How Do I Build A Financial Planning Practice From Scratch?

« Back to Learning Center

If you just started your career as a financial advisor or are thinking about becoming a financial advisor, you’re probably wondering how to get your career off to a good start. It’s easy to look at an established advisor’s practice and be envious of the lifestyle this career has the potential to provide. It’s even easier to find examples of rookie advisors failing out of the profession – 80-90% of financial advisors fail within their first three years in business. *Source Advisor Perspectives*

How do you beat the odds and build a successful financial planning practice?

We’ve trained financial advisors since 1981 and have helped hundreds of people launch their careers as financial advisors. Over the years, we’ve developed a playbook for building a practice. The average new advisor we’ve coached using this playbook earns more than $250,000 during their 5th year in business. Many advisors set their sights higher and reach even greater levels of income once they internalize the revenue drivers within our process.

In this article, we’ll share what we’ve learned over 40 years of financial advisor development and give you the playbook to build a rewarding financial planning practice from scratch.

What Is A Financial Planning Practice?

Let’s start by defining what a successful financial planning practice is. A practice has a client base of 100 or more households with enough recurring income to pay for a viable practice service model with a lead advisor, support staff, and potentially an associate advisor.

At this size, the practice helps to maintain itself by creating consistent planning and business opportunities within its client base. This recurring practice income creates a transferable value that can be sold if desired.

What Type Of Financial Advisor?

Next, you must decide what business model you’ll choose for your practice. Will your practice have a narrow focus on investment or insurance sales? Will your practice be comprehensive and planning-oriented? Will you charge fees or earn commissions?

While all of these are viable business models, we’ve found that a comprehensive approach that provides planning, investment, and insurance services builds the most successful practices over time. Many companies allow you to offer a broad mix of services to your clients, but others have a bias towards insurance or investment products. You’ll want to be sure the company you choose to align with fits your needs and practice goals before you get started to avoid unnecessary growing pains down the road.

Getting Licensed As A Financial Advisor

Once you’ve decided the type of financial planning practice you’d like to build and chosen a company to partner with to build it; the next step is to acquire your licenses. You’ll need to obtain both insurance and investment or securities licenses.

On the insurance side, you need to be licensed to sell life and disability insurance. Licensing varies by state, but most states require 20-40 hours of classroom or online courses before passing a final exam.

On the investment side, you’ll need to pass several exams, including the FINRA Security Industry Essentials Exam (SIE), the FINRA Series 7 General Securities Representative Exam, and the NASAA Series 66 Uniform Combined State Law Exam. These exams are all self-study, and many reputable online courses are available to help you prepare.

We recommend new advisors get their insurance licenses first because the material is generally more straightforward and are quickly obtained. Once you have your life insurance license, you can begin working with clients on the protection and cash flow planning side of the business while working to obtain your investment licenses. This approach maximizes your time most efficiently from a business planning perspective.

The SIE exam is the first step to getting your investment licenses. This exam is an introduction to the securities industry and is a prerequisite for the Series 7. The SIE exam is 75 questions and requires a 70% minimum passing score. The Series 7 exam is more in-depth with 125 questions and requires a minimum passing score of 72%. The Series 66 exam allows you to qualify as an Investment Advisor Representative. Even though this exam is shorter than the Series 7, many people find it more challenging. It consists of 100 questions and requires a minimum passing score of 73%. Each investment exam requires about 80 hours of study time to complete.

New call-to-action

How Do I Get Clients As A Financial Advisor?

You’ll want to start working with clients as soon as you are licensed, but where will you find them?

Building your client base is one of the most challenging aspects of building a financial planning practice. This is where the rubber meets the road and what separates the successful advisors from the 80-90% that don’t survive their first three years in business.

As a new advisor, you have three markets to prospect – your natural market, your necessary market, and your target market.

Natural Market

Your natural market consists of people you already know. Almost every company in this industry has its new advisors complete a natural market inventory (NMI) when hired. Sometimes the NMI simply lists 50-100 names of people you know who “have money.” Other companies have a more robust process for completing an NMI.

Developing a clear strategy around how and when you will approach the prospective clients within your natural market is essential. This market is often a safe place to build experience, but you’ll want to be sure that you don’t unintentionally burn bridges. Unfortunately, some companies within the industry have earned a bad reputation for exploiting new advisors’ natural markets.

Necessary Market

Your necessary market could also be called your referral market. Cultivating referrals and business opportunities from within your client base starts on day one. Client referrals are some of the easiest opportunities, but it takes practice to build the skill of asking for a referral without sounding like a sleazy salesperson.

Advisors earn referrals when they do two things:
1. The advisor must clearly articulate their value to the client and show this value through their work.
2. The advisor must ask for the referral directly. This habit is vital to practice growth even with mature practices.

Niche Market

Your target or niche market is one or two specialized markets that you become an expert in working with. Some target markets are based on the client’s profession (doctor, lawyer, engineer). Others are based on the client’s life situation (30-40-year-olds with kids, 55-65-year-olds focused on retirement, 65+ retired).

Choosing to specialize allows you to market your services better and be a resource for your clients and prospects. Developing a target market takes a year or more to develop fully but can carry your practice for decades when done well.

So, how can you thrive in this industry?

We’ve found that an advisor needs to acquire 30 new planning clients per year to not only survive but thrive in this business. Our experience has shown that new advisors must contact ten qualified prospects to generate three appointments, creating one new client.

This 10:3:1 ratio dictates the activity necessary to acquire 30 clients per year. Over a year, you need to contact 300 new prospective clients to set 90 initial meetings to close 30 new clients. Consistent habits are essential to hitting these numbers.

New call-to-action

Control What You Can As A Financial Advisor

As you build your practice, you should create habits around the activities you can control. If you know that you need to contact ten prospects to set 3 appointments and close one new client, you are only in control of the number of prospects you contact. You can influence how many appointments you set and how many new clients you close, but ultimately those decisions are not within your control.

Block time on your calendar each week to call prospects. Treat this time as sacred and stick to it each week. Two to four hours of dedicated prospecting calls each week will ensure that you are making contact with enough prospects to build your practice.

When you first start setting appointments with prospects, it’s tempting to meet whenever and wherever the prospect is available. It takes confidence not to fall into this trap. As you build your client base, your schedule will fill quickly, and following a model work week will be necessary for efficiency. Like most habits, the model work is easier to maintain when implemented from the start.

Model Work Week

Our advisors follow a 1-3-1 model work week. In this model, Monday is a buffer day for administrative work and learning. Friday is a catch-up day for appointments, admin, and client activities. Tuesday, Wednesday, and Thursday are focus days with prospects and clients. Over these three days, you should strive to keep 15 appointments.

An ideal breakdown of meetings would look like this:

  • Four new prospect open meetings
  • 4-6 client planning meetings
  • Two meetings with centers of influence
  • Three target market meetings

This level of focus and activity will drive results if maintained over time. Track what you can control and focus on gathering ten new prospects per week and maintaining a full calendar with 30 future appointments at all times. Building a practice is a game of numbers and requires constantly gathering new prospects to contact.

Finding ten new prospects each week will ensure that your schedule remains full and that you are feeding your practice enough prospects to thrive. Having 30 future appointments at all times will improve your confidence and remove your emotional attachment to client outcomes. On the other hand, an empty calendar creates stress and leads to poor results.

With a model work week in place and a full calendar of client and prospect meetings, you are well on your way to building a thriving financial planning practice. As you can probably imagine, at this point, a financial advisor’s life can swing from busy to frantic quickly if proper systems aren’t in place.

Financial planning is an ongoing process. Establishing and following a process for guiding your clients through their financial journey will improve their outcomes and make you more referable and make your life as an advisor easier.

A Repeatable Process

Our advisors help clients organize, protect, and focus their dollars in alignment with their priorities. This process is laid out over a series of meetings at the beginning of every new client relationship.

This allows our advisors to focus on their client’s needs rather than pushing a predetermined product sale. While the inputs and outcomes change based on the client’s situation, the process remains the same. The repeatable nature of this process allows advisors, like you, to build it into a robust service model for their clients, continually engaging clients, and driving business for your practice.

The steps to building a financial planning practice are straightforward and boil down to consistency and disciplined habits. Yet despite the simplicity, the overwhelming majority of new financial advisors fail within their first three years in business.

Why is this the case?

Building a practice is hard, and most advisors are missing the final ingredient necessary for success: a strong support system. Successful advisors are self-starters, but they never go it alone. Advisors at Consolidated Planning will benefit from a support system that includes:

A supportive team can be the difference between floundering and thriving.

Begin Building Your Financial Planning Practice

Now that you know what it takes, are you ready to start building your dreams’ financial planning practice? The first step is finding a firm that aligns with your vision and provides the support network you need to grow. When interviewing potential firms, ask them how they plan to support you and what their blueprint is for success.

Pay close attention to how they answer, and you’ll know if they’ll help you build a practice or simply sell financial products. If you’re interested in learning more about how CP supports its advisors, schedule a quick call with our team.

New call-to-action


2022-144679 Exp.10/24

Published:  October 19, 2022