Financial advisors, also referred to as investment advisors, are professionals who provide financial and investment advisory services to the general investing public. To become a financial advisor, you must register with appropriate regulatory authorities and demonstrate professional qualifications. A beginner in the asset management business will need to develop a business plan that sets certain goals in different aspects of the business. A beginner’s goals often define the size of the business, how to attract clients, what kind of services to offer and where to obtain technical and operational support.
The first goal the beginning financial advisor must set is for the intended scope of the business, often defined by the amount and type of assets the advisor will manage. Since fees are often charged as a percentage of the assets managed, the asset base helps determine the fees the financial advisor can charge annually. If he doesn't sell financial products for commission -- which requires a separate license -- the management fees will be the main profit source for a beginner financial advisor. If the fee percentage is 2 percent and assets managed are $5 million, annual management fees would be $100,000. Depending on the financial adviser’s ability to attract clients, he may lower the fee percentage in order to expand the asset base, thus charging a lower percentage but on more assets.
After deciding on the scope of assets, the beginning financial advisor can use that to set goals for client marketing. Using the planned asset base, along with an average account size, the financial adviser can decide on the number and type of clients he will target. The average account size reflects the net worth of potential clients that the financial advisor intends to target. That is, will he target wealthy investors (generally those with investment assets over $1 million), modestly wealthy investors (with between $200,000 and $1 million to invest) or average investors (those investing less than $200,000)? By targeting a specific clientele, a beginner financial adviser can employ a single investment advisory strategy to serve all clients.
Based on client needs and an advisor’s professional capability, the beginning financial advisor can decide what services to provide. Some clients may want an advisor to draw up an investment plan but do the actual investing themselves. Other clients may turn over their assets to the advisor but want to make decisions based on advice. Still others may turn over full investment responsibility to the advisor. The more services a financial advisor provides, the higher the advisory fees he can charge. However, a beginner financial advisor is better providing basic investment plans with the option of offering full portfolio management as the client base grows.
Financial advisory services can be either independently operated or affiliated with a known brand in the market, like Edward Jones or Wells Fargo Advisors. When a financial advisor operates his business under a recognizable industry name, he benefits from back office support, technology and other investment research services provided by the affiliating firm. He also benefits from the firm’s reputation when attracting new clients, which can be a major benefit for someone just starting out. Joining in an affiliation program often means sharing profits with the program’s head office, but once a clientele is built up, the advisor may decide to offer independent services.
- Prosperity Coaching, LLC: Financial Advisor Success -- Goal Setting with a Mini Business Plan; Suzanne Muusers
- Securities and Exchange Commission: Accredited Investors
- Congressional Research Service. "The SEC’s Best Interest Proposal for Advice Given by Broker- Dealers." Accessed Mar. 8, 2020.
- U.S. Securities and Exchange Commission. "Regulation Best Interest." Accessed Mar. 8, 2020.
- Charles Schwab. "Robo-Advisors: An Introduction." Accessed Mar. 8, 2020.
An investment and research professional, Jay Way started writing financial articles for Web content providers in 2007. He has written for goldprice.org, shareguides.co.uk and upskilled.com.au. Way holds a Master of Business Administration in finance from Central Michigan University and a Master of Accountancy from Golden Gate University in San Francisco.