how to become an independent financial advisor

Small business basics

Want to become an independent financial advisor? Here’s what it takes.

Find out what it takes to become an independent financial advisor and be your own boss.

August 05 · 8 min read

Most people know the importance of being financially prudent and managing their money wisely. But knowing and doing are often very different things. In most cases, they simply don’t know how to do it. And so, they turn to financial advisors who have the requisite skills and experience to help them.

This opens up massive opportunities in the financial services space. The best part is that you don’t even have to work for a firm before you can offer professional financial advice. You can go the independent route and carve out your own share of the vast market.

At the end of this article, you’ll know what it takes to become an independent financial advisor and be your own boss. Let’s dive in!

Overview of the primary responsibilities of a financial advisor

In simplest terms, financial advisers help their clients make informed financial decisions based on their short and long-term financial goals. These decisions typically range from what financial products to purchase for retirement planning to stock market investing and estate planning and even to risk management.

Some financial advisers boast diverse backgrounds, which enables them to provide an array of general financial services, while others specialize in a particular area, such as wealth management or personal finance.

Beyond implementing tailored solutions for their clients, financial advisors also spend their time on marketing their services. This is a crucial skill to have, especially if you want to transition into an independent financial advisor.

New client acquisition is integral to the success of any new business, especially one in the financial industry. The main reason for this is that financial products and services aren’t things that the average consumer buys regularly. Some clients buy these services once or twice in their lifetimes.

Established financial advisory firms might fare better because they usually have the money to hire a marketing agency to send new prospects their way. But as an independent financial service professional, be ready to put in the necessary work to obtain new clients and retain existing ones.

Why become an independent financial advisor?

Despite the challenges that come with such a move, there are a number of compelling reasons to consider becoming an independent financial advisor. These include:

Become your own boss

Being gainfully employed is a great thing because it can mean financial stability and diverse growth opportunities within the organization. But ask anybody who has successfully transitioned to being self-employed, and they’ll tell you that nothing beats the freedom of being your own boss. You can build your new business exactly how you feel it will provide the most success in the long term.

Uncapped income potential

Rates tend to vary in the financial industry, but no matter how much work you put in as an employee, there’s always a limit to how much you can earn within a given period. If the financial advisory firm bills clients by the hour, then your income potential as an employee is capped to the hourly rate set by the firm. If you work for a broker-dealer, you may be paid a fixed percentage of the income earned by the brokerage platform.

This is not the case when you’re an independent financial advisor. There’s no salary cap when running your own business. You set your own rates based on the complexity of the services you provide. If you do your work well and land a few good clients, you could make way more income than you did working as an employee.

Customize client offerings

Today’s average consumer expects more flexibility when it comes to financial services. They want to work with a financial adviser that understands their unique needs and provides personalized solutions. Being an independent financial advisor gives you this much-needed flexibility to customize your offerings and develop stronger client relationships as a result.

Another advantage this flexibility provides for self-employed financial professionals is that they can easily personalize their services to differentiate themselves from their competitors. This is usually a sharp contrast to top financial advisory firms and broker-dealers, whose usual practice is to lock in a certain set of product offerings.

What are the main types of financial advisors?

The financial industry is quite broad, and so there’s a wide spectrum of focus areas from which to make your selection(s) as a financial adviser. The main types of financial advisors are:

  • Registered Investment Advisors (RIA)
  • Certified Public Accountants (CPAs)
  • Estate Planning Attorneys
  • Independent Broker-Dealers
  • Certified Financial Planners
  • Investment Advisor Representative (IAR)
  • Stockbrokers (also known as Registered securities representatives)
  • Insurance companies Salespeople
  • Money/wealth managers

If you’re interested in pursuing a career in the financial services industry, take the time to assess your personality and skill set so you can choose the right focus area.

Do you have what it takes to become an independent financial advisor?

The benefits discussed above sure are compelling. But before you take the leap, take some time to consider if the independent financial advisor career path is right for you. Ask yourself these important questions:

  • Are you genuinely passionate about helping people achieve their financial goals?
  • Do you have a knack for simplifying complex ideas and then presenting them seamlessly to a wide range of people?
  • Are you excited by the prospect of networking and reaching out to strangers to promote your financial services?
  • Do you enjoy working with numbers and analyzing data from multiple sources to develop sound financial advice?
  • Are you comfortable taking decisive action for yourself and others?
  • Are you adept at building strong client relationships?

If your answer to all or most of these questions is Yes, then pursuing a career as an independent financial advisor may be right for you. The next step is knowing how to go about it.

Becoming an independent financial advisor

The steps to becoming an independent financial advisor will differ depending on your starting point. For instance, if you’re just starting out and considering a career path in financial advisory services, you’ll need to first meet certain requirements before you can call yourself a financial advisor. These include:

Meet the educational requirements

Having at least a bachelor’s degree related to finance, investment, accounting, business, or economics is a great place to start. If you do have a bachelor’s degree but not in any of these relevant courses, you could take on the additional coursework, so you at least have a basic foundation in finance. Another option is to apply to work in a financial services firm and receive on-the-job training.

If you intend to become a certified financial advisor, you’ll need to complete a number of college-level courses in various relevant topics, including retirement planning, estate planning, insurance planning, income tax planning, investment planning, and professional conduct.

Though not a requirement for providing financial planning services, having a master’s degree in a related course is a great way to set yourself apart.

Meet the necessary certification or licensure requirements

Depending on the financial advisory services that you wish to provide, it might be necessary to obtain certain licenses and certifications. In fact, some states require individuals to have a valid license before they can sell or provide professional advice on financial products like insurance, traded securities, mutual funds, scholarship plans, and so on.

The National Association of Personal Financial Advisors (NAPFA) recommends having one or more of the following certifications before offering financial advice:

  • Certified Financial Planner (CFP)
  • Personal Financial Specialist (PFS)
  • Chartered Financial Analyst (CFA)
  • Chartered Financial Consultant (ChFC)

If you want to become an RIA, you’ll need to pass the Series 65 exam. Alternatively, you could take the Investment Advisers Law Exam. Both are administered by the Financial Industry Regulatory Authority (FINRA). You’ll also need to register with the Securities Exchange Commission (SEC) or the state in which you wish to practice.

Obtain errors and omissions insurance

This is a special type of professional liability insurance that protects financial advisers, insurance companies, lawyers, consultants, and other related professionals from claims of negligent actions or inadequate work.

If you were previously an employee of a financial advisory services firm, chances are the company had E&O insurance. But now that you’re breaking away and setting up your own independent firm, you will need to obtain coverage before you can start taking on clients.

Check out this quick guide on how to obtain E&O insurance.

Stay up to date on compliance matters

The financial industry is highly regulated. Penalties for not meeting your compliance obligations can be quite steep, especially for someone who’s just starting out. So before you start servicing clients, make sure you are up to date on the many regulatory requirements that govern the financial services industry. For example, independent life insurance agents must adhere to the Anti-Money Laundering/Terrorist Financing Compliance regulation.

Create your business plan

Your business plan doesn’t have to be complex. But it should be detailed enough such that you can easily refer to it and gain clarity about what you want to achieve in your business. A good business plan should have:

  • The legal structure of your business
  • The business name and brand
  • A detailed assessment of your business’s current assets and liabilities
  • Plans for important considerations like your office space, equipment, technology, etc
  • Staff management plan

Create a plan for how you intend to finance the transition

Becoming an independent financial advisor is a big step, one that may require some serious financing. So before you print that resignation letter, make sure you have certain financial safeguards in place. Start-up costs can quickly add up, and you need to be able to get them out of the way before you can begin servicing clients.

The reality is that unless you already have a solid client base, you’ll likely struggle to match your previous income within your first few months as a new business owner. Don’t set your expectations too high at this stage. If you can manage to break even in your first year, that’s already a massive achievement.

Implement cost-cutting measures such as working from home instead of renting an office space, outsourcing back-office functions, and minimizing overheads.

Begin sourcing clients

Ideally, you should already have a few clients willing to transition with you. This way, you at least have some revenue coming in while your new business takes root. Tapping into the existing client base of your current employer is a great place to start. However, this is not always feasible since most employers include an iron-clad non-compete clause in employee contract agreements.

If you cannot poach these existing clients directly, consider asking them for referrals instead. They might have people in their network that may be perfect for your particular brand of financial advisory services.

Another option is to reach out to your own immediate and extended network. The truth is everyone needs financial planning even if they don’t know that they need it. Talk to your family, friends, colleagues, and acquaintances about the importance of obtaining sound financial advice. Even if they don’t immediately sign up with you, they might be able to send some referrals your way.

Set up your inbound marketing

A well-designed financial advisor website is at the center of every successful inbound marketing strategy. This is not one of those start-up expenses that you can avoid. If people are unable to find your financial services online, then you’re not yet ready to commence business operations — that’s just the fact.

Social media platforms like Linkedin, Reddit, and Facebook are also great for sourcing new clients. The key is to first define your services and outline the kinds of people who stand to benefit the most from them. After that, it’s a matter of finding those people and then getting their attention.

You’ll also need to invest in automation tools and client relationship management (CRM) platforms. The main benefit here is that you get to automate a huge chunk of your inbound marketing, so you have time to focus on actual client work.

Related: Our top 5 popular CRM platforms for financial advisors

How long will it take before I become a financial advisor?

This really depends on your focus area(s). On average, it can take up to seven years or even more to become a CFP. Of course, this includes the time spent obtaining the bachelor’s degree (usually four years) and gaining the necessary years of experience to meet certain certification requirements.

If you already have a college degree in a finance-related course or the focus area you’re pursuing doesn’t require a certification, you can usually start seeking work right away.

What are the long-term prospects in this career path?

According to the U.S. Bureau of Labor Statistics, financial advisors can look forward to a robust job outlook over the next couple of years. They predict that the field will grow by as much as 27% and lead to the creation of over 60,000 new jobs in the next few years.

One of the main reasons for this is the rising interest in proper financial education. More and more people are starting to realize that they need to have better control over their personal finances. And so, they seek out financial advisors who can walk them through and provide personalized solutions based on their financial circumstances.

Another reason is that new financial products and services are entering the market en masse. People who were unable to take advantage of traditional financial products like mutual funds, life insurance, and stock investing are turning to newer products like cryptocurrency and decentralized finance solutions.

Launch your independent financial advisor business with B12!

B12 is an all-in-one solutions platform for small business owners and professional service providers. Let us help you launch your new independent financial advisory business with a powerful online presence. First, you get a stunning, fully functional website built using artificial intelligence and painstakingly customized to your specification by our web design team.

This website comes with built-in business management tools like an online billing and invoicing system that allows you to accept payments directly on your site. There’s also our intuitive booking and scheduling tool that allows your website visitors to easily schedule appointments with you without leaving your website. We also offer marketing services like SEO, copywriting, blogging, and more.

Sign up on B12 today to get started and get your business’s online presence up and running in as little as 30 days. You can also visit our Product Overview to learn more about the solutions that we provide.

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