Being a financial planner can be a rewarding career choice. What can make it even more so is the choice to start your own business rather than working for someone else. As many as 25% of those in the finance and financial advising industries reported a desire or goal to start their own business rather than working for a firm. If you’re considering your own financial planning business, this guide will cover everything that you need to know.
Demand For Financial Planners On the Rise
The growing demand for financial planning professionals and the increasing technology that makes remote work accessible is changing the way that people do business and the reasons that they start them in the first place. In uncertain times, having a business that you can rely on because it is your own could be an invaluable asset. In a field with high demand like this, it’s an even better choice.
Independent vs. Incorporated Financial Planning Business
By far, the easiest way to set up a business is to work as an independent contractor and provide services to people on a consulting or 1099 basis. This can save a lot of paperwork and startup expenses when it comes to your new business. Even if it’s just the first stepping stone to actually creating a company and hiring employees, it may be the way to go.
If, however, you have the resources and means to build an entire business from the beginning, you’ll want to set up a business plan and look into how it will be best to incorporate your business. Sometimes, starting an agency right away is the best option, even if you are the only employee or one of two or three. After all, the idea is that you will continue to grow, which will make it more necessary for you to use this business structure. Thus, it could behoove you to have it in place already.
Ultimately, it will be your decision as to what to do or how to incorporate your new business. You might want to consult a lawyer that is experienced in business startups to see what they recommend and make sure that you are doing everything by the letter of the law. Speaking of which, don’t forget about licensing and training that your new financial planner business may need.
Licensing, Training, and Planning
If you are new to the world of financial planning, you’ll want to get the necessary training and licensing to ensure your clients that you have the knowledge and resources that they need. You can also choose to seek additional credentials, like those of a Certified Financial Planner, or seek out continuing education for your business needs.
Then, you’ll need to consider creating your business plan and choosing your business model. Think about the goals of your business and how you want to work as a financial planner. This will dictate the type of business that you set up. You’ll also want to list in your business plan:
- Your target audience
- Your marketing plan
- Potential expenses
- A realistic timeline
- How you stand out from the competition
Choose what services you will offer to your clients, based on both your expertise as well as what is in high-demand in your market. You will also need to decide whether you are going to work on commission or whether you will provide fee-based services. There are pros and cons to each. Namely, those who want unbiased advice will typically go to a fee-based planner, but commission-based agents will earn far more than most fee-based service providers.
You might even want to look at business loans for funding if you want to grow into a larger agency.
Building a Client Base
If you already have clients that you can bring to your new business, this might not be on your to-do list. If, however, you’re just starting out, you’ll need to know where to find clients who need your financial planning business services. As part of your marketing plan, look to social media and rely on the word-of-mouth of your friends and family to get things off the ground.
Another great way to build a client base is to make that what differentiates your business from the rest– create a need-based service that targets a specific audience. Then, your target client base will segment itself. If you’re taking clients from a larger firm, bear in mind that they might have a certain level of expectation from working with a big-name agency that is going to have to be tempered when they transition to working with your new business.
Invest in Insurance for Your Business
Any new business owner needs to understand the risks and liabilities that they are taking on in their new venture. In the world of financial planning, this is even truer. You will be required to invest in indemnity insurance, as well as E&O (errors and omissions) insurance to protect yourself from potential risks related to your financial advice or planning services. You should also make sure that your entire business is following all regulatory compliance guidelines and federal and state laws.
Again, it may be in your best interest to get the assistance of a lawyer that is familiar with starting a business so that you can make sure that everything is in order. There is a lot to love about starting your own financial planning business, but you’ll love it even more when you know it’s done right.
Reap the Rewards of Your Efforts
Financial planners and advisors can earn a high income for their efforts. Plus, the chance to create your own office hours, use virtual tools to connect with clients and save the expense of office space, and to be your own boss all make starting a business like this a great choice for those who enjoy the work. If you like helping people get more out of their finances, this could be the business solution that you need.
While there is a significant amount of risk and work involved here, it’s all worth the effort when you do it right. It’s time to get out on your own and take your financial planning career to the next level with your own business and this is how.
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