financial services.
Steps to Starting a Financial Planning Business
Ready to get started? Here are five steps you can follow to begin starting your financial planning business.
1. Understand Start-Up Requirements
Before starting a financial firm, it's important to know what it really entails.
It's no different than the start-up costs of other businesses — like furniture, advertising, utilities, technology, and rent.
Even if you plan to conduct most of your business through virtual meetings, it will look much more credible to potential clients if you have a brick-and-mortar office, especially if you have one in a prominent location.
Other than standard start-up costs, you need to check the laws in your state and register as a practitioner in your area.
If you need another licensing or training, put that in as well. For example, you might need certifications to become a Certified Public Accountant (CPA), Certified Financial Planner (CFAs), or Registered Investment Advisor (RIA). You might also need certification from FINRA if you’d like to act as a broker or a broker-dealer. Look into what kind of licenses and certifications you need to complete depending on where you’re located and the services you offer.
Some independent financial advisors suggest taking hiring costs into account, even if you plan to start as a one-man team. Some businesses only hire when they're desperate. In desperate times, you don't want to pick the wrong partner because you don't have enough funds.
If you're a veteran advisor, you'll need to factor in possible loss of income when you transfer books from your old employee to the new firm.
On top of that, there are also business taxes to familiarize yourself with and insurance shopping.
2. Choose a Target Client Base
Like starting out with financial planning for the first time, you need to choose a niche — that is, who your target client will be. It's unwise to try to be a jack of all trades in such a populated field.
Your niche will decide where and how you advertise, how you approach new clients, and sometimes even your fee structure.
You can do this by deciding a type of service you want to offer, such as retirement planning, wealth management, or investment management.
You can also specialize based on the type of clientele you want to serve. For example, rather than picking one discipline, you might want to offer personal finance advice for millennials or comprehensive financial planning for small business owners instead.
Either way, once you decide on who you want a client, everything else becomes easier. With a clearer view of their financial goals and problems, you’ll be able to tailor your conversations with prospects and clients alike. Instead of having years of experience in general financial planning, you can spend those years becoming the best at what you do.
3. Undergo the Legal Process
Now that you've considered start-up requirements and your target niche, the next thing to do is undergo the legal process to make your business official.
Start by establishing a legal entity. This will protect you from being held personally liable if there are legal troubles with your practice.
Look for information regarding business structure types to determine which one is the right fit for you. The four most common business structures are limited liability companies (LLCs), companies, partnerships, and sole proprietorships.
Next up is registering for taxes, which depends on where you're based.
Regardless, you'll need to apply for an Employer Identification Number (EIN) before that, which can be done for free through phone, fax, mail, and even the IRS website. The taxes that you'll need to file depends on where and how you conduct your business, so be sure to do your own research.
4. Establish Your Brand
Your brand is how you want your clients to see you. Designing a brand and actually fulfilling those values and mission statements are some of the most challenging yet important parts of running a business.
Knowing what to call your firm is only a part of branding. Before registering your business name, it's recommended to check the following:
Your state's business records to look for doubles,
Trademarks registered in federal and state records to ensure a smooth application process,
Social media platforms to see if your firm's name is offensive or has unintentional meaning,
And the availability of your domain name.
Beyond just visible markers, like your logo and name, your brand should also be baked in every decision you make about your business.
For example, if you’d like to be known as the accessible firm for service providers, then all of your decisions should be tailored to fulfilling that role.
5. Start Lead Generation
Now that your firm is open for business, the next challenging part is bringing in customers to your firm.
Even if your existing customers are satisfied and help out your business by creating a good buzz for you in the community, word of mouth alone won't generate enough new business for your practice.
You need to take steps to generate new leads, such as:
Establish a solid online presence — the more people see you, the more people contact you;
Make sure how you generate leads is consistent with your brand's message;
Host or attend virtual meet-ups or in-person seminars.
An effective local SEO strategy will serve you a long way — in fact, specific searches for local things and establishments comprised 46% of Google's searches;
Depending on your target market, using social media to generate additional leads may be profitable, but you still need to consider which social media your niche frequents;
Use paid advertising campaigns, such as Facebook or LinkedIn ads;
Email marketing campaigns — this is one of the most effective marketing strategies a company can use;
Create a website with a high-conversion rate (that's why we talked about checking your website's domain name earlier);
Get referrals from past and current clients and various networking strategies — attending school alumni events, sponsoring local sports teams, interfacing with local groups, and more.
Lead generation is the best way to keep new business coming. However, it requires the right strategies, time, and enough effort before you start to see results.
Implement the right lead generation strategy for your business and goals. For example, if you’re just starting, one-to-one outreach or cold calling can give you a better chance of landing clients. However, once you start to grow as a firm, you’ll want to do this at scale by using different strategies such as content marketing or social media marketing.
Kick-Start Your Financial Planning Business with Asset-Map
Starting out as an entrepreneur in the financial advisory business might be challenging, but it also comes with its own perks. Whether you’re a veteran or a rookie just starting out, there are things to consider and certain steps that you need to take before your practice is legal. Like other businesses, you need to know what your start-up requirements are.
The next step is determining your client base, which is very important as your advertising and lead generation tactics depend on it.
Once you’re ready, you need to file the relevant documents to officially establish your firm.
Kick off your business by establishing your brand and employing lead generation strategies that will bring clients to your doorstep.
Want clients to think about the impact you’re making on their finances rather than the nitty-gritty details?
Asset-Map helps clients get the big picture, branding you as the most accessible financial advisor they’ll ever work with.
Simplify your processes and client conversations. Impress clients with surprisingly seamless interactions.
Sounds like something you’ve been looking for? Book your demo today, and let’s walk through how a visual map can help you grow your brand new financial planning business.