Financial Advisory Practice: Building Your Own Dream To Reality

Embarking on the journey to establish your own financial advisory practice marks the beginning of a thrilling chapter in your professional life. Transitioning from working within the confines of a broker-dealer or wirehouse environment, where numerous decisions are made on your behalf, to setting up your own advisory firm presents a unique set of challenges and opportunities. 

 

While delegating logistics to a firm allows for focus on clients, independence and higher earnings are tempting. However, creating and launching your own Registered Investment Advisor (RIA) firm involves more than just evaluating the economics of such a move. 

 

Building your own financial advisory practice requires you to navigate a series of intricate steps, from creating your RIA legally to choosing the right technology and vendors, all while bearing the total weight of these decisions on your shoulders. 

 

Achieving independence in running your own firm may seem challenging. However, the experiences of successful individuals, like many of the advisors who make up the IFG Brain Trust, demonstrate that it is entirely possible with proper guidance and preparation. 

 

This blog post aims to unravel the complex process of breaking away from the conventional wirehouse model to establish a thriving, independent financial advisory practice, ensuring you’re equipped to make this pivotal transition as smoothly as possible.

 

The Costs of Starting an Independent Financial Advisory Practice  

Starting an RIA firm involves various costs, from initial setup to ongoing operations. 

 

Opening an RIA can typically cost between $10,000 and $50,000, influenced by state fees, consulting for legal and compliance, technology, and starting operational expenses. Common initial expenses cover legal setup, consulting fees, office necessities, technology infrastructure, and marketing efforts. Hiring staff and setting up payment systems also contribute to the startup costs.

 

Once past the startup phase, annual expenses can range from $20,000 to $30,000, varying with your firm’s specifics. These include compliance updates, financial planning software, and (for some) office overheads. 

 

One effective way to reduce the recurring costs of starting your own financial advisory practice is to join professional networks. By taking advantage of these networks’ services and resources, such as marketing discounts, compliance support, and technology services, you can save money and make your business more sustainable in the long run.

9 Steps to Starting Your Own Financial Advisory Practice 

For a financial advisor considering a new direction, establishing your own Registered Investment Advisor (RIA) firm could represent a significant career milestone, offering an opportunity to venture independently. 

 

Becoming an independent RIA can provide more flexibility and direct influence over your business’s growth. However, starting an RIA is neither simple nor immediate. It’s crucial to grasp the complexities of founding an RIA firm to determine if it aligns with your professional aspirations.

 

If you plan to initiate an RIA firm, understanding the process is vital, as it typically spans several months. Early planning is key to ensuring you’re moving towards opening your firm within a feasible timeframe without overlooking essential steps.

 

Here are nine fundamental steps to consider when starting an RIA firm:

 

Examine Your Current Employment Contract

Launching an RIA straight from employment without any client base can be challenging. You might expect to bring your existing clients to your new venture, but your current employer may have restrictions, such as non-solicitation or non-compete clauses, to prevent this.

 

Assess Your Finances

Starting an RIA firm requires an initial investment in home office space, furniture, hiring staff, and marketing. Additionally, if starting with few or no clients, you’ll need to plan for personal and business expenses. Options to consider for funding include personal savings, investments, or a small business loan.

 

Acquire Required Certifications 

The Series 65 exam is a prerequisite for operating an RIA unless you hold equivalent professional designations. Thorough preparation for the Series 65 exam through self-paced online courses, for example, is advisable if needed. 

 

However, if you possess any of the following certifications, you are exempted from taking the Series 65 exam:

 

    1. Series 66
    2. Series 7
    3. Certified Financial Planner (CFP)
    4. Chartered Financial Analyst (CFA)
    5. Chartered Financial Consultant (ChFC)
    6. Chartered Investment Counselor (CIC)
    7. Personal Financial Specialist (PFS)

 

Formalize Your Business Structure

A crucial step in starting an RIA firm is legitimizing it as a legal entity. This involves selecting a business structure, such as a sole proprietorship or limited liability company, setting up business banking accounts, securing the necessary insurance, and obtaining any state or local licenses required. 

 

Engaging a business attorney to guide you through selecting the appropriate entity and understanding the licensing you need based on your business model is beneficial. The choice of business structure will impact your liability and tax obligations, making it an essential consideration for your firm’s foundation.

Decide on a Fee Structure

Your earnings as an RIA firm owner depend on the fee model you adopt. There are various ways to structure your fees, whether based on assets under management, an hourly rate, project-based fees, or a set flat fee. The key is to choose a model that aligns with the services you offer and the client demographics you aim to serve.

 

Complete Regulatory Registration

Once you’ve laid the groundwork for your RIA firm, the next step is to register with the appropriate regulatory bodies. Advisors managing over $110 million in assets must register with the SEC, while those under management below $100 million usually register at the state level. 

 

Part of this process includes setting up an account with the Investment Advisor Registration Depository (IARD) to file Form ADV. This crucial document outlines your services, fee structure, conflicts of interest, and professional credentials. The SEC’s approval of Form ADV allows you to start operating as an RIA. Assistance from a compliance consultant can be invaluable at this stage, ensuring your firm meets all regulatory requirements.

 

Select a Custodian and Service Providers

Choosing a custodian to safeguard your clients’ assets and other vendors critical to your firm’s operation is necessary. Furthermore, when evaluating custodians and providers, consider services, costs, and integration with your business’s needs. This decision is central to establishing a robust operational framework, including selecting CRM and accounting software and performance reporting tools.

 

Implement a Marketing Strategy

With your RIA firm’s structure in place, the focus shifts to attracting clients. A dynamic marketing plan is essential for increasing your visibility and fostering growth. Depending on your target clientele, your strategy might incorporate a professional website, social media engagement, and email marketing. Tailoring your marketing efforts to your desired audience is crucial for building a successful firm.

 

Consider Working with a Partner

Collaborating with Integrated Financial Group is a strategic decision for businesses seeking growth.

 

At Integrated Financial Group, we pride ourselves on our extensive experience and comprehensive resources. These assets empower us to serve as a powerful catalyst in realizing your business goals. 

 

Our team is committed to providing comprehensive guidance and support to navigate the landscape of financial planning and business development. By leveraging our experience, you can unlock new opportunities for success and ensure that your venture is well-equipped to overcome the challenges that come with scaling and evolving in today’s competitive market.

Share on facebook
Share on twitter
Share on email

Ready to Set Your Future Free?

Apply to join our consortium today to see if you qualify. The independence you’ve been seeking is just a conversation away.

Subscribe to get the latest posts straight to your inbox 👇

Please enable JavaScript in your browser to complete this form.