Considering going independent?

Plan your new advisory firm

When you start a new advisory firm, you’re creating something that’s yours. Careful planning can help make your new endeavor more successful.

Starting a business takes a commitment from you, and the potential rewards of running your new firm are worth the effort. A well-thought-out business plan is one of the keys to a successful transition. But, keep in mind that the process takes time, and that’s why we recommend that you organize the tasks involved into stages.

Business Planning

Planning a business is less daunting when you break it down into simple, manageable chunks. In this section, you’ll learn everything you need to develop a plan for success, including:

Write a business plan

Business plans can vary in detail, but at minimum your plan should clearly define:

  • Services you can provide now and in the future
  • Strengths that differentiate you from others in your market
  • Your target market, including profiles of the types of clients you want to attract
  • Start-up details such as where your office will be located, staffing needs and how you’ll organize a typical workday
  • Financial plans for earnings in the short and long term, start-up costs and ongoing expenses

Forecast revenue and expenses

You’ll need to know your start-up costs and forecast your revenue, expenses and net income. This analysis will help you decide if going independent would enhance your income and net worth as well as help you plan a growth strategy.

Determine financing needs

Once you forecast revenue, ongoing expenses and start-up costs, you will be able to determine if you need help with financing. Many advisors consider establishing their new advisory firm with their personal equity. If start-up funding is a barrier or if you don’t want to use personal funds, you may need to consider a loan to manage your cash flow through the first few months of your transition.
It’s also a good idea to establish a relationship with a bank for your business transactions. A banker can provide a source of capital, payroll services and advice about managing your operating budget.

Develop a marketing strategy

Marketing is key to growing your business and attracting the kinds of clients you want. From your initial business announcement to ongoing promotional activities to “thank-you” notes to clients — don’t overlook this crucial aspect of running your own business.
Here are some potentially effective marketing activities you should consider as part of your start-up plans:

  • Work with a creative resource to develop business materials with a branded identity such as business cards, letterhead, brochures and other materials
  • Develop a communication strategy to inform your clients and the broader community of your new business and the unique services you will be offering
  • Prepare a press release and time its release with the opening of your business

Select a custodian for clients’ assets

You need to select a custodian who has the platform that works best for you. Whether you select a fee model, commission model or a combination of the two, it’s most important that you feel comfortable with your decision. Various financial services firms offer a broad array of wealth management platforms, so it’s a good idea to research what’s available.

Plan for the conversion

Planning and mapping out a timeline leading up to your launch date can make for a smoother transition. One key to a successful launch is understanding what is involved in planning for a successful conversion of client assets. A few critical tasks include:

  • Review client assets. Ensure your client assets can transfer to your new custodian. The transferability of certain asset classes and proprietary products may be limited.
  • Draft Client Investment agreements. Set up the contract between your new firm and your clients. This agreement outlines the services you will provide and includes the fees you will charge.
  • Prepare an announcement for clients. Consult your legal counsel on when to send it to your clients.
  • Although it’s possible to plan the transition yourself, don’t overlook the value of engaging your custodian as a strategic partner and getting advice from legal counsel along the way.