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Tailored for entrepreneurs that want to establish additional active and passive income streams.

Tailored for entrepreneurs that want to establish additional active and passive income streams.

 

 

 

Customized financing to consolidate high-interest debt or fund major purchases or expenses.

July 23, 2024

How to Start a Financial Advisor Business

Which business loan is right for you

Whether you’re a new financial advisor wanting to be on your own or an experienced financial professional finally ready to make a change, starting an independent financial advisory firm is a path to a lucrative and flexible business. The financial advisory field is ripe with opportunity, whether your focus is on crafting tailored investment strategies, comprehensive retirement planning, or wealth management.

The one certainty of starting any new business venture is that you’ll need money. If you plan to build your firm while you maintain full-time employment, you may intend to bootstrap your venture on the side until it’s ready to launch. However, if you plan to leave your current position to start a firm, you may need to consider securing financing through small business loans or personal loans to turn your aspiration of owning a financial advisory firm into reality.

 

Key considerations

  • Success in a financial advisory business depends on your ability to carve out a distinct niche and identify your target audience, as this will guide your business plan, offerings, fee structure, and more.
  • Certifications, designations, and education are critical, but you’ll need to prioritize delivering personalized financial advice and exceptional service to build trust and long-term relationships with your clients.
  • It’s critical to develop a robust business plan outlining your objectives, target market, marketing plan, operational structure, and financial projections, then revisit and refine it over time to adapt to changing market and client needs.
     

Opening a financial advisor busines

Opening a financial advisor business offers autonomy, flexibility, and the potential for unlimited earnings. This potential for financial success can be inspiring for aspiring financial advisors to make the decision into entrepreneurship. As a financial advisor, you can make a meaningful impact on clients’ financial well-being, which can be personally rewarding.

However, entrepreneurship in the financial industry comes with inherent risks. Market volatility, regulatory changes, and economic downturns can challenge stability and growth. Additionally, building a client base, navigating compliance requirements, and managing expenses require careful planning and perseverance. Despite these challenges, aspiring financial advisors can position themselves for success by weighing risks against rewards and taking proactive steps to mitigate challenges.

 

How to build a financial advisor practice

Crafting a successful financial advisor practice hinges on strategic planning and meticulous execution. You can use the following steps to lay the groundwork for your financial advisory business, from.

Earn necessary certification

In your journey toward becoming a financial advisor, acquiring the requisite certifications is a pivotal stepping stone toward your professional credibility and expertise. While a bachelor’s degree in finance, economics, accounting, or a related field lays a solid foundation, attaining specialized certifications truly sets you apart in the competitive landscape.

Among the most esteemed certifications is the Certified Financial Planner (CFP) designation, renowned for its comprehensive curriculum covering topics ranging from retirement planning and investment management to estate planning and tax strategies.

Acquiring this certification puts you in a select group of around 100,000 individuals in the entire U.S., which is a fraction of the nearly 272,000 personal financial advisors as estimated by the Bureau of Labor Statistics (BLS).*,** Holding such respected credentials bolsters your knowledge base and instills client confidence and trust.

  

Create a business plan

Creating a comprehensive business plan is paramount as it is the guiding blueprint for your financial advisor business. Your plan should meticulously outline various elements, including:

 

  • Specific business objective
  • Analysis of your target market
  • Detailed pricing  
  • Comprehensive marketing plan
  • Operational structure
  • Realistic financial projections

 

Remember, your business plan is not static; it should be revisited and updated regularly to adapt to changes in the market, industry trends, and the evolving needs of your business as it progresses.

 


Register your business

To establish your financial advisor business, it’s imperative that you carefully select a suitable legal structure that aligns with your goals and needs. Consider options like a sole proprietorship, partnership, limited liability company (LLC), or corporation.

Once you’ve chosen the appropriate structure, take the necessary steps to register your business name and obtain any required licenses or permits to operate legally as a financial advisor in your state. This may involve navigating regulatory requirements specific to your industry and location, so conduct thorough research and seek professional guidance if needed to ensure compliance with all legal obligations.

Note: We highly recommend consulting with legal and tax professionals on the pros and cons of any business structure before making any final decisions.



Establish your specialty

To establish a successful financial advisory firm, it’s crucial that you meticulously identify the specific area of financial advice you aim to specialize in and define the demographic you intend to serve. You may need to conduct comprehensive market research and analysis to pinpoint areas of opportunity and assess the needs and preferences of your target audience.

Whether you choose to focus on retirement planning, wealth management, estate planning, or niche markets like socially responsible investing, you must deeply understand your chosen area and its unique challenges and opportunities. Focusing on a specific niche can help differentiate yourself from other advisors and position you as an expert in the financial services field.



Determine your offerings and fee structure

If you’ve chosen a specialty or demographic area to serve, the niche will likely drive your services. For example, if you want to work with seniors, estate planning and tax planning during retirement might be your core offers. However, if you want to cater to Gen Z’s young professionals, you might instead focus on early retirement planning and investment management over a lifetime. When you offer a suite of services that cater to your niche, you position yourself as an advisor capable of addressing all aspects of your client’s financial lives.

Equally important is determining your fee structure, which should align with both your business model and the value you provide to clients. Some common fee structures include flat fees, hourly rates, retainer fees, or a percentage of assets under management (AUM). Flat fees and hourly rates offer transparency and predictability, while retainer fees provide clients with ongoing support. AUM-based fees tie compensation to the growth of clients’ portfolios, aligning your interests with theirs.

Regardless of the fee structure you choose, transparency is paramount. Clearly communicate your fees and value proposition to clients, outlining the services included and any additional costs they may incur. As your practice grows, it’s important to regularly review your fee structure and service offerings to ensure they remain competitive and aligned with industry standards and client expectations.



Meet regulatory and compliance standard

Ensuring strict adherence to regulatory and compliance standards is vital in the financial advisory industry to safeguard your client’s interests and the integrity of your business. Depending on your area of specialization, you may need to get intimately familiar with Securities and Exchange Commission (SEC) rules, Financial Industry Regulatory Authority (FINRA) regulations, or other guidelines. A legal professional is the best resource to help you navigate the complexities of financial regulations. To fortify your compliance efforts, establish robust policies and procedures tailored to your business’s specific risks, which may include:

  • Implementing rigorous client onboarding processes
  • Conducting thorough due diligence on investment products
  • Maintaining meticulous record-keeping practices

Conducting periodic audits and assessments can help you identify potential gaps or areas for improvement and take proactive measures to address them before they become problems for your clients and your business.

 

Promote your brand

Crafting a brand identity is more than just choosing a logo; it’s about authentically expressing who you are, what you stand for, and why clients should choose you. As you develop a brand, reflect on your values, expertise, and unique selling proposition. Use these factors to craft the story of your brand that you’ll use to drive your mission, vision, tone, voice, and more.

When starting a financial advisory firm, it’s critical to establish a web presence. Your website is your online storefront, and the first impression matters. It makes sense to invest in a professional website that showcases your services and reflects your brand identity. If you have the time and resources, social media platforms can be a great way to engage with current and potential clients. Sharing educational content through a blog, videos, or a webinar may also position you as a thought leader and attract potential clients seeking expertise and guidance.

However, online promotion is only one aspect of promoting your new firm and your brand. Networking and meeting with people face-to-face, whether in-person or virtually, is also key. Take time to attend industry events, join professional associations, and actively participate in online communities to connect with peers, potential clients, and strategic partners. When you cultivate genuine relationships within your community by adding value and contributing to the success of others, others are far more likely to refer your services to others in their network.  

 

Grow your client base

To build your business, you’ll need a robust client acquisition strategy that blends networking, referrals, digital marketing, and educational outreach to attract your ideal clients. Above all, prioritize delivering personalized financial advice and exceptional service that exceeds client expectations.

Take the time to truly understand each client’s goals, aspirations, and concerns, and tailor your recommendations accordingly. You’ll earn trust and loyalty by demonstrating a genuine commitment to your client’s financial well-being and going above and beyond to meet their needs, laying the foundation for long-term relationships built on mutual respect and understanding.

 

Explore new business initiatives

As a financial advisor, your success hinges on your ability to explore new business initiatives that keep you competitive and address the evolving needs of your clients and the market. Embrace innovation, recognizing that it may hold the key to unlocking fresh revenue streams and avenues for growth. You’ll want to stay updated on state-of-the-art financial technologies and, when appropriate, integrate them into your practice to elevate service delivery. If you need financial support to grow operations through new technology, an existing business acquisition loan may help.  

 

How BHG Financial can help you start a financial advisor business

BHG Financial offers highly specialized business financing up to $500K,1,2 which you could use to start your financial advisory firm. With repayment terms of up to 12 years,1 you can begin your business strategically and affordably. Our dedicated concierge service means you can rely on our team to serve your needs every step of the way.

Get started by quickly viewing your personalized estimate using our payment estimator.

 

Starting a Financial Advisory Firm FAQs

 

Is it profitable to be a financial advisor?

The profitability of being a financial advisor can vary depending on factors such as your experience, expertise, client base, and market conditions. While you have the potential to earn significant income, especially as you build your client roster and expertise over time, success in this field typically requires dedication, hard work, and a commitment to delivering exceptional value to your clients.

 

How much does a financial advisor cost to start up?

The cost of starting a financial advisory business can vary widely based on factors like location, business model, scale of operations, and regulatory requirements. You’ll need to factor in expenses such as education, including certifications and licensing, technology, marketing, insurance, and fees for auxiliary professionals like accountants and lawyers to support you.

1 Terms subject to credit approval upon completion of an application. Loan sizes, interest rates, and loan terms vary based on the applicant's credit profile. Finance amount may vary depending on the applicant's state of residence.

2 BHG Financial business loans typically range from $20,000 to $250,000; however, well-qualified borrowers may be eligible for business loans up to $500,000.

Business Loan Repayment Example: A $94,695 commercial loan with a 9-year term and an APR of 14.8% would require monthly payments of $1,633.

For California Residents: BHG Financial loans made or arranged pursuant to a California Financing Law license - Number 603G493.

IMPORTANT INFORMATION ABOUT ESTABLISHING A NEW CUSTOMER RELATIONSHIP To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies every customer. What this means for you: When you apply for a loan, we will ask for your name, address, date of birth, social security number and other information that will allow us to identify you. We may also ask to see your driver's license or other identifying documents. If all required documentation is not provided, we may be unable to establish a customer relationship with you.

* “CFP® PROFESSIONAL DEMOGRAPHICS.” CFP Board, https://www.cfp.net/knowledge/reports-and-statistics/professional-demographics. Accessed May 14, 2024

** “Occupational Employment and Wages, May 2023 13-2052 Personal Financial Advisors.” CFP Board, https://www.bls.gov/oes/current/oes132052.htm. Accessed May 14, 2024