How To Start An Investment Advisory Firm


Use This Financial Advisor Checklist

How To Start Your Own Investment Firm and Become an Independent Financial Advisor

What else should you look for in a financial advisor? I recommend the 4 Cs:

  • Competence: Check for experience, education, and reputation.
  • Compensation: A fee-only advisor will not be motivated by commissions.
  • Credentials: Choose a Registered Investment Advisor. RIAs are required to put your interests first. Also look for credentials such as a Certified Financial Planner or a Certified Public Accountant/Personal Financial Specialist.
  • Comfort: You will be trusting this person with your financial future as well as your goals and dreams. Make sure you feel comfortable talking to your advisor and that you feel like your advisor really listens to you! The comfort factor is at least as important as the other factors. Not only do you need to feel listened to, your advisor should be available to you as needed, communicate frequently, be responsive to your calls and emails, and explain strategies in a straightforward manner.

Finally, know that any decision you make does not need to be forever. If you no longer feel as comfortable or confident with you advisor as you did previously, it could be time to find a new advisor. Dont hesitate or feel shy about changing. After all, its your financial security at stake.

The views expressed in this article do not necessarily reflect the views of Morningstar.

Scott Hanson Started A Firm In 1993 Here’s How He’d Build One In 2019

This is the second in a three-part series detailing what I would do if I were to move to a new town and start an advisory practice from scratch.

In my first installment, on marketing, I described how an adviser should go about acquiring a steady stream of new clients, which is the lifeblood of any practice. Without an effective marketing plan, your business wont survive.

In this installment, I want to focus on the structure of the practice, and specifically, what functions its best to outsource, what functions should be kept in-house and how to organize for growth.

The most valuable use of any financial advisers time is communicating with clients and prospective clients. Time devoted to other tasks, things like investment management or office administrative work, doesnt generate revenue and can suck up a huge portion of an advisers week.

Thats not to say those things arent important, because they are. In fact, there are many financial advisers who enjoy selecting investments, managing portfolios and monitoring the markets.

But, to be frank, this is a poor use of time. Not only do these tasks consume hour upon hour that could be used for marketing, they simply dont generate any money. An adviser who spends too much time in these areas will quickly find him or herself with too few clients and little or no income.

Set Up Your Business Email Account

I set up my business email account with , which has a base cost of just $5/month.

Make sure you purchase the domain name associated with your business, before you set up your business email. Google requires you to verify ownership of your domain prior to buying an email with your company name.

For example, my email is . But I had to own before I set up my business email account.

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Finding A Financial Advisor Niche

Holy crap, underserved niches in the financial planning world. All of them? I say that kind of tongue-in-cheek, but just look out there at the advisor landscape. How many people say they’re focused into a particular niche, and then how many people say, “Oh, well, I’m a generalist that serves anyone and everyone who ever comes in the door because I provide customized, personalized financial planning advice based on the individual needs of my particular clients,” which is a nice B.S. way of saying I do anything for everyone. Almost everybody does that.

The financial advisor niches are so endless, it’s hard to name them. You can go into a profession. You can work with attorneys. You can work with doctors. You can work with architects. You can work with real estate professionals. You can work with software developers. You can work with startup folks. You can work with engineers.

You could go company-specific. If there’s a big company in your area, you could build an entire business. I know many have done this, just working with employees from a particular industry, a particular company, one large corporation in your area that just has a large base of people where you learn all their employee benefits and their executive comp, and you advise all the executives of the company, and you work with most of the senior management as well.

When To Update The Register

Is a Career in Investment Banking Worth It?

AFS licensees must update the Financial Advisers Register when:

  • they authorise a financial adviser
  • a financial adviser no longer works under their licence
  • a financial adviser’s details change â for example, their name, qualifications or financial products they can advise on.

AFS licensees must update the Register within 30 business days.

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Select A Consolidated Performance Reporting Provider

I use Blueleaf for performance reporting, although it is more than just a consolidated performance reporting system. Theyve coached me time and again on how to best utilize their software and team in order to win new business. Thanks to the team at Blueleaf, their reporting system has become an integral part of my prospecting strategy . In addition, the team is always responsive and helpful when I have any questions or constructive feedback on ways to make the platform better for advisors.

Blueleaf offers a number of partner-level integrations with some of the leading providers in analytics, reporting, CRM, and Financial Planning.

Pricing for Blueleaf varies by the number of households that are aggregated.

The team at Blueleaf is offering 2 free months to Nerds Eye View readers who sign up for a 1-year subscription.

How To Start Your Own Investment Firm

While starting your own investment firm is challenging,the process can be fascinating. You will have the satisfaction of running a business that can make a positive difference in your clients’ lives, helping them to manage the money they earn and to save and invest for a comfortable retirement. eHow asked investment advisor Larry Russell, who owns a successful one-man financial planning and investment firm in Pasadena, California, what you need to know and do to succeed in the investment business.

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What Is The Growth Potential For A Financial Planning Firm

A financial planning firm can be small or large. Many firms are one-person operations. However, some financial advisors grow their firms into multi million-dollar companies. Blue Ocean Global Wealth is one example of a large planning firm. Edelman Financial Services is another example of a firm that grew into a household name.

How To Start Your Own Financial Planning Firm

How To Start a Financial Advisory Business

A financial advising business helps people set financial goals and plan out a course of action to realize it. Financial planners who work for the business help clients by analyzing budgets, investments, insurance, and other financial products. They make plans for clients and serve a vital role in todays world, since they have advanced knowledge of both basic and complex financial concepts. They can also teach their clients how to make their own financial plans and act as a coach or guide.

Most people find finance inherently difficult to understand, so a financial planning business bridges the knowledge gap while providing extensive support and tools for clients. The best financial planning businesses dont just sell products and services. They transform peoples lives and get them to think seriously and deeply about money and how it impacts their life and the world.

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Woes At Major Exchanges Show Why Choosing The Right One Is Essential Heres How

In November 2013, after two years of preparation and planning, Marguerita Cheng and I co-founded Blue Ocean Global Wealth, an investment advisory firm that strives to be a trusted partner and educational resource. We deliver comprehensive financial planning and wealth management solutions to families, entrepreneurs, and executives. Based upon our experience, we provide a simple framework to help you make the most-informed decisions when considering your own firm.

Consider How Much You Can Afford To Pay An Advisor

Financial advisors have a reputation for being costly, but there is an option for every budget. It’s important to understand how much a financial advisor costs before you commit to services. Generally speaking, there are three cost levels you’re likely to encounter:

  • Robo-advisors often charge an annual fee that is a percentage of your account balance with the service. Robo-advisor fees frequently start at 0.25% of the assets they manage for you, with many top providers charging 0.50% or less. On a $50,000 account balance, 0.25% works out to $125 a year.

  • Online financial planning services and advisors typically charge either a flat subscription fee, a percentage of your assets or both. For example, Personal Capital charges 0.49% to 0.89% of assets under management per year. Facet Wealth charges an annual fee that starts at $1,800 a year and goes up based on the complexity of your financial situation. Both fees include portfolio management and financial planning.

  • Traditional financial advisors also often charge a percentage of the amount managed, with a median fee of 1%, although it can range higher for small accounts and lower for large ones. Others may charge a flat fee, an hourly rate or a retainer.

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Ehow: Is That How You Started

Larry Russell:More or less, yes. I have an undergraduate degree from the Massachusetts Institute of Technology — MIT — but in the process of getting the degree I became even more interested in human behavior. After graduating and getting an MA from Brandeis I began survey research and performed statistical analyses of corporate employee benefit programs at the National Manpower Institute in Washington, D.C. Next, I joined the Institute for the Future, a think tank in Menlo Park, California. For Fortune 100 clients, we used sophisticated projection methods to develop long range planning scenarios that incorporated demographic, econometric, financial, and technological factors. Stanford University is also in Menlo Park and as much out curiosity as having an immediate goal in mind, I picked up another degree there, a Master’s Degree in Business Administration. Following that, I had a career in Silicon Valley, mostly in business and corporate development. Twenty-five years later I co-founded a venture capital financed corporation that took a technological approach to investment management by harvesting, filtering, and displaying new information on traders workstations in real-time. That led to the Lawrence Russell Company, an investment firm where I am a Registered Investment Advisor providing scientifically-based, personal financial, investment, money and retirement services to individuals.*

With Freedom Comes Responsibility

The Biggest Stock Brokerage Firms in the U.S.

One of the greatest things about operating as an independent RIA firm is the freedom it brings. Moreover, because you will receive a much higher payout than you would working for a wirehouse or bank, you can earn the same money with half the number of clients.

In addition, you are building equity in a business that is more likely to have value and be able to be sold in the future. Freedom, higher payout and building equity in your own business are just a few of the reasons more advisors are moving toward independence.

However, like any good recipe, you can read all about it, even see a picture of the dish, but until you actually try it, you wont know how it tastes. Its similar when going independent but with one major difference: With a meal, you can push it away. Once you leave your current firm and become an independent, youve made a career decision. Therefore, give it careful thought, and I hope you find it to be as good as Ive described.

Up Next

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Becoming A Registered Investment Advisor

Lea Uradu, J.D. is graduate of the University of Maryland School of Law, a Maryland State Registered Tax Preparer, State Certified Notary Public, Certified VITA Tax Preparer, IRS Annual Filing Season Program Participant, Tax Writer, and Founder of L.A.W. Tax Resolution Services. Lea has worked with hundreds of federal individual and expat tax clients.

Those who wish to work as independent financial advisors to individual investors, to manage assets or provide financial counsel, generally need to become a registered investment advisor . Unlike that of a financial plannera broader profession, with no legal mandates for training or licensingthe road to becoming an RIA has specific requirements.

Buy An Errors And Omissions Insurance Policy

I purchased my initial RIA E& O policy through Napa Premier for $952/year.

Napa has a preferred rate program that I qualified for because Ive never had a customer complaint filed with FINRA. This made the E& O policy from Napa the most affordable policy I came across during my search process.

I recently found out that . If youre a CFP certificant or carry other industry designations, you may qualify for a lower rate as well.

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Starting Finding Your Financial Advisor Niche Before You Start Becoming An Ria

And frankly, for many, you can start down the road of those niches even while you’re still working or getting ready to launch. You can’t solicit clients yet, but you can start to talk to those people. You can find out what their needs are. You can begin crafting a business that’s relevant for them, getting the expertise you need to answer their questions and problems. Taking them out to lunch, learning more about their situation. All of that formulation of what would a good business be and how are you going to serve them, you can do that before you actually launch your business.

Don’t solicit them. Client solicitation requires investment advisor registration. But you can talk to them. You can figure out what you’re going to offer them, what business you’re going to provide, how you’re going to charge for it, what services you’re going to create for them. All of that can be done in the pre-launch phase as well, so that at least when you actually do hit the transition, you kind of hit that ground running as the race is on to bring in clients, bring in revenue and try to earn your way back to where you were before, or at least before your personal overhead buries you.

Now, it’s great in 10. It’s great in 15. It’s amazing in 20. Advisory firms tend to build and compound over time. But recognize how long that transition is, how much of a runway you need, what kind of reserves you need to get there, how you need to bring your expenses down in order to make that work.

Determine Your Business Legal Structure And Incorporate

How to Start an Investment Company

I used Legalzoom to form a Single Member LLC for my advisory firm.

Do yourself a favor and go with the Express Gold Optionnot the Economy or Standard packages offered by Legalzoom. Especially if youre in a rush to get incorporated!

While the Economy package is reasonably priced at $149+state filing fees, youll end up having to wait 30 business days to get your operating agreement, financial account authorization letter, and File Articles of Incorporation with the Secretary of State. Spend the extra $210 for the faster turnaround time offered by the Express Gold Option. Plus, with the Express Gold Option, you end up saving $30 on the application for your Federal Tax ID so the difference is actually only $180.

The reason this matters is that several of your next steps will be delayed if youre waiting 30 days to get your business entity in place. Looking back, I would have gladly paid the $180 to prevent delays in opening a business bank account, credit card, and more importantly beginning the process of filing as a registered investment advisor with the State of California. Spend the extra few hundred dollars to avoid downtime which may result in lost revenue and opportunity.

Ill admit, having an attorney would have helped me incorporate a bit quicker to avoid any lag between my employment with Merrill Lynch and having my firm registered with the state so I could legally conduct business as an investment advisor.

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How Much Does It Cost To Start An Investment Advisory Business

Wondering how much it costs to start an investment advisory business?

  • The minimum startup costs for an investment advisory business: $62
  • The maximum startup costs for an investment advisory business: $25,886
  • The average startup costs for an investment advisory business: $13,586

Here’s a detailed list of an investment advisory business startup costs:

Business Formation Fees

There are a few key costs associated with forming your business entity, such as setting up an LLC and getting trademarks, copyrights, and patents sorted.

Set up business: LLC & Corporations Required

Software Expenses

Your investment advisory business needs software to run efficiently!

Why spend money on software? Because it can help you save time and automate certain parts of the business, so you can focus on the most important matters. Software and technology can help you grow your business, and save you from expensive personnel costs.


Office Space Expenses

It will be your call to determine if you need office space. It is not a requirement but may be necessary as your investment advisory business grows.


Website Costs

Every business should have a website, and it’s worth spending a bit of money to set it up right.

Direct Campaigns, Printing and Mailing Optional

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