SALT LAKE CITY -- Financial planners often get into the profession because they want to help clients achieve their dreams. That's great, says James Christie, president of Freedom Wealth Management in Basking Ridge, N.J. -- as long as new planners also realize that opening your own firm means running a business.
Christie, who spoke at the 2014 NAPFA conference here, said attention to financial planning's business component is key. Here are his tips for success.
- Plan for startup costs. It's reasonable to spend $25,000 to $50,000 on a brand-new practice, Christie said, to cover business setup and licenses, office equipment and software, registration and compliance, office expenses and insurance, marketing, professional-association membership fees and continuing education.
- Profitability is not immediate. It takes time to build a client base, and initial clients might not be ideal. New planners need to consider how they'll draw income while working toward profitability.
- A consistent revenue stream is key. A new planner might charge hourly fees for as-needed planning, flat or hourly fees for comprehensive planning, fees for managing assets under management, a retainer, fees for tax preparation, or some combination of all these things. In any case, it's important to design a fee structure with a consistent income stream in mind.
- Keep a tight rein on your time. No matter how much you enjoy your work, it's still work. Doing it efficiently is central to growing your practice and your income.
- Consider your service model. Will you offer financial planning, investment management, tax preparation or a combination of these services? Don't invest in any software before you're sure which services you're offering to clients.
- Avoid common pitfalls. Among the traps to avoid: undercharging, perfectionism, being too frugal with setup costs and software purchases, paying too little attention to regulatory and legal issues, not asking for help, spreading yourself too thin, and following industry fads. All these pitfalls can hurt planners at any stage of their professional lives, but such mistakes can be particularly expensive for beginners.
"You can't help others if you're not taking care of yourself," Christie said. "Like they say on airplanes: Put on your own oxygen mask before you assist others."
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