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Six Things Advisors Should Know Before Branching Out on Their Own

For advisors who have spent the majority of the last two years working in a fully or partially remote capacity, many of the benefits of working for a wirehouse may no longer outweigh the expenses and lack of flexibility. While branching out and building your own business comes with many perks, it’s also no easy task. In fact, almost 90% of financial advisors fail within the first three years. Here’s what you’ll want to know before you decide to branch out on your own.

1. What Services You’ll Offer and Your Revenue Model

First and foremost, you need a viable business plan. For example, many advisors dislike the minimum asset requirements common throughout the industry, but if your compensation is an AUM based fee, you may struggle to earn enough without minimums. This doesn’t mean you can’t work with a wider range of clients, it just means you may need to think outside of the box. Maybe you decide to offer three or four different services with different fee structures, which could allow you to work with a wider variety of clients while still maintaining a viable business. 

One of the biggest benefits of branching out on your own is the flexibility that comes with it. If you have priorities that don’t align with the standard financial planning model, consider offering services or a revenue model that’s more aligned with your goals.

2. Focus on What Interests You

While there are plenty of valuable certifications and programs, if your only goal is adding letters to your name, you’re wasting your time. Instead, focus your education on an area that interests you. Most financial advisors have a niche that especially speaks to them. Yours may be anything from options trading to helping a client going through a divorce. If a designation is available within your area of interest, that’s great, but don’t limit your education to what’s covered by designations or certifications.

Especially when you’re starting out, throwing money at anything that may attract clients is hard to turn down, but at the end of the day, knowing your business inside and out will help more than an alphabet soup behind your name.

3. Who Your Target Client Is

It may sound counterintuitive but focusing your energy on a narrower client base is almost always better than casting a wide, generic net. 

Defining a target client doesn’t mean you’re limited to someone who exactly fits your target, but it can help you make decisions about your services, marketing, branding, etc. For example, if your target client is a millennial doctor or lawyer, a speaking event with retired baby boomers probably isn’t the best use of your time. 

You’ll want to consider your target clients’: 
 • Age 
 • Occupation 
 • Income level 
 • Life stage 
 • Financial needs and priorities

4. How to Maintain Strong Relationships with Existing Clients

Finding new clients is one of the hardest parts of life as an independent advisor. Especially when you feel the pressure building to bring in new clients, you may find yourself putting all your energy there, to the detriment of your current clients. 

Besides the fact that supporting your clients is part of the job of an advisor, and therefore the right thing to do, it’s also a good business strategy. The more satisfied your clients are, the more likely they are to recommend you to their friends or family members. Additionally, keeping an existing client is far cheaper than finding a new one. 

Whether the client is one you’ve worked with for years who followed you to your new practice, or a brand-new client, one of the best ways to keep clients satisfied is to communicate. Older clients may wonder how the change will impact them, while newer clients may not have previous experience working with an advisor. No matter the circumstance, communicate expectations with clients, making sure to be as specific as possible.

Topics to discuss include: 
 • How often will you meet? 
 • How can they reach you outside of face-to-face meetings? 
 • How quickly will you respond to clients? 
 • How will you and your client handle market corrections?

5. What Realistic Expectations Look Like

Starting a financial planning practice is not easy. That doesn’t mean it’s not worth it, but the more realistic your expectations are upfront, the more likely you are to succeed. 

First of all, it’s highly unlikely that all of your clients will follow you. People simply don’t enjoy change, and most major wirehouses make it easier for clients to stay than follow their current advisor. No matter how satisfied your clients seem, if you’re expecting all or even most of them to follow you, you’ll likely end up disappointed. 

There are also income expectations to consider. Almost every new advisor will need to dip into savings for a while. To make sure you have enough, crunch the numbers using your most conservative estimates. How much do you expect you’ll need to take from savings, at most? Now add at least 25% more. While you should hope for the best, when you’re running your own business, you have to prepare for the worst. At the very least, knowing you have plenty of additional cushion can help you sleep easier. 

Finally, you need to set realistic expectations on your time. The best way to do this is to focus your energies and figure out how to get the best return for time invested. A great way to do this is to track your time. While this itself may take a little extra time, knowing how and where you spend your time and how it is or is not converting clients is a great way to work more efficiently and effectively.

6. All the Hats You’ll Wear

When it comes to realistic expectations on time, you’ll also need to consider all the hats you’ll be wearing. Once you’re on your own it’s your responsibility to handle admin tasks, IT, marketing, and compliance. 

While you may be working on a limited budget in the beginning, you’ll also need to be honest with yourself on what you can and cannot handle on your own. Is it worth saving a few dollars at the risk of being out of compliance? Once you begin making a profit is that money better spent going into your pocket or towards hiring someone to help with admin tasks? The key to answering questions like these is to keep the big picture in mind.

The Takeaway

Branching out on your own comes with plenty of benefits, but it’s not easy. If you’re considering starting your own advisory practice, you’ll want to spend as much time as possible preparing beforehand to give yourself the best possible chance for success. 

One way to make life easier is with Presults automated email archiving, specifically designed to meet the compliance needs of Advisors.

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