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Setting up a Financial Advisory Business

All you need to know about starting and running your business

Business guides » Setting up a Financial Advisory Business

What is a Financial Advisory Business?

A financial advisor is a professional that helps you make financial decisions. They use their knowledge and expertise to create personalised financial plans (based on a client’s individual circumstances) that are designed to help them reach their financial goals. An advisor provides their clients with specialist, individualised advice on how best to manage their money and grow their finances.

A financial advisor doesn’t just create a one-time plan with no follow-up. Instead, they usually consult with the client on a regular basis, evaluating their current financial situation and adjusting their financial strategies and goals accordingly. A financial advisory business uses financial planning to help its clients build a better future and achieve a stronger financial position. Your business can choose to work with individual clients or business clients.

A financial plan created by a financial advisory business can include:

  • Saving: Different saving strategies depending on what your client is saving for (e.g. a house deposit), their time frame and the amount of money they need to save.
  • Budgeting: Providing different advice, tips and strategies on how to create a manageable and achievable budget that helps the client to meet both short-term and long-term financial goals.
  • Investments: Investment advice on different types of investments and which investment styles and level of risk will be best for their financial goals, risk tolerance level and risk capacity. A financial advisor helps their clients to choose an investment strategy that suits their needs and adjust their investments as needed.
  • Debt management: Including how to reduce and eliminate any debt they currently have and how to avoid getting into debt in the future.
  • Tax strategies: Including preparing tax returns, minimising tax reductions, ensuring the best capital gains, minimising taxes in retirement and making any relevant tax claims.
  • Account types: Which debit, credit and savings accounts best suit the client’s financial situation and financial goals.
  • Insurance (e.g. life insurance): Choosing the best insurance for the client’s budget.
  • A retirement plan: A savings and budgeting plan that is designed specifically for the client’s retirement. The plan will be based on their income, the number of years until their retirement and their retirement goals. When creating a plan, you should consider the best-case and worst-case retirement scenarios.
  • Estate planning: Including creating a will and planning the best ways to leave their estate (including property, money and valuables) to their beneficiaries.

 

Not only does a financial advisor help their clients to plan their finances and make the best financial decisions for their situation and future goals, but they also act as a financial educator. Rather than blindly following a financial advisor’s plan, the client should be educated in understanding a range of financial topics and what is involved and required to meet their financial goals.

In order to offer accurate and effective advice and create a personalised financial plan, a financial advisory business will need to gain a complete picture of a client’s assets, debts, incomes, expenses and liabilities. You will also need to understand any financial obligations (e.g. child support payments) and any future income sources and outgoings. You will also need a thorough understanding of the client’s current finances, including net worth, assets and liquid or working capital.

When starting up your financial advisory business, you may choose to offer a wide range of financial services. Alternatively, you may choose to specialise your business by focusing on a particular type of client or a particular type of financial product (e.g. stocks and bonds) or financial advice (e.g. offering retirement or investment advice).

There are many responsibilities associated with running a financial advisory business, including:

  • Conducting detailed reviews of a client’s financial situation, current incomings and outgoings and any debts.
  • Meeting clients and discussing their current finances and financial goals.
  • Analysing all available financial information, including financial goals, to create a customised plan designed to improve your client’s finances and in line with their individual requirements.
  • Helping your clients to implement financial strategies.
  • Completing risk analyses.
  • Determining the client’s risk file and setting up asset allocation in line with the client’s risk tolerance level and risk capacity.
  • Selecting financial products to fit the client’s risk file.
  • Providing clients with regular updates on their portfolios.
  • Providing unbiased and unrestricted advice that is in the client’s best interest and is suitable for the client.
  • Conducting industry research and researching the investment marketplace.
  • Conducting extensive research on different financial products and explaining key details and information to clients.
  • Providing clients with information on new and existing products and services.
  • Staying up to date with any changes in the industry, changes to legislation or industry trends and researching information from various reputable sources.
  • Reviewing a client’s changing needs and making any appropriate changes to their financial plan.
  • Communicating with other professionals, for example banks and mortgage advisors.
  • Producing accurate financial reports.
  • Negotiating with providers of financial products.
  • Complying with all legal requirements and guidelines.
  • Marketing and advertising.
  • Completing business and administrative tasks.
  • Handling payments and invoices.
  • Working to high ethical standards.

 

Starting up a financial advisory business can be both personally rewarding and financially lucrative. To help your business succeed, a strong level of expertise in the financial industry and a high level of knowledge of different financial products and a good understanding of investments are essential. You will also need strong research and analytical skills and the ability to collate and evaluate data and information to create a personalised financial plan.

You will also need excellent communication and interpersonal skills, the ability to establish positive relationships with your clients and the ability to explain complex information in a more simple and comprehensible way. You will need a combination of industry-specific and personal skills to help your clients in the most effective way.

Types of Customers

There are many different people who may use the services of a financial advisory business, including:

  • Someone who feels stressed, overwhelmed, confused or concerned about their financial situation.
  • Someone who wants to ensure they are on the correct financial track.
  • Someone who doesn’t have the knowledge, time or desire to manage their finances.
  • Someone with no investments or who has investments that are losing money.
  • Someone without an estate plan or a retirement plan.
  • Someone who is looking to build their finances and their financial future.
  • Someone who wants the tools and resources to become financially independent.
  • Banks, building societies, law firms, pension consultancies and investment companies.
  • Financial firms looking to build credibility and client loyalty.

 

In many cases, your clients will be individuals or businesses with specific financial needs.

Although the types of clients that use the services of a financial advisory business can be extremely varied, defining your target market more precisely makes it easier to focus on the specific clients who are most likely to use the services of your business and determine exactly where and how to market your business.

Some of the factors that can determine your typical client base include:

The type of financial advice you specialise in

This is the most important factor in determining your typical client base. You may choose to specialise your business in a specific type of financial advice (such as retirement planning or managing debt) or a particular type of financial product (such as investment accounts or stocks). Alternatively, you may choose not to specialise your business and instead offer a wide range of financial services to different clients. Consider who is most likely to use different financial services and how this could affect your typical client base.

Your skills, training, qualifications and areas of expertise

Because there are a lot of financial advisors in operation and a high level of knowledge, skill and trust is required for this role, many potential clients will look closely at your qualifications and training, your experience, your level and area of expertise and the level of knowledge you possess. Financial advisors who are highly trained, skilled and experienced can usually charge a higher rate for their services and may be more likely to attract higher-value clients with a higher net worth and more ambitious financial goals.

How and where you offer your services

Also known as your primary operating strategy, this is another important factor in determining the types of clients that will use your services. For example, you may offer your services online or in person. Your primary operating strategy can significantly impact the types of customers that use your services.

Your pricing

Clients can typically be separated into three pricing categories:

  • Budget: Price is the most important factor for this type of client. They will be looking for the lowest-price advisor and are less likely to look at your qualifications, experience and reputation.
  • Mid-range: This type of client is looking for a combination of quality and affordability. Although price is important to them, it is not the most significant factor.
  • High-end: These clients are willing to pay higher prices for the highest qualified, most experienced and most highly skilled financial advisors. They are usually higher-value clients with more complex finances.

Your reputation

This is another important factor that many clients will look at when choosing a financial advisory business. They may consider your reputation, look at your customer reviews or decide based on recommendations from others.

Your reputation may be based on multiple factors, including:

  • The financial plans you create.
  • How personalised your service is.
  • The improvements the client sees in their finances.
  • Your knowledge, experience, qualifications and skills.
  • Your interpersonal skills, i.e. how you interact and communicate with your clients.
Financial Advisor Cartoon
Money Cartoon
Financial Advisory Business Cartoon

Equipment You Will Need

The equipment requirements for a financial advisory business can vary, depending on whether you operate your business from an office or from your home. If you hire employees to work for your business, you will need to purchase more equipment.

You may already have some of the equipment required to run your business. If you decide to use your existing equipment, ensure it is in good working condition.

Below is a list of equipment typically required by a financial advisor.

Reliable laptops or desktop computers

You will need a high-specification, reliable laptop or computer that can handle the amount of time you will be using it each day. If you plan to work from different locations or take your computer to in-person meetings with you, you will need a laptop, rather than a desktop. Your computer will be an important tool in your financial advisory business as you will use it for tasks such as researching investment options, creating financial plans, investing money and tracking finances. Ensuring your laptop is compatible with a variety of software and computer programs is essential. Your laptop will also need an updated operating system. Each employee that works for your business will need their own computer.

A website

A website is a way for potential clients to find your business and see your experience, qualifications, skills and areas of expertise. Your website can act as your online CV, showcasing some of your success stories or with information about your previous clients. Ensure your website includes your contact information so potential clients can connect with you. You should also include an About page, a contact page and a blog (to demonstrate your expertise in financial advising).

Client Relationship Management (CRM) software

CRMs automate work such as tracking clients’ financial goals, keeping notes and tracking your clients’ needs. You can manage multiple clients at one time and automate the documentation work for each client. CRMs can also be beneficial to your clients, as it allows them to track their wealth management, investment details and expenses. Choose a CRM that has data security, risk management features, automated services and client user features.

Account aggregation software

Account aggregation software helps you access a complete picture of your clients’ finances. This can be particularly helpful if a client fails to report all of their accounts and assets (for example, if they forget about a retirement account or stocks and bonds). This software helps your clients to manage their accounts more effectively.

Retirement calculators

A retirement calculator can help to calculate a client’s retirement savings, analyse their accounts, calculate how long their pension fund is likely to last and calculate how much of their savings or pension funds will be available to them each week and month of their retirement. The calculator allows you to input their pension pot balance, their yearly spending and the minimum time they expect to access their pension. This allows the client to see how far their pension will stretch and how much additional funds they require.

Trading software

If you offer investments as part of your financial advisory service and invest or trade in stocks, bonds or cryptocurrency, you will require trading software to allow you to make investments and build your clients’ portfolios. You can also use the software to rebalance their portfolios and make withdrawals.

Performance reporting software

This type of software is beneficial as it shows your clients how their investment portfolio is performing over time. It is an easy way for you to show your clients how their finances are improving and can form a basis for discussions regarding changing needs and strategies.

Business software

Business software can have a variety of uses, including:

  • Organising and managing daily operations.
  • Managing payments and expenditures.
  • Managing and tracking donations.
  • Accessing client information.
  • As a payroll tool.
  • Creating, tracking and sending invoices.
  • Scheduling appointments and meetings.

 

Depending on the business software you opt for, you could also have tools for increasing your revenue, including marketing tools. Many types of business software come with a mobile application for easy access on the go.

Business phones

Business phones are essential, as you will be regularly speaking on the phone with your clients and with individuals and businesses you are working with. If you have an office, you may opt for landline telephones, and you will need one telephone for each employee. However, you may also opt for business smartphones, which will allow you to keep in contact with clients on the go and give you constant access to your emails.

Video conferencing software

Even if you offer in-person consultations and meetings, some clients may request video conferencing, particularly for updates and follow-up meetings. When choosing video conferencing software, look for one that offers a screen sharing and collaboration feature and that has high video quality.

A headset with a microphone

If you do not use a headset with an attached microphone when making phone calls, the quality of your sound will be significantly impacted. Your phone or computer microphone can pick up background noises, which can be distracting to your clients and can create an echoing sound. A headset with a microphone results in higher-quality sound for your customers and enables you to hear your meetings and phone calls more effectively. A lack of background noise can also help clients to feel more secure discussing financial information, as they will not feel like they are being overheard. You can opt for a wireless or wired headset.

Reliable and high-speed Wi-Fi

Because you will be running your business from your office, you will need to ensure your Wi-Fi is reliable and high-speed. Video calls and online research require a strong and consistent connection, and you must ensure your Wi-Fi doesn’t cut out in the middle of a meeting or when investing money. Ensure your Wi-Fi has a minimum connection speed of 20 megabytes per second (Mbps).

A printer

You will need a reliable, high-quality printer for important business tasks, such as printing letters and contracts for your clients and printing your records. You could also opt for a printer that comes with an in-built scanner.

As well as your printer, you will also need:

  • High-quality printing paper.
  • Black and coloured ink.

 

A secure storage system

You will likely amass a lot of resources and research that is vital to your business. You will work with the majority of your clients on a long-term basis, meaning you will accrue a lot of resources and information that is essential to their financial plan. If your laptop breaks or contracts a virus, you may lose everything you have stored on your device. Investing in secure Cloud storage that is password protected and encrypted ensures everything is backed up and protected in the event of a technological issue. A secure storage system also helps to protect your clients’ personal data and financial information.

Scheduling tool or software

Scheduling tools allow you and your clients to make appointments and meetings without needing to waste time trying to find an available date and time. The software links to your calendar and recognises your availability. If a client books a meeting with you via the software, you will receive an automatic confirmation email and the meeting will appear in your calendar.

An email service

Setting up your own email service using your own domain may be beneficial as your business grows. A business domain can make your business seem more professional and official. Using a public email domain such as @google or @hotmail can look less professional compared to using your own business domain, for example, oscar@ogroupfinances.co.uk. You will need to make sure your email service is fully secure and encrypted and abides by email security policies in the UK.

Email marketing automation software

An email marketing tool can be used to improve your relationship with your clients, for example by automatically sending company updates and holiday celebrations (e.g. Merry Christmas or Happy New Year emails). Email software can also schedule reminder emails, for example reminding clients about an upcoming meeting. Some email marketing tools can also be used to turn prospective clients into actual clients.

A Microsoft Office subscription

You can utilise Microsoft Office for a variety of tasks, such as tracking finances in Excel, preparing documents and letters in Word and accessing Teams or OneDrive. You can also share documents with your clients through Microsoft, making it easier to communicate without needing to schedule a meeting.

An Adobe Acrobat subscription

This is another popular software choice for financial advisors. If any of your clients work on PDF documents, Adobe Acrobat allows you to annotate the PDFs, including making comments, highlighting content and adding notes.

Invoice software

You will likely need to issue invoices to your clients and keep them for your own records (and for when you submit your taxes). Digital invoice software allows you to create electronic invoices, send them to your clients and store them safely.

Electronic signature tool

To create a faster and more streamlined service, you will need an electronic signature (e-sign) tool. Having this tool will save you a significant amount of time compared to physically mailing each document when a signature is required. An e-sign tool allows you to email documents that need signing to your clients and receive an electronic signature immediately. Electronic signatures are legally recognised in the UK.

A payment system

The type of payment system you require will depend on your primary payment strategy. For example, if you accept online payments, you may require an online payment system or a way to track payments to your business bank account.

Office furniture

You will need to furnish your office with sturdy, high-quality furniture and equipment. The amount of furniture you require will depend on the size of your office and the number of employees you hire. Ensure the furniture is an appropriate height and doesn’t require you to strain your neck or back.

Some of the furniture you may require includes:

  • Office desks.
  • Ergonomic office chairs.
  • Secure filing cabinets.
  • Shelving units or storage cabinets.
  • A paper shredder.
  • A clock.
  • Lamps and lights.
  • Long tables (for meetings).
  • A kettle and coffee machine.
  • Kitchen equipment for your employees’ break times (e.g. fridge, microwave).

 

Stationery

Several pieces of stationery can be beneficial to your business and can make it easier for you to make notes and plan meetings.

Some stationery you can purchase includes:

  • Pens and pencils.
  • Paper and notepads.
  • A diary and/or calendar.
  • Highlighters.
  • Post-it notes.
  • Folders.
  • Binders.
  • Envelopes and stamps.

 

Business cards

Business cards are an important marketing tool and can be given to new or existing clients. Your business cards should include your business name, contact information, location and the types of services you offer.

A CCTV system

Because you will be storing expensive equipment and sensitive information, CCTV can protect your business from potential break-ins and theft. CCTV can also protect your business in the event of an accident, an incident or an allegation. You can choose the specification of the equipment and how many cameras you require.

Cleaning equipment

You will need to ensure your premises is clean and hygienic and complies with health and safety legislation, particularly if clients or employees will be visiting your premises. Some cleaning equipment you may require includes a sweeping brush, vacuum cleaner, mop, cloths, disinfectant, antibacterial and cleaning products.

Financial Advisor With Clients

Typical Costs

When you are setting up your financial advisory business, an important consideration you will need to make is your expected start-up costs and running costs. Calculating your expected costs allows you to determine your initial investment requirements, your pricing strategy and your income goals.

There are multiple costs associated with setting up and running this type of business. Some of these costs will be one-off initial costs that you will need to pay when you are setting up your business. Other costs will be ongoing costs you will need to pay regularly – usually weekly, monthly, quarterly or annually.

Although the costs can vary depending on the type of financial advisory business you set up, some of the typical costs you can expect are:

Your business premises

If you opt to set up an office for your financial advisory business, your premises will likely be your biggest expenditure. You will need to rent your premises on a monthly or annual basis. Rental prices can vary significantly, depending on the location and the size of the premises. City centre locations and newly built premises usually have the highest rental costs. Rental costs are often calculated per square metre and can range significantly, from £500 to £15,000 per square metre annually. Your rental costs may also be higher if you are renting an already established or equipped office. Alternatively, you could opt to purchase your premises upfront or take out a mortgage.

Refurbishment and installation costs

Unless your premises previously operated as an office, you will need to refurbish or convert your premises to install the equipment you need for your business and to make your premises fit for purpose. You may be able to do much of the work yourself, although you may need to hire professionals for jobs such as installing a bathroom and installing equipment and furniture. Refurbishment and installation costs can start at as little as £500, depending on the scale of work required.

Equipment

Your equipment is an important purchase. Although equipment costs are not usually high for a financial advisor, ensuring you have the correct equipment is essential. Consult the list above to determine the type of equipment you require. The cost of your equipment can vary significantly, depending on the specification of your equipment and how much equipment you need. The bigger your premises is and the more employees you hire, the more equipment you will likely require. You may opt to purchase less equipment initially and then expand your equipment as your business grows. Equipment for a financial advisory business typically costs between £2,000 and £35,000.

Maintaining, repairing and replacing equipment

Repairs, maintenance and replacements are ongoing costs you will need to factor into your budget. Although some of your equipment will come with warranties or guarantees, repairs and replacements are inevitable because much of your equipment will experience frequent usage and technology, such as laptops and phones, generally only has a lifespan of a couple of years. Maintaining equipment and ensuring it is used correctly can extend its life, but potential repairs and replacements should still be factored into your budget.

Monthly and annual equipment costs and subscriptions

Your monthly and annual subscription costs could include the various pieces of software and business tools you require, your Wi-Fi, website, email service and secure storage. Depending on which subscriptions you require and the specifications of the ones you choose, expect to pay between £50 and £250 per month.

Your business website

A business website is an essential advertising tool, as it allows potential clients to find your business online. You should ensure your website is attractive to customers and use search engine optimisation (SEO) so that your website ranks highly on search engines, such as Google. Your website will need regular monitoring, updating and upgrading. You also need to make sure your website is secure, particularly if you will be collecting any customer information or banking details. You may choose to set up and run your website yourself or hire someone to do this for you. You can expect to pay between £20 and £100 per hour for someone to set up and run your website.

Staff

You may choose to run a business where you are the sole financial advisor or hire other advisors or administrative staff (particularly as your business grows). If you hire employees on a permanent basis, you will need to pay them at least the national minimum wage and account for other expenses such as holiday pay, sick pay and maternity/paternity pay. Keep in mind that the more highly qualified and experienced your staff are, the higher wage they will expect.

Branding

Branding is an essential expenditure for your business. It can help you to establish your business’s identity and set you apart from your competition. Branding could include creating your business’s visual identity, a logo and your business name, and creating your business website. You can hire a professional to help you with branding or do some of the work yourself. Branding can cost between £500 and £10,000, depending on the amount of branding you require.

Advertising and marketing

To ensure your business attracts clients and creates maximum profits, you will need to invest in advertising and marketing. It is recommended that you spend between 1%-3% of your annual turnover on marketing. For example, if your annual turnover (or your desired annual turnover) is £150,000, you should spend between £1,500 and £3,000 on advertising and marketing. You may need to invest more money when you initially set up your business or when you are trying to grow your business.

Business insurance

Insurance is recommended to help protect your business, your equipment and your clients. Some types of coverage are mandatory, whereas others are optional.

Some insurance coverage you could opt for includes:

  • Public Liability Insurance.
  • Professional Indemnity Insurance.
  • Professional Cyber Insurance.
  • Employers’ Liability Insurance (if relevant).
  • Business Equipment Cover.
  • Legal Expenses.
  • Cyber Liability Insurance.
  • Business Interruption Cover.

 

Insurance prices can vary significantly, depending on your insurance provider and the level of coverage you require. Prices typically start at £10 per month.

Typical Pricing for Customers

Once you have calculated the expected costs associated with setting up and running your business, you can then create your pricing strategy.

Your pricing strategy may depend on your qualifications and experience as a financial advisor.

For example, financial advisors with different qualifications and experience levels charge significantly different prices for their services:

  • Trainee Financial Advisor.
  • Qualified Financial Advisor.
  • Senior Financial Advisor.
  • Wealth Management.

 

Your rates will rise as you move through the various levels of financial advisory:

Financial advisors typically charge fees in different ways, including:

  • Hourly: Hourly fees can vary, from £50 to £400 per hour.
  • A set fee: This will be a set fee for the entire cost of the job. The price will be based on the complexity of the job, the amount of money that is involved (e.g. the investments) and the time it will take.
  • A monthly fee: This could be a flat fee or based on the amount of work that is required from month to month.
  • An ongoing fee: You can only charge an ongoing fee if you are providing an ongoing service.
  • A percentage: Some financial advisors are paid a percentage of the money the client plans to invest or a percentage of their returns.

Safely Running a Financial Advisory Business

Safe practices in your financial advisory business can help to protect you, your business, your clients and your client’s finances.

Some ways you can safely operate your business include:

Perform risk analysis

Financial risk analysis assesses, identifies and analyses the risks associated with different financial decisions and different types of investments. Risk analysis can help you to identify future events that could result in you or your client losing money on an asset or investment. Risk analysis can also be beneficial in ensuring any investments you make are in line with your client’s risk tolerance and risk capacity levels.

Keep detailed and accurate records

You will need to keep detailed records of every client you work with and every financial plan you create, including recording any interactions and keeping records of payments and investments. This is necessary to protect both you and your clients. You should also keep detailed records to prove that you are complying with all legal guidelines.

Adhere to an ethical code

Ensuring you implement and follow ethical practices at all times is essential. An ethical code helps to protect the well-being of your clients and ensures good practices at all times. An ethical code may be provided by your registered professional body (e.g. the Chartered Banker Institute), or you can create your own ethical code.

Create client contracts

Although contracts are not a legal requirement, creating a legally enforceable contract with your clients ensures that any terms are laid out straight away and both parties are aware of any expectations and timeframes and any payment details. Contracts also help to protect you in the event of a dispute and make your business appear more professional.

Conduct risk assessments

Risk assessments are only a legal requirement if your business has five or more employees. If you have fewer employees, risk assessments are recommended to ensure safe practices in your business.

When conducting risk assessments, you should:

  • Identify hazards.
  • Determine who could be at risk.
  • Evaluate the potential risks.
  • Implement safety measures.
  • Record the results of the risk assessment.
  • Review the risk assessment on a regular basis.
Financial Advisory Business
Finance Advisor Meeting

Use two-factor authentication for client records and information

All your personal and business passwords should be set up with two-factor authentication. This means you will need to prove your identity in two ways, such as with your usual password and with a code that is sent to your registered mobile number. This adds an extra layer of security to your accounts.

Properly maintain and set up equipment

If you open a financial advisory office, you must ensure any equipment is properly maintained, correctly set up and safe to use. You must protect yourself, your employees and your clients from accidents or injuries caused by equipment. You should also perform regular equipment inspections to ensure your equipment’s safety and help extend the lifespan of your equipment. Maintenance includes cleaning equipment regularly and checking it is functioning correctly.

Install anti-virus software

If you use a computer or laptop in your business, anti-virus software can detect and remove malicious codes and intrusions on your computer or laptop. This can protect you and your business against viruses and malware. If your laptop becomes infected with a virus, this can cause irreparable damage to your equipment, can delete your computer’s data and cause you to lose money and business. A virus on your laptop could also be sent to your clients via email which could affect your business’s reputation. Anti-virus software should be installed on all of your devices and your Wi-Fi.

Install a firewall on all of your devices

Any information kept on your devices is better protected by a firewall. It shields your device and accounts from unauthorised access and notifies you automatically if someone tries to access your information. While some laptops and desktops already have a firewall installed, others could require you to install or activate one yourself.

Install anti-spyware software

Without your knowledge, spyware can track and gather all of the sensitive data you keep on your computer or other devices. Some spyware varieties can even find your passwords and access bank data. To safeguard your business and your clients, make sure that anti-spyware software is installed on all of your devices.

Secure your Wi-Fi network

It isn’t recommended to set up your Wi-Fi and enter the default password. Make sure your Wi-Fi network is encrypted and that you use a strong password to prevent unauthorised access. This helps to protect your devices and prevent anyone from accessing any client or financial information.

Legal Requirements

The financial advisory industry is highly regulated, with multiple regulations you must ensure you comply with.

Some of the legal requirements you should be aware of include:

Complete specialist qualifications

Running a financial advisory business can be very difficult, with extensive regulations and legal requirements you need to be aware of and a high level of knowledge required. For this reason, financial advisors are required to undergo training and gain qualifications. To run your business, you will need a Level 4 qualification in Financial Advice that is recognised by the Financial Conduct Authority (FCA).

Some qualifications you could opt for include:

  • Diploma in Professional Financial Advice (Chartered Banker Institute).
  • Diploma in Investment Advice (Chartered Institute for Securities and Investment).
  • Diploma in Regulated Financial Planning (Chartered Insurance Institute).
  • Diploma in Professional Financial Advice.

 

Until you have achieved a suitable qualification, you are not authorised to offer financial advice. If you want to offer advice on mortgages, equity, stocks or shares, you may need to take additional examinations and gain further qualifications.

Ensure your business is FCA regulated

You cannot run your business or work as a financial advisor unless you meet the requirements of the Financial Conduct Authority (FCA). You will need to submit an application to become FCA regulated. You will then be assigned a case officer who will assess whether you meet the FCA requirements. Any senior figures in your business will also need to be assessed by the FCA. If you are operating as an independent financial advisor, you may not need a licence to operate. However, you will still need to be authorised by the FCA.

Comply with the Financial Services and Markets Act 2000

The Financial Services and Markets Act is the legislation that permits financial advisors to carry out financial activities. Under this Act, you are not permitted to carry out any regulated activities or promote investments if you are not authorised by the FCA.

Regulated activities include:

  • Investments of a specified kind, including effecting and carrying out contracts of insurance, arranging deals in investments and organising trading.
  • Managing investments.
  • A specified activity carried out in relation to a property.
  • Requesting information about a person’s financial standing, setting or administering a benchmark.
  • Accepting deposits.
  • Establishing personal pension schemes.
  • Activities related to home finance, e.g. mortgages.

 

It also sets out arrangements for the regulation of financial promotion.

Register as an approved person

To operate as a financial advisor you will need to register as an approved person with the Financial Conduct Authority (FCA). As an approved person, you will be approved to do activities known as controlled functions.

To qualify as an approved person, the FCA will look for:

  • Honesty.
  • Integrity and reputation.
  • Competence and capability.
  • Financial soundness.

 

Ensure client confidentiality

You will have access to a lot of personal and sensitive information, including a client’s financial status. Client confidentiality is required of all financial advisors (except in exceptional circumstances, such as if you believe a crime has been committed). You should also ensure that no person who is not authorised is able to access a client’s data.

Some ways you can protect your client’s confidentiality include:

  • Ensure your premises is physically secured and only allow individuals who are authorised or able to enter your premises or enter specific areas.
  • Ensure your premises is physically secured and only allow individuals who are authorised or able to enter your premises or enter specific areas.
  • Control the flow of data.
  • Use a paper shredder.
  • Don’t release a client’s data unless you are legally required to do so (e.g. because of a court order).
  • Use secure payment methods.

 

Be aware of the legal limits to confidentiality

Because you will have access to a client’s financial information and personal data, you may discover information that it is your legal duty to report.

This can include illegal activities, such as:

  • Drug trafficking.
  • Money laundering.
  • Terrorism.
  • Child, elder or dependent abuse.
  • Fraud.
  • Theft.

 

You should contact the relevant authorities if you become aware of any activities that could be causing someone harm or that are considered a crime.

Comply with the Consumer Rights Act 2015

The Consumer Rights Act is designed to protect clients from sub-standard work and overpriced services. It covers the selling, terms and conditions and supply of services (including financial services) to ensure consumers are better informed and more well-protected.

Under this Act, your clients have the right to:

  • Request that substandard work is redone or receive a price reduction.
  • Challenge unfair small-print terms, conditions and costs.
  • Reject work if the tradesperson (you) used their one chance to redo the service ineffectively.

 

Comply with consumer protection legislation

Legislation is in place that is designed to protect the rights of individuals and to prevent businesses (including those providing a financial service) from using unfair practices.

Consumer protection legislation you must ensure you comply with includes:

  • You cannot make false claims about yourself or the service you provide.
  • The service you provide must be up to the expected standard.
  • Services must be performed with reasonable care and skill.

 

Comply with invoice or receipt guidelines

You may make it standard that you send all of your clients an e-receipt or invoice once they make a payment to your business. Even if you don’t make it standard, some clients will request receipts or invoices.

You must include certain information in any invoices you create, such as:

  • The word ‘invoice’ and a unique invoice number.
  • Your business name and address.
  • The client’s name and address.
  • A brief description of your work.
  • The total you are charging the client and when the payment is due.
  • The payment method.

 

Ensure your website complies with the guidelines

If you set up a business website, there are several guidelines you need to comply with, including:

  • Privacy policies.
  • Cookie legislation
  • Service descriptions.

 

Under the Equality Act (2010), all websites in the UK must be accessible to people with disabilities. If you set up a business website, you must make reasonable adjustments to your website to ensure it is accessible, for example having text-only versions of each page so that they can be read by text converters.

Comply with the General Data Protection Regulations (GDPR) and the Data Protection Act (DPA)

You must comply with both pieces of legislation when storing or sharing personal information, such as your clients’ personal information, financial information, contact details and banking information. You must also apply for a Notification to Process Personal Data Licence. You will also need to apply for a licence with the Information Commissioner’s Office and renew your registration every year.

Comply with employment legislation

If you employ any staff on a permanent basis, you must ensure you follow employment legislation, including the Employment Rights Act (1996) and the National Minimum Wage Act (1998). You must also comply with legislation relating to recruitment, working hours, sickness, discrimination, dismissals, and maternity or paternity pay.

Register your business

Your business must be registered with HMRC before you begin operating. You can choose to register as a sole trader or as a limited company. You will also need to register your business name and any other relevant information.

Register for self-assessment tax

This allows you to calculate and pay your own taxes each year. You will need to track your finances every month and submit any expenses as part of your tax assessment.

As part of your tax responsibilities, you must:

  • Record all forms of income and expenses.
  • Complete an annual self-assessment tax return.
  • Register for VAT if you earn above the threshold (currently £85,000).
  • Pay National Insurance contributions.
  • Keep a record of your business accounts for the previous five years.

 

Premises Legal Requirements

If you run your financial advisory business from a business location, there are certain legal requirements you must comply with in relation to your premises, particularly if employees, clients or members of the public visit your premises.

Some of the legal requirements you should be aware of include:

Comply with fire regulations

You must ensure fire safety measures are implemented on-site. There are multiple fire regulations you must ensure you comply with.

For example:

  • Perform a fire risk assessment.
  • Comply with the Regulatory Reform (Fire Safety) Order 2005.
  • Implement any necessary fire safety measures.
  • Implement emergency procedures and ensure these are clearly displayed on your premises.

 

Comply with the Provision and Use of Work Equipment Regulations (PUWER) 1998

These regulations specify that any equipment you use in your business must be fit for purpose and maintained and inspected regularly. Health and safety risks should be minimised to an acceptable level, and you must ensure that you have the correct knowledge and training to use the equipment and that protective measures are put into place. You must also ensure the equipment is used under appropriate conditions.

Comply with the Electricity at Work Regulations (1989)

The Electricity at Work Regulations state that any workplaces that use electricals must construct electrical systems in a way that prevents danger, maintain electrical systems to ensure they are safe, ensure electrical equipment is checked by a competent person annually and conduct Portable Appliance Tests (PAT). This includes any electrical equipment such as computers, chargers and printers.

Comply with the Health and Safety at Work Act 1974

The Health and Safety at Work Act lays out the duties of all employers in the UK in relation to the health, safety and welfare of everyone in your workplace. As the business owner, you will be responsible for protecting the health and safety of your employees and any clients or visitors to your business.

Prepare a health and safety policy

The law states that every business in the UK must have a specific policy for managing health and safety. Your policy should state exactly how you will manage health and safety in your business, who is responsible for specific tasks and how and when these tasks are completed.

Finance Advisory Business

Positives of Owning a Financial Advisory Business

Running a financial advisory business can be extremely rewarding in many ways.

Some of the main positives associated with this type of business include:

High-income potential

Starting up a financial advisory business can be financially lucrative, with a significantly higher-than-average income. The income potential for a financial advisory business is unlimited, particularly if you work with high-value clients. As your business grows and you develop a good reputation, you will see your profits grow. You can charge higher prices for your services and expand your business to increase your profits. Financial advisory can have a high-income potential and your profit margins are likely to be high. With a good business plan and strategy for growth, your business could have unlimited income potential.

Make a real difference to your clients

Your business can make a significant difference to your clients’ finances and their financial future. You can help your clients achieve their financial goals and manage their debts, increase their investments, improve their long-term finances and accomplish something they’ve been aiming for, such as buying a house or saving for their family. Knowing that you have truly helped your clients can be very rewarding.

Strong prospects

The financial services industry is showing strong industry growth, with high demand for a wide range of financial services. As well as running your business, you will also have the opportunity to branch out into different areas of financial advisory and expand your skills and your business prospects. The skills you learn in your business are also transferrable to other financial arenas.

Capitalise on your qualifications, experience, knowledge and interests

Because you can choose your speciality, you can opt to focus on a specific type of financial advisory or specific financial products that you are knowledgeable about and interested in. Not only will this make your work more interesting and enjoyable, but clients are also usually willing to pay extra if you have special qualifications and experience in specific areas of the financial industry.

Varied and interesting

The financial industry is fast-paced and sometimes unpredictable. You will be constantly working on new tasks, with different clients and significantly different financial goals and plans. There are constant opportunities to learn new things and evolve and grow as a financial advisor. Your work will be varied, interesting and fast-paced, leaving little time for you to become bored or complacent.

Build business connections

As part of your business, there will be regular opportunities to network with high-profile individuals and businesses and build solid business connections with other people working in the financial industry and potential clients. Connecting with like-minded individuals can not only be personally rewarding, but it can also help you to advance your skills and your business and develop your professional network.

Specialise your business

It can be financially rewarding to specialise your business in a particular type of financial advisory or a particular type of client. This enables you to learn specialist knowledge and skills and develop your expertise, which can help you to grow your business’s reputation. Being seen as an expert financial advisor in a particular field can help your business to be more attractive to potential clients and can allow you to charge a higher rate.

Opportunities for growth

As your business becomes more successful, you may hire other financial advisors, allowing you to expand your client base and grow your business. Having more people working for your business allows you to take on more clients and maximise your profits. A financial advisor business is highly scalable, with great opportunities for growth. Because you will already have a solid business plan, a good reputation and established practices, you can easily adapt your business model for expansion.

A scalable business

A financial advisory business can have a simple business model, making it easy to set up this type of business. If you want to grow your business, this type of business is highly scalable, as you will already have established strong business relationships with clients, your business set-up and operating processes will be easy to replicate, and you will already have a solid business plan. There is always demand for financial advisors, giving your business great opportunities for growth.

Choose your clients

As the business owner, you will have complete control over the clients you accept and the types of jobs you work on. You can work in areas you are interested in and choose your clients based on your own skill and interests. You can choose not to work with difficult clients and can turn down or accept as many jobs as you choose. Being aware of your target market and the types of clients that are going to be most beneficial to your business will enable you to maximise your opportunities. You can opt to only work with clients that you think will benefit your business growth, pay a higher rate or that you think you will enjoy working with

Client loyalty and recommendations

You can gain a lot of business and maximise your profits through client loyalty. If your clients have a good experience with your business and see an improvement in their finances, they are more likely to use your business on a long-term basis. Customer loyalty can help to increase your profits and grow your business reputation. Loyal clients may also recommend your services to other individuals or businesses, helping you to grow your profits.

Create a positive work environment

As the business owner, you can create a healthy work culture and a positive work environment that can make it more enjoyable for you and your employees to come to work every day and can help you to complete work more efficiently. Different financial advisors will bring different skills, knowledge and experience to your business which can be beneficial to your business.

Choose how to run your business

You can choose how you operate your business, the clients you work with, and your rate of pay. As the business owner, you can decide the best way to run your business.

Be your own boss

Being your own boss gives you the opportunity to control the growth of your business, manage your own time, and gain more self-confidence and job satisfaction. Owning your own financial advisory business also means that all your profits will belong to you, and you will be in control of creating your ideal business.

Clients having a Meeting with a Financial Advisor

Negatives of Owning a Financial Advisory Business

Although owning a financial advisory business can be rewarding in many ways, there are some potentially negative aspects to this type of business you should be aware of, including:

Difficult to set up your business

The financial advisory industry has stringent regulations and strict training and qualification requirements. You will likely need to apply for several licences and adhere to laws and regulations closely in order to qualify as a financial advisor and be able to set up a business. It can be a long and arduous process and can take several years of studying for qualifications and gaining experience until you are qualified enough to set up your business.

Strict industry regulations and financial rules

The financial industry is highly regulated with strict laws and legal guidelines. There are many different pieces of legislation and legal guidelines you will need to comply with. Not only can this be complicated and time-consuming, but any non-compliance (even if this is accidental) can be punished with a fine or the forced closure of your business. Some types of legislation also require you to follow very specific procedures, which can be costly and arduous. This can be very stressful.

Accountability and liability

This industry is highly regulated with a large number of laws and regulations you must be aware of. You need to ensure you follow all policies and procedures, particularly those relating to health and safety. Not only can it be time-consuming and stressful to ensure compliance, but failure to comply, even unintentionally, could have serious consequences. Additionally, if a client loses a large amount of money while following your financial plan and implementing your strategies, they may hold your business accountable.

High start-up costs

A financial advisory business has a lot of associated costs including the cost of your premises, staff and equipment. The high initial investment that is required can make it more difficult for you to start up your business yourself. Not only does this mean you may need to source outside investment, but it also makes your business high risk. Having a large initial investment also means it will take longer before you begin turning a profit. You will also need to ensure consistent profits to cover your monthly costs, which can also be high.

Long working hours

Many financial advisors find that their working hours don’t follow the traditional 9-5 working hours. Working in a high-pressure, fast-paced work environment means you often can’t predict when your work will be finished and when you can clock off for the day. Long working hours can not only be physically and mentally exhausting but can also negatively affect your personal life.

Difficult clients

As part of your job, you will have to work closely with your clients. Because you are helping them to manage their money and build their finances, this can be very stressful for your clients, particularly when they are making difficult decisions, such as making investments. The client’s stress can affect you, particularly if emotions are running high. Some clients can also be demanding, for example by demanding a lot of your time and energy. Difficult and demanding clients can take a lot of your time and have a negative effect on your business.

An unpredictable economy

The financial industry can be very unpredictable in nature, particularly with the ever-changing economy and periods of recession. An unpredictable economy can be difficult to manage, particularly if a client sees their portfolio decreasing in value or see their debts increasing because of the rising cost of living. No matter how good you are at your job, you cannot plan for every eventuality and many of your clients (particularly those with less financial knowledge) may not understand the unpredictability of the financial world and may blame you for any negative changes.

A cyclical industry

This industry can be cyclical, which means that when the economy is strong, financial advisors are in high demand and many individuals and businesses will request your services. However, during economic downcycles, your business will likely see a downturn in business. Not only can this make your business high risk, but it can also affect your profits, particularly if you are responsible for paying for a business premises and your employees’ wages.

High stress

The financial services industry is often fast-paced, competitive and high stress. Running this type of business can be stress-inducing, not only because you will have a high level of responsibility but also because you will need to fulfil the demands of your clients and meet targets.

Constant education and research are required

Even if you are an experienced financial advisor, you will still need to conduct extensive research and stay up to date with methodologies, regulations and industry information. Failing to keep up to date can result in failed investments, mismanaged money and unhappy clients, which can be detrimental to your business.

It can be physically demanding

Many people think this type of career is easy and results in no physical stress, as you will be sitting down for much of the day. However, several physical concerns could be attached to an office job, for example:

  • Eye strain.
  • Back and neck pain and strain.
  • Musculoskeletal pain and strain.
  • Reduced cardiovascular fitness.

 

It can be difficult to grow your client base

Many individuals and businesses who are looking for financial advice will choose a well-established business with proven success or an advisor that has been recommended to them. This can make it difficult to grow your client base, particularly because there are already a lot of well-established financial advisors operating. Difficulties in growing your client base will result in a reduced income and could affect your ability to continue pursuing your business.

Business can be inconsistent

You may have times when your books are full, and you are working with multiple clients at once, and other times when you have a smaller client base and lots of available time. It can be difficult to plan your finances, predict your profits and decide your working hours when your business is inconsistent. There could be times when you are less busy, and this can have a significant impact on your profits.

It can be time-consuming

You will have a lot of responsibilities, including meeting with clients, researching, planning and preparing, managing accounts, marketing and advertising and the tasks associated with the day-to-day running of your business. This can be time-consuming and stress-inducing, particularly when you are trying to grow your business. You will also have the additional responsibility of keeping your clients happy and ensuring your business succeeds.

Staffing challenges

There are many staffing challenges you could face, such as a lack of staff motivation, client complaints about staff and staff not fulfilling their expected duties. It can sometimes be difficult to create and maintain a positive work environment when working in such a stressful industry. You will also have lots of responsibilities related to your staff, such as hiring staff, staff training, day-to-day management, staff rotas and staff payroll. While your business and your profits are growing, you may have to undertake many of these responsibilities yourself.

No benefits

As you are self-employed, you won’t receive benefits such as pension contributions. You will also be responsible for doing your own taxes and organising your National Insurance contributions. You will also have a lack of job security.

Your business could fail

Starting up your own business can be risky. Many new businesses fail which could result in you losing money or getting into debt. Your business could fail for several reasons, such as high local competition, an ineffective business plan or if there is another recession or a period of financial difficulty.

Planning Your Financial Advisory Business

If you are considering starting up a financial advisory business, an effective and well-designed business plan is essential. A business plan can help you to focus on the specific steps that will help your business succeed, plan your short-term and long-term goals, determine your financial needs and help your business to grow.

Your business plan should contain information such as:

  • Your company information.
  • Your company description.
  • The services you will provide.
  • Your branding, marketing and advertising plan.
  • The structure of your business.
  • The operational plan for your business.
  • The financial plan for your business.

 

When creating your business plan, some factors you will need to take into consideration include:

The type of financial advice and products you specialise in

This is one of the most important considerations you will need to make when setting up your business. You may choose not to specialise your business and, instead, offer a wide range of financial advice to different clients with different financial situations and goals. Alternatively, you may choose to specialise in one type of financial advice, such as retirement, savings and investments or debt management. Choosing to specialise will likely result in you becoming an expert in your chosen field and can result in a higher income. Consider your skills, training and experience, the market demand and the likely profits when considering your speciality.

Your typical client base

This is another important consideration. Determining your target market is a key step in helping your business succeed. Different types of financial advice and advisory services will appeal to different clients. Some other factors that can influence your target market are how and where you operate your business, your reputation and your pricing. Once you have identified your target market, you can then focus on how to attract these clients to your business.

Your competition

Being aware of your competition is an important step to ensuring the success of your business. Analysing your competition allows you to look at what they do well and what you think can be improved upon. Look at their financial specialities, the services they offer, their pricing and their target markets. Analysing your competition also identifies whether there is space in the market for your business; for example, if there is already a successful financial advisor specialising in pensions operating in your area, you may choose to focus on a different speciality or customer base or think of ways to make your business stand out.

Your business location (if relevant)

If you operate an in-person business working with clients directly, your location will have a significant impact on the types of clients you are likely to attract. Your location will also impact your premises’ rental costs. If your business is located in an area with a high volume of individuals and businesses from your target market, the increased custom and higher profits will be extremely beneficial to your business. Consider your rental budget and your size requirements when choosing your premises.

Your brand and your unique selling point (USP)

Creating your brand is a key way to ensure you stand out from your competition. Branding can help you to focus your target audience, attract clients and concentrate your marketing and advertising strategies. Some ways you can create your brand are by focusing on your business’s visual identity, considering your specialities and creating a brand story. Your USP can also be part of your brand and can help your business stand out from your competitors. Consider what makes your business special and how this fits into what defines your business.

Your marketing and advertising strategies

Marketing and advertising are especially important when you first open your business. Your marketing strategy needs to be effective and budget friendly. Consider your target clients and the best way to reach them.

Some ways you can market and advertise your business are:

  • Build a functional and attractive website.
  • Create targeted online advertisements.
  • Offer discounts to new clients.
  • Partner with businesses and financial institutions.

 

Your equipment requirements

Consult the list above to determine your equipment requirements. The equipment you require will depend on the type of financial advisory business you set up, how big your premises is and how many employees you have. Once you have determined your equipment requirements, you can then calculate the initial costs of purchasing the equipment.

Your start-up costs and running costs

Consult the list above to help you calculate the approximate costs of setting up and running your business. Determine what equipment you need and the amount of equipment, as well as the cost of your premises, to help you determine your start-up costs and what your initial investment requirements will be. You can then calculate whether you can finance your business yourself. Determining your start-up costs and running costs can also help you to create a budget and predict when you will begin to turn a profit.

Financing your business

Consult the list of start-up costs and running costs above to determine what capital you will require. Can you finance your business yourself or will you need to source outside investment? If you require investment, you could consider:

  • A bank or building society loan.
  • A personal loan.
  • External private investment or a business partner.
  • A government grant.
  • Venture capital.
  • Personal investment.

 

Your sales forecast

How many clients can you realistically work with at one time? How much time is required to be devoted to each client? Are there certain times of the year that are likely to be busier than others? What are your weekly, monthly and annual sales forecasts? As your business grows, your sales forecast is likely to change.

Your pricing strategy

Deciding how much you are going to charge your clients is an important consideration. You may choose to charge your clients per hour, per day or per month. Alternatively, you can charge a total price for the work required, work with your clients on a rolling basis or be paid a percentage of their investments or total gains. As your business and your reputation grow, your payment strategy may change.

Your strategy for growth

Your strategy for growth is the actions you will take to realise your goals for expansion and any potential challenges your business could face and how you will avoid or overcome them. This can help to make your business more successful.

Potential challenges could include:

  • Difficulties building your client base.
  • Clients not working with your business long term.
  • Managing each client’s finances and creating their financial plan being extremely time-consuming.

 

Some potential strategies for growth include:

  • Using multi-strategy advertising and marketing.
  • Hiring other financial advisors.
  • Focusing on higher-value clients.

 

Your business summary

Your business plan should include a detailed overview of your business, including the type of business you are setting up, the financial advisory you specialise in, your typical client base, your staffing and equipment requirements and your business goals.

Your business goals

Your business goals or objectives are an essential part of creating your business plan. Your business objectives highlight the targets and goals of your financial advisory business and help you to create a one-year, three-year and five-year business plan.

Your business objectives should be SMART:

  • S = Specific
  • M = Measurable
  • A = Achievable
  • R = Realistic
  • T = Time-bound

 

Check you have complied with all legal requirements

Consult the list of legal requirements above to check you have complied with all requirements and regulations and that all your paperwork is accurate. Failure to comply with legal requirements could have a detrimental effect on your business or could result in a fine, the forced closure of your business or, in serious cases, prosecution.

 

Download our business plan

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