Owning A Financial Advisory Business vs. Joining An Established Practice

The decision to become a financial advisor is not for the faint of heart. 

In the beginning stages of evaluating your options in this career, you might be wondering what it looks like to start your own firm versus joining an existing one.

Advisors at Consolidated Planning work for themselves and own their own practices but utilize the established resources, training, and development opportunities of an existing firm to maximize the trajectory of their career.

Deciding whether or not you want to own a business is a huge decision. While starting your own financial advisory business can be a high risk, high reward venture, it’s important to carefully consider what it looks like to own your business, the benefits and drawbacks, and if opting to  join an established firm offers you a more structured approach for your career.

 

What Owning Your Own Financial Advisory Business Looks Like

Owning your own financial advisory business is actually two jobs. As the owner of a business, you are everything. Everything.

This means you have complete control over all aspects of business. While this kind of independence can be very appealing to people who value true autonomy, that autonomy comes with the potential for higher risks and additional stress.

In addition to providing financial advising to your clients, you’re responsible for:

• Human Resources
• Compliance
• Technology
• Marketing

The problem with owning your own business here is a lot of these tasks don’t have anything to do with financial planning. And if helping people by providing financial planning services is what you wanted to do, will you have the capacity to continue doing so, or will you be spending all of your time running a business?

 

4 FACTORS TO CONSIDER

 

#1 SUPPORT & RESOURCES

Building a successful business requires time, effort, and resources. You’ll need to be willing to invest in marketing, advertising, and building your brand. You’ll also need to be willing to invest time and energy into building relationships with clients and developing experience in your field.

Going through these processes to start your own business can be lonely, isolating, and overwhelming at times. It’s important to have a support system in place, whether that’s in the form of a business partner, mentor, or supportive family and friends. 

A strong support system can help you stay motivated and focused when times get tough. And they will get tough.

 

#2 AUTONOMY

Owning your business allows you to have true autonomy in your career. This means you are responsible for holding yourself and any staff accountable, day in and day out. Often this can seem ideal before getting started, but true autonomy requires a certain level of entrepreneurial spirit that can’t waiver.

You’ll need to be self-motivated, creative, and willing to take initiative. If you’re someone who prefers to follow a set schedule and take direction from others, owning a business may not be the best fit for you.

 

#3 RISK

Starting your own business always involves some level of risk. But, will the reward outweigh the risks here? You’ll need to invest time, money, and resources into building your business, and there’s no guarantee that you’ll be successful. 

With a financial advising business the risk goes beyond just your invested time and money, but also the legal risk of being solely responsible for the client-advisor relationship and client portfolios.

If the idea of taking on risk and uncertainty makes you uncomfortable, owning your own business may not be the best choice for you.

 

#4 EARNINGS

Your earnings potential as a business owner can be higher since you have the ability to set your own prices and keep the profits within the business. Your compensation is based on the revenue paid by the clients and all of which flows to the business.

With that said, as the business grows, so will the overhead costs, which could mean more money going out the door than into your pocket.

But maybe building a business is what you want for your career. But just remember, you don’t have to start your own business to be a financial advisor who works for themselves.

 

Joining A Firm As A Financial Advisor

If you want to focus on doing what you love as a financial advisor, there might be better options for your career path. While you have no tangible business entity by joining a firm, you have access to the established resources necessary to grow in your career.

 

#1 THE INDEPENDENT CONTRACTOR MODEL

This model is a happy medium between being a business owner and being a firm’s employee. As an independent contractor, you will be registered with your chosen firm as a 1099 contractor. And while you work for yourself as a financial advisor, you don’t work by yourself.

When you choose the right firm for you, this model allows for a good mix of support and autonomy in your practice. This takes not only some of the guesswork out of the equation but the legwork as well.

With less guesswork and legwork, this model allows you to come into your career with processes in place. Helping you to focus on revenue-generating activities and simply building your practice by doing what you do best – helping individuals and/or businesses find and implement solutions for their financial wellness.

Here, building your own practice means you own your book of clients and have more skin in the game. And while you’ll align yourself to your firm’s planning philosophy, there is plenty of room for flexibility within this model, including two big factors:

• Making your own schedule
• The clients you choose to work with

As an independent contractor who owns their book of clients, you can justify spending the extra time, energy and effort in building a long lasting relationship.

Ownership over your client base also means that regardless of the extent to which you work with others within the firm, you are vertically integrated, not horizontally. Your actions, or inactions, as a financial advisor have no effect on other advisors. The same is true for their actions or inactions.

You failing to meet your goals, or expectations only falls onto you, no one else. So you best be prepared to hold yourself accountable here.

 

#2 THE EMPLOYEE ADVISOR MODEL

As a financial advisor in this model you simply service the client as an employee of the firm. In an employee-advisor model you are paid by the firm as a W2 employee.

A service role like this model doesn’t require you to find your own clients. Rather you’re acquiring clients from general inquiries coming to the firm. A great example of this is customers physically walking into a bank for help, or calling into a call center.

While you might be doing a similar job as an independent contractor, you have no skin in the game. You don’t own a business and you don’t have ownership over the clients you work with.

 

#3 JOINING A TEAM

If starting your own business sounds scary, and you don’t want to go it alone, you may want to consider joining an existing team. This model lets you join an established practice and may function like a hybrid between the other models. 

You may receive a salary for your role but also be able to develop your own client relationships and be compensated accordingly. This can be a way for you to learn the ropes and gain experience without starting completely from scratch.

 

Which Path Is Right For Your Career As A Financial Advisor?

Owning your own business or joining an established firm comes with benefits and drawbacks. Something that you won’t avoid with any of these options? Working hard to become successful, especially in your early days of practice building.

Reflecting on your comfort with risk, entrepreneurial drive, vision for your career, willingness to invest time and resources, and support system, you can make an informed decision about which entrepreneurial path is right for you.

If you’re ready to get started evaluating the best firm for you to join, reach out to our recruiters to learn more about our planning philosophy.

 

 

2023-155733 Exp. 5/2025