Startup Costs For Financial Advisors – What To Expect

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Becoming a financial advisor requires an entrepreneurial spirit. Many are drawn to this career by the opportunity to run their planning practice as a business owner. Like all successful business owners, financial advisors exhibit tenacity and find a way to get the job done, especially when finding new clients.

Like most businesses, there are startup costs to become a financial advisor. Unlike most businesses, the start up costs to become an advisor are comparatively low and accessible to many.

Consolidated Planning builds financial advisors. Our time tested planning process is backed by robust advisor resources that add rocket fuel as you launch your career. This combination results in our average new financial advisor earning over $250,000 annually by their fifth year with our firm.

In this article, we’ll discuss the various expenses you will face as you launch your career as a financial advisor. Let’s walk through how we support our financial advisors with start-up costs. So, by the end, you’ll be ready to make an educated decision about whether this career is the pathway to business ownership for you.

What Licenses Do Financial Advisors Need?

The first step toward becoming a financial advisor is to obtain the proper licenses. You need both insurance and investment licenses to run a comprehensive planning practice. You may also choose to pursue a professional designation to deepen your expertise.

Insurance License

Insurance licensing requirements are established by each state’s Department of Insurance and vary as a result. Consolidated Planning is headquartered in North Carolina, so we’ll use that as an example. The North Carolina Department of Insurance requires you to complete 20 hours of prelicensing education from an approved provider and pass a state exam. You’re also required to be fingerprinted for a criminal history check.

Initial costs to become life insurance licensed in NC are as follows:

  • $50 Registration fee
  • $44 Application processing fee
  • $38 Fingerprint fee
  • $45 Exam fee
  • $75-250 Pre-licensing education

You can expect it will cost between $252 to $427 to obtain your life insurance license. The major variable in cost is based on the prelicensing education and whether you choose self study or classroom education.

At Consolidated Planning, we reimburse our financial advisors for the costs of getting life insurance licensed after successful exam completion.


Investments License

You’ll need to complete three investment exams to become fully licensed to be able charge clients investment management and planning fees. The exams are administered by FINRA and are the Securities Industry Essentials Exam (SIE), the Series 7: General Securities Representative Exam, and the Series 66: Uniform Combined State Law Exam.

These exams and their costs are the same from state to state:

  • $80 SEI Exam
  • $300 Series 7 Exam
  • $177 Series 66 Exam

All of these exams are self study and there are numerous classroom and online courses available. Prep books can be found on Amazon for as cheap as $25, while reputable test prep companies like Kaplan and Securities Training Corp offer online packages for all three courses ranging from $260 to $800+.

Here at Consolidated Planning, most of our advisors choose to purchase a self study course and participate in small group study sessions with our investment director. Many firms will reimburse you for your exam fees after you pass but we will pay your exam fees before you sit for the test.


Additional Professional Designations

Professional designations show that you have completed advanced training to improve your skills as a financial advisor. These designations aren’t essential, but can help you stand out from the competition and show expertise in certain areas of planning.

Some of the most popular professional designations at CP are the Certified Financial Planner (CFP), the Retirement Income Certified Professional (RICP), and the Certified Exit Planner (CExP). These designations can require 12 months or more of study and can range from $1,750 to $5,000 to obtain depending upon the type of prep course you choose. Consolidated Planning reimburses 50% of these costs upon successful completion.

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What Tools Do Financial Advisors Use?

Financial advisors use a number of tools to help with the day to day activities of their business. Some are essential to doing business, while others are just to make life easier. In either case, there is almost always a cost associated.


Financial Planning Software

As an advisor, you’ll use financial planning software to do the work you do for clients. You’ll use it to aggregate client data, make projections, and track progress toward goals. To a comprehensive planning advisor, there is no more valuable tool than their financial planning software.

Here at CP, we use a proprietary software called the Living Balance Sheet (LBS) which is built on the popular eMoney platform. This tool has been built out in alignment with our unique planning philosophy. We believe LBS is integral to our advisors’ success and cover the costs for their first six months. We further subsidize the cost for new advisors through their second full year with CP as follows:

  • $0/month for months 0 – 6
  • $100/month for months 7 -12
  • $200/month for months 13 – 24
  • $300/month for months 25+

The monthly cost of LBS is comparable to similar products from eMoney Advisor and Money Guide Pro once you hit year your 25th month, but for those first 24 months LBS is greatly subsidized and often less expensive that other solutions.


Marketing Tools

Many financial advisors take advantage of tools to help with marketing and client acquisition. Some of the more popular tools with CP advisors include newsletter automation software, websites, and premium Linkedin subscriptions. These aren’t required to be an advisor but make life easier through automation.

Below are the examples of cost for these tools:

  • $60 Monthly Newsletter Automation
  • $50 – $250 Website & Content Marketing
  • $59 – 99 Premium LinkedIn Subscription

There are certainly many more marketing tools available, but in your first year these three are likely more than you’ll need. In fact, we typically encourage advisors to stick to the basics their first three years and avoid these tools.


Other Costs Are Involved With Being A Financial Advisor

Financial advisors are required to have errors and omissions insurance (E&O insurance). This required coverage protects you from financial liability if you make a mistake when working with a client. At CP, we have a negotiated E&O rate of $70/month for base level coverage.

We’ve covered the major startup costs associated with becoming a financial advisor, but that doesn’t mean our list is all inclusive. As an advisor and a business owner, you have the ability to tailor your practice the way you see fit. This may mean taking on additional costs.


Is Becoming A Financial Advisor A Good Investment?

At the beginning of this article, you wanted to know what it cost to become a financial advisor. You’ve learned about the required licenses and their costs as well as the tools you will need to do your job well. We’ve also shown how CP subsidizes or reimburses you for many of the start up costs.

At this point, you have a thorough understanding of what to expect from a cost perspective and have a few burning questions left…

  • Is it worth it?
  • Is becoming a financial advisor a good investment?

That depends.

If you don’t want the responsibility of being a business owner, then becoming a financial advisor and running a practice isn’t for you.

If the thought of sitting in the driver’s seat excites you, then becoming a financial advisor gives you the ability to run your own business with little upfront capital. Here at CP, our average inexperienced financial advisor earns $72,000 in their first year as an advisor and more than $250,000 in their fifth year.

To learn more about what to expect as an advisor, continue reading here and reach out to our team for a copy of our $250k in 5 Years playbook.


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2022-145208 Exp 10/23

Published:  October 31, 2022