How to Ensure the Success of Your Advisor Practice

“Would you tell me, please, which way I ought to go from here?”  asked Alice.
“That depends a good deal on where you want to get to,” said the Cat.
—Lewis Carroll

Run Your Independent Financial Planning Practice Like a Business

Money is always a major concern for most people. The rich and well-to-do constantly need to find ways to manage their riches and build upon them, while those who are not as fortunate continuously look for ways to turn their fortunes. It is for this simple reason that it will always be a lucrative business to provide financial advice.

And the present circumstances couldn’t be better for people like you who want to grow their business by growing more profitable clients. The global economic downturn has gotten a lot of people worrying about their finances more than ever. The falling prices of securities that marked the early part of the millennium and the resulting pessimism that rendered the situation spiraling downwards caused market fallout that facilitated a huge demand for the advice of a financial expert.

Yes, client’s are scared and they complain. It’s not easy to calm them down. Sometimes it becomes a contest. Will you calm them down or will they scare you too? Of course, you win. Don’t you? Be grateful for their emotions. That’s why they need you.

Also, the 77 million baby boomers are nearing retirement  age but are saving only one-third of what they need for a comfortable and happy retirement. They will certainly need assistance in managing what little savings they have and perhaps giving it a boost. It used to be that financial advising services were only for those who had small fortunes to take care of. These days, the middle-class now also requires sound financial advice, especially through life-changing events, such as marriage, divorce, death in the family or, well, retirement.

The Business Side of Being an Independent Financial Advisor
Working as a financial advisor for a big financial firm is different from being your own boss. There’s a huge difference between getting up in the morning to head to an office, where it’s always someone else’s rules you follow each and every single day, and actually being the boss of your own financial firm. There is the business side of it. Your expertise in the field of finance is the cornerstone of your financial advising business, but it’s not enough. You cannot simply rely on it alone to get you through.

A. Creating a Business Plan

A business without a plan is doomed to end up in flames. This important document is your best assurance that your firm is going to be successful. It doesn’t have to be grand. You can certainly jot it down on a notebook before you find the time to whip it up into something more appropriate for, say, future investors. For the time being, a handwritten plan that contains the following important information will suffice:

•  The goals of your firm
•  The state of the financial industry
•  Your target market
•  Your firm’s unique selling point
•  A marketing plan
•  Your strategies for achieving your goals
•  Costs
•  A realistic schedule

B. Choosing a Business Model

Your specialization and perhaps even your personality traits will determine what type of business model to go after. Some financial advisors are best in helping their clients with retirement planning, college financing or estate planning. Others, such are those who are traditionally called stockbrokers, account executives and registered representatives, buy and sell and manage for their clients’ financial products such as stocks, bonds, mutual funds and insurance.

There are two typical ways financial advisors charge for these services. A commission-based approach proves to be more profitable for a lot of financial advisors. However, many clients purposely look for practitioners who are fee-based because they feel they are receiving better advice from someone who has no personal interest in how much their clients are going to spend on investments.

C. Budgeting for Your Firm

Your firm’s expenses are similar to the traditional costs needed to start any business: rent, utilities, furniture, marketing and technology. If you have a new broker-dealer, you might also need to pay an earnest deposit.

D. Risks and Liabilities

As with all other new businesses, there will always be risks involved, including the risk of not bringing in enough revenue and the risk of making a misjudgment. The nature of financial advising requires that you acquire indemnity insurance to protect yourself in the event of misjudgment and errors and omissions insurance against malpractice suits. I know you already spend an extraordinary amount of time keeping up with all the regulatory standards in the financial industry.

E. Skills and Training

There are really no academic requirements to be a financial advisor, but there are preferences. A successful advisor must have at least a college degree, particularly one in a related field, such as finance, business, accounting, economics or mathematics. Courses in taxes, investments, risk management and estate planning are also helpful. The Financial Planning Association reports that 88% of all financial advisors began their careers in the aforementioned fields before shifting to financial advising.

Financial advisors also have to pass the licensing exams administered by the Financial Industry Regulation Authority (FINRA). If you’re a seasoned adviser who used to work for another firm, this may not pose a problem, but if you’re new to the business, you have to secure the blessing of a sponsoring firm so you can take the exams.

F. Create an Effective Marketing Plan

Being extremely skillful financial planner in providing outstanding client service is the foundation of your marketing, but is not enough. You just can’t stumble along trying to find is many clients as you can and selling them as much product as possible. Rarely is this highly profitable.

Financial Advisor’s Marketing Plan

•  State Your Desired Outcome: exactly how many clients, how much assets under management in six months, etc.
•  Understand Your Target Market: what are your ideal prospects, what do they want, what do they buy, where to find them, etc.
•  Differentiate Your Practice: how is my practice different, what are my strengths, how do I stand out, what is my unique selling proposition
•  Choose Your Marketing Tactics: public speaking, cold calling, newsletters, networking, etc.

Run your practice like a business and you insure your own financial success just like you insure the financial success of your clients.

Your questions and comments are welcome. Let me know what you think.