Tips for starting a financial planning company

Why open your own company?

Whether you want to get rid of a senior financial planner from a bossy boss, or a rookie who just graduated from college, the dream of starting your own financial services company may be the desire to get you up on rainy days. Money, autonomy, and convenience Office hours and recognition within the community are all part of the package, at least in our dreams. In fact, starting a financial services company is a daunting task. The losers are often those who have no plan.

Read on and we will explore the knowledge needed to turn our dreams into a thriving business reality. We will introduce seven key factors to keep in mind when starting your own practice.

Growing demand for financial planners

The age of your average financial planner increases with the age of their client base. With this, more planners are leaving their practice, and more potential clients are entering their retirement age.

The changing demographic structure of the American population is rapidly opening up new areas of expertise, such as long-term care and alternative investments. The latest generation of financial products and services also allows consultants to meet customer needs in ways that were unpredictable just a few years ago. These factors increase the demand for qualified financial planners.

Veterans and customer base retention

If you are a veteran in the industry and trying to be independent, then you may be tired of the ongoing sales pressure, office politics, and other company restrictions. At this stage of your career, you may have formed your own personal investment philosophy, which may be different from the methods supported by your current employer. You may also worry about managing your business book and think that it will serve your customer base better in a more independent environment.

Although having an established customer base is a huge advantage for anyone starting their own financial planning practice, it also creates a series of problems. Think about how you will achieve customer retention and still be able to serve key customers when transferring these accounts from one company to another.

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Rookie and customer base building

Newcomers in this industry will face greater obstacles on their way to success. In addition to the normal start-up issues that must be dealt with, novices must also build a customer list from scratch and learn the mechanics of the business, which can be considerable. However, like many entrants in the field, you may view financial planning as a way to truly change the lives of others.

If you are an entrepreneurial person, you may be attracted by the prestige, freedom, and high compensation that many financial planners may enjoy. But regardless of your background or motivation, establishing your own financial planning company may be one of the most difficult and satisfying things you have ever done.

#1. Start-up cost

Many of the startup costs required to start a financial planning company are the same as any other business. These include furniture, rent, advertising, technology, utilities, and perhaps a deposit to a new broker-dealer (if used). For those who need them, licensing and training costs must also be taken into consideration. Veterans who have a business book also need to consider any possible loss of income due to switching to a new company.

#2. Licensing and Training

In addition to obtaining the necessary licenses, novices should also consider obtaining one or two professional titles, such as a registered financial planner or a chartered life insurer. A certificate like this can help those who are just starting their business or looking to expand their business scope to provide much-needed credibility and academic training.

However, if you are a veteran in the industry, licensing and training may not be critical issues unless you are going to take up a new job. For example, if you have an insurance business and plan to increase investment or comprehensive financial planning in your practice, then you will need to obtain the appropriate license (and perhaps certification).

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#3. Business plan creation

As with any other business, it is essential that an independent financial planner starts with a well-written business plan. The plan should include:

  • business goal
  • Specific strategies on how to achieve these goals
  • The current state of the financial market
  • Demographics of customers and prospects
  • How to make your company stand out from the competition
  • Flexible marketing plan
  • All possible costs (these should be clearly defined)
  • Actual estimate of the time required to complete the planned goals

#4. Business model and service

Determining what kind of financial planning practitioner you will become is an important decision. This choice involves both the type of service you will provide to your customers and your compensation method. The income of financial planners engaged in commission work (on average) is often much higher than that of fee-based planners.

However, clients who particularly want fair advice often look for fee planners. Your personality type may play a role in making this choice; if you have an analytical mind and don’t like high-pressure sales, then just run the numbers and make recommendations, and you may feel more comfortable.

On the other hand, if you are a type A personality who likes to work with people, then using a sales-based approach may be more successful. The type of business model you decide to adopt may also determine which licenses you need to obtain.

#5. Build professional relationships

Establishing professional relationships is essential for any fledgling financial planner, especially those who do not have mature business books. Finding a lawyer or certified public accountant who is willing to work with you may be the best thing you can do for your business. Mentors are equally important, especially for new entrants. For those who are still learning about business, it is invaluable that someone asks for advice and can guide you through the difficult early stages.

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If you need it and can afford it, then you must find and build an effective support team around you, whether it is a single assistant or an actual team of people. It takes some time and adjustments to ensure that all these parts are properly matched, but the end result should be streamlined and efficient employees that enable the company to run smoothly and profitably.

#6. Know the risks and responsibilities

Conducting any business involves certain risks. There are risks that the income generated by the business is not enough to survive, as well as the risks of liability and other fiduciary responsibilities. All financial planners need compensation insurance. Errors and Omissions (E&O) insurance will prevent misconduct lawsuits, but remember, it will ultimately be your responsibility to ensure your business compliance. All customer complaints and problems must be handled in a professional manner to ensure business stability.

#7. Reap the rewards

Successful planners enjoy high (and sometimes very high) salaries, virtual autonomy, convenient office hours, and recognition in the community. But the best reward may be to help customers achieve a sense of accomplishment brought by inner peace by solving complex financial problems. No matter what type of reward you want, the financial planning profession can provide what you are looking for.

Bottom line

Although starting a private financial planning practice undoubtedly involves a lot of work and risks, those who want to do so should not let fear prevent them from achieving their dreams. Many private and even corporate practitioners will easily tell you that financial planning is the best business in the world.


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