7 Lessons Learned After Building A Fee-Only Financial Planning Firm From Scratch

7 Lessons Learned After Building A Fee-Only Financial Planning Firm From Scratch

Launching an RIA firm can be a rewarding experience for advisors who desire the independence, flexibility, and control of owning an advisory practice. At the same time, the process of establishing a new business can be daunting, especially when the firm is ‘truly’ starting from scratch with zero clients, revenue, or infrastructure. These challenges, along with the sheer number of priorities that must be addressed (e.g., choosing fee structures, identifying target client profiles, and developing marketing and lead generation strategies) – and the fear and uncertainty of making the ‘wrong’ decision – can keep many potential new firm owners from making the leap to starting their own practice.

In this guest post, Jake Northrup, CFP, CFA, CSLP, founder of Experience Your Wealth, LLC, relays some of the lessons he learned himself during the first three years of building his own fee-only RIA firm from scratch, to help advisors who are thinking about launching their own firms understand how they can navigate the early pitfalls of owning an advisory practice.

Many of the key business decisions in an RIA’s early startup phase revolve around marketing and selling the firm’s services. For Jake, having limited business experience prior to launching his firm made these elements especially daunting as he sought to attract his first few clients. But significantly investing early on in marketing (notably, creating a custom-designed website to clearly communicate his firm’s values and story) and sales training made it much easier for Jake to find and ‘hire’ the kinds of clients he wanted to work with most. Likewise, many individual firm owners will be stronger in certain areas than others, so finding and investing time and resources in areas that may need extra attention early on can be crucial to achieving a sustainable business.

But launching an RIA is not only a business decision, it is also a personal decision that can reshape many aspects of an advisor’s life. While offering the potential rewards of choosing where and when to work – and, with virtual planning becoming a more popular option, giving firm owners flexibility over where to live, regardless of where their clients are located – starting an RIA also comes with potentially significant risks. This is especially true given that firm owners must often tap into their own personal savings to keep it running, at least until the firm generates enough revenue to cover both its own business expenses and the owner’s personal expenses. For aspiring firm owners, then, understanding why launching an RIA from scratch is worth the risks to them – whether that be on account of their personal values, lifestyle preferences, or hard-wired personality characteristics that make them especially suited for running an advisory firm – is a crucial step in creating a practice that supports the ideal life that the owner wants.

Ultimately, what’s important to remember for aspiring advisory firm owners is that virtually everything about the firm – from its fee structure to its target niche and even to the owner’s long-term vision – can change. For Jake, what started in 2019 as a vision for a solo advisory practice quickly expanded to include an associate advisor, and since then has integrated a plan to build out a five-person team… all because his vision for the firm evolved based on wanting to spend more time on high-value advisory activities (and less time on other tasks that could more easily be outsourced). And while it’s important for new firm owners to plan out how the business will look and operate in its first few years, perhaps even more vital is to build in flexibility to account for how the firm’s vision will change over that time, especially since the flexibility to make firm decisions itself is often one of the main reasons advisors choose to start their own practice in the first place!

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