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Is Your Practice a Business or Just a Job?

Terry Mullen
Jan 11, 2017

There is a typical progression in the financial planning and wealth management industry, one that many independent financial advisors and practice owners can know well. After spending years in college, and more years earning an MBA, financial professionals start out at a major brokerage firm, mutual fund company, investment bank or wirehouse. They put in their time in the daily grind. They learn the ropes. They discover the best ways to serve their clients and earn money for their bosses. 

Then, after five years, ten years, fifteen years or more of dedicated service for their firm, they strike out on their own. They open their financial planning and wealth management practices, taking the knowledge they have gained and the experience they have accrued and using it to serve the needs of their independent clients.

Planning for Success

While the desire to start a new business and strike out on their own is certainly admirable, many former financial employees find themselves woefully unprepared for the challenges of business ownership. Many continue to view their new roles as a job and not an independent practice. This is an easy trap to fall into, but it is not an inevitable one. Many advisors do make a successful transition from employee to independent practice owner, and you can too. 

If you are planning to make the leap yourself, or if you have already done so, proper planning will be key to your success. As a financial professional, you recognize the importance of smart planning, and you can apply those same lessons to the practice you own or hope to own.

A Broader Perspective

The path from financial industry employee to independent practice owner is a fairly common one, and that means there are plenty of lessons to draw from the experiences of those who have gone before. Taking advantage of those lessons and learning from them is one of the best ways for new practice owners to avoid the same mistakes and get their practices off to the best possible start.

One of the most frequent mistakes financial industry employees make when transitioning to business owners is to not utilize the wealth of online tools and services at their disposal to run their practice like a business.

Over the last couple of years, FinTech has exploded on the scene with many new tools that help an independent advisor optimize their practice (Truelytics), stay compliant (RegEd), communicate with customers (WealthBox), and manage their portfolios (eMoney Advisor), just to name a few. 

Customers have come to expect, thanks to Amazon and Netflix, instant online access to products and services. Those expectations have spilled over to the wealth management sector. Independent advisors need to evolve from Microsoft Excel onto real platforms that have been specifically created to meet their business needs.

The Demands of the Business Owner

Owning a financial planning or wealth management practice and running it like a business requires a different perspective and a more comprehensive knowledge of the industry as a whole. Financial professionals who work for large investment banks and brokerage firms can rely on their vast resources to mitigate trading risks, stay complaint with the latest industry regulations and serve the needs of their clients. Practice owners have no such assurances, and they need to take care of all those things and more.

Starting a new independent practice means trading some of that corporate stability for a more personal and self-made stability. By focusing on the needs of their clients, always putting their best interests first and providing stellar results, independent financial planners can create their form of business stability, but doing so requires looking at the big picture and maintaining a broader perspective.

Client stability is another big challenge independent practice owners face in the transition from employee to entrepreneur.  Independent advisors must work harder, and smarter, to deliver quality customer service, exceptional results, and excellent client education. They must rely on their efforts for their success, and the success they achieve will be a direct reflection of the effort they put in.

In addition to maintaining business stability and the trust of their clients, the owners of independent financial planning and wealth management practices also face at least one more significant challenge, market stability. The ups and downs of the market are completely outside the control of the practice owner. You may be the best stock picker in the world or the most knowledgeable bond expert on Earth, but when the market moves against you, there is not a whole lot you can do. This dynamic will require one to have a diverse portfolio of revenue streams related to:

  • Commodities/Alternatives
  • Equities/Individual Securities
  • Managed Accounts
  • Mutual Funds/ETFs
  • Municipals
  • Annuity Commissions & Trails
  • Fixed Income/Debt
  • Insurance Commissions & Trails
  • Financial Planning & Consulting

By broadening their perspective and understanding the needs of the business world, financial industry employees can make a successful transition from daily worker to independent practice owner. Making a move takes courage, dedication, and knowledge, but with the right planning and preparation, it can be done. 

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