Many people have trouble figuring out how to handle their finances such as knowing how to invest or what to do with their savings. Therefore, a lot of people would benefit from some help. If you have a wide knowledge of finances, you could consider starting a financial advisory to share your wisdom.
Figuring out how to and what to invest in is not necessarily easy. Therefore, people who are interested in this need to be able to find helpful advice to make sure they make the right decisions regarding their money. The market can be tricky to understand for someone who has never invested before and even for someone experienced who may not have all the time in the world to keep up with the dynamics of the market.
This is where you keep up with the news from the financial world and provide advisory assistance. If the idea of starting a financial advisory is appealing to you, you can get some tips on how to get started through this article.
Identifying your target group
First, you will need to decide who your primary customer should be. Do you want to help out the beginners who try to navigate in the fields of investing and financial speculation? Or do you want your advisory to be aimed at the ones already roaming the field of investments and who have some amount of knowledge on the market?
The target group can be wide, and you could decide to include customers on the opposite side of this scale. The important thing is that you are aware of your abilities and that the customers you take on will be provided with the advice best fitted for them.
Embracing a wide customer range can be great for your business, however, you should be aware that it takes a lot of work to get to know each case to provide the best possible advice. Including both the newcomers and the experienced, you will need to activate more knowledge, which can be demanding and not the least time-consuming.
Define your niche: The key to standing out
Trying to serve “everyone” means you resonate with no one. A well-defined niche allows you to tailor your services, messaging, and marketing for maximum impact. Instead of being another generic financial advisor, you become the recognized expert for a specific group.
Here are 5 profitable niches for new financial advisory:
- Tech Employees with Stock Options: This group needs help with complex compensation packages, concentrated stock positions, and tax-efficient exercise strategies.
- Retiring Corporate Professionals: They need guidance on pension rollovers, Social Security optimization, and the transition from accumulation to decumulation.
- Medical Professionals (Doctors, Dentists): Often have high debt, complex insurance needs, and late-start retirement planning, requiring a long-term, structured approach.
- Widows and Divorcees: This niche requires deep empathy and guidance on suddenly managing finances alone, often involving asset division and revised long-term plans.
- Small Business Owners: They need integrated advice for both their business (retirement plans, cash flow) and personal finances (compensation, succession planning).
Financial reality: Startup costs for your financial advisory firm
Before you earn your first dollar, you’ll need to invest. Proper financial planning from day one is crucial. Here’s a breakdown of expected startup costs:
- Licensing & Exams: Series 65 exam fees ($187), plus study materials ($300-$600). State registration fees for your RIA can range from $100 to $500.
- Technology Stack (First Year):
- CRM (e.g., Redtail, Wealthbox): $600 – $1,500/year
- Financial Planning Software (e.g., MoneyGuidePro, eMoney): $1,200 – $3,000/year
- Portfolio Management/Trading Software: Costs vary widely; some custodians provide this for free.
- Insurance: Errors & Omissions (E&O) Insurance is non-negotiable. Expect $500 – $2,000+ for your first year.
- Business Formation: LLC or S-Corp filing fees with your state ($50 – $500).
- Marketing & Website: Professional website development ($1,500 – $5,000) and initial marketing budget.
A realistic initial investment can range from $5,000 to $15,000+. It’s also wise to have at least 6 months of personal living expenses saved.
Building your digital backbone: The advisor tech stack
You can’t run a modern advisory firm on spreadsheets and email. Your technology stack is your operational engine. The core components are:
- Customer Relationship Management (CRM): This is the heart of your business. It tracks all client interactions, meetings, tasks, and important dates. Popular Options: Redtail, Wealthbox, Salesforce Financial Services Cloud.
- Financial Planning Software: This allows you to create detailed plans, run scenarios, and visually show clients their financial future. Popular Options: MoneyGuidePro, eMoney Advisor, RightCapital.
- Portfolio Management & Trading: This software aggregates client accounts, performs rebalancing, and facilitates trading. Important Note: Your chosen custodian (like Charles Schwab, Fidelity, or TD Ameritrade) often provides robust tools in this category for free.
- Document Management: A secure portal for clients to view documents and for you to store signed forms and financial statements. Examples: ShareFile, Egnyte, and many CRMs have built-in solutions.
Navigating compliance: The non-negotiable foundation
Compliance isn’t just a one-time hurdle; it’s an ongoing part of your business. As a Registered Investment Advisor (RIA), you have a fiduciary duty to act in your clients’ best interests.
Key Steps to Launch Legally:
- Pass the Series 65 Exam: This qualifies you to register as an Investment Adviser Representative (IAR).
- Form Your Legal Entity: Typically an LLC or S-Corp to protect your personal assets.
- Create Your Compliance Manual: This is your firm’s rulebook, outlining your policies and procedures. Many advisors hire a compliance consultant for this.
- File Form ADV: This is your primary registration document with the SEC or your state securities regulator. It has two parts: Part 1 is for the regulators, and Part 2 is the “brochure” you must deliver to clients.
- Engage with a Custodian: Establish relationships with custodians like Charles Schwab, Fidelity, or Pershing to hold your clients’ assets. This separation protects clients and is a key fiduciary practice.
Pro Tip: Consider hiring an RIA compliance consultant for the first year. They can set up your manuals and ensure your initial filings are flawless, saving you from costly mistakes.
4 common startup mistakes to avoid
Many new advisors stumble on the same hurdles. Being aware of these can save you time, money, and stress.
- Underpricing Your Value: Don’t compete on price alone. If you’re a fiduciary providing comprehensive advice, charge what you’re worth. Focus on communicating your value, not discounting it.
- Neglecting a Marketing Plan: “If you build it, they will come” is a fantasy. You must consistently market your services through networking, content creation (like a blog or LinkedIn posts), and asking for referrals.
- Trying to Be a Generalist: As mentioned in the niche section, being all things to all people is a recipe for obscurity. Specialization is the path to becoming a sought-after expert.
- Skipping the Business Plan: A business plan isn’t just for getting a loan. It forces you to think through your revenue model, target market, and operational strategy. It’s your roadmap for the first 3-5 years.