How to Start a Financial Consulting Business in 2024
Last Updated: 12/17/2023
How to Start Your Own Financial Consulting Business
Have you ever thought about striking out on your own and starting a financial consulting business? As someone who enjoys helping people get their finances in order, it could be an incredibly rewarding career path. This comprehensive guide will walk you through everything you need to know to start a successful financial consulting firm from the ground up.
Sizing Up the Market
Before diving in, take some time to study the market and make sure there’s a demand for financial consulting services in your area. Talk to people you know and ask if they would ever consider hiring a financial consultant. What specific services or advice would they want the most help with — investing, taxes, budgeting? Their answers can help you identify gaps or unmet needs to focus on.
Research your local competition to see how saturated the market already is. If there are quite a few established firms, consider how you can differentiate yourself, such as by specializing in certain services or working with an underserved clientele. The goal is determining if you can realistically build a client base given the competitive landscape.
Need a Financial Consulting Business Plan?
Create a custom business plan with financial projections and market research in minutes with ProAI’s business plan generator.
Choosing a Business Structure
One of the first legal steps is deciding what kind of business entity you want to operate under. Common options include sole proprietorship, partnership, Limited Liability Company (LLC), and S-corp. Talk to an attorney or accountant to understand the pros and cons of each structure in terms of liability protection, taxes, and regulations in your state. Many financial consultants opt for an LLC which separates their business and personal assets for liability purposes while allowing pass-through taxation.
Crafting a Solid Business Plan
Creating a detailed business plan is crucial in the early planning stages. Clearly map out what services you will offer, your intended market and clients, operations, marketing strategy, and financial projections. Having this plan will help you secure any necessary funding and loans. It also allows you to set concrete milestones and business objectives so you know exactly what you need to accomplish to get your consulting practice up and running.
Obtaining Necessary Certifications and Licenses
Make sure you have the credentials and qualifications needed to provide financial consulting services. Most advisors obtain certified designations like Certified Financial Planner (CFP), Chartered Financial Consultant (ChFC), or Chartered Financial Analyst (CFA) to give them credibility. Check regulations in your state — if you plan to give specific investing advice, you may need to register as a licensed investment advisor. Also look into what business licenses, tax IDs, and permits you’ll need to operate legally.
Setting Up Your Office
Determine whether you will work from home or lease professional office space. Working from home reduces overhead costs substantially, but having a nice office signals credibility and provides separation between work and personal life. Whether you go the home office route or lease commercial space, make sure your office allows you to have productive meetings with clients in a quiet, professional setting.
Getting the Necessary Tools
There are some key pieces of equipment and software every financial consulting practice needs:
- A fast computer or laptop capable of running the latest financial planning and tax prep software
- Printer/scanner for printing professional reports and digitizing documents
- Shredder for securely disposing of sensitive client information
- CRM software for keeping organized records of clients
- Solid phone system for communicating with clients
- Comfortable, presentable office furniture and décor
Building Your Team
Consider hiring staff to help support and grow your practice. Even if starting as a solo consultant, bring on an office manager or virtual assistant to handle administrative tasks and logistics right away so you can focus on advisory work. If client demand expands, hire additional advisors and support staff. Pay competitive wages to attract talented, ethical employees.
Defining Your Service Offerings
Outline what financial services you will make available to clients based on your areas of expertise. Typical services include retirement planning, tax preparation, investment management, estate planning, college savings guidance, and general personal finance advice like budgeting and debt reduction. Start with core offerings, and expand over time as your business grows.
Setting Your Fees
Decide how you will charge clients for your time and services. Common models include hourly fees, fixed project fees, commissions on investment products, or an annual percentage of assets under management. Choose an approach aligned with your services and clientele. Be transparent about fees upfront so clients know what to expect.
Funding Your Endeavor
Starting any business requires capital. Determine your expected startup costs, and explore funding options like savings, loans, business partners or crowdsourcing. A lack of access to capital is one of the biggest obstacles for aspiring business owners, so have a plan for obtaining any necessary funding before getting too far along.
Developing Strong Systems and Processes
To operate smoothly as you scale, establish clear systems and processes for every aspect of your consulting practice. For example, implement organized client intake and screening procedures, consistent billing and collections processes, secure file management protocols, and compliance processes to meet all legal and regulatory requirements. Documenting procedures makes taking on more clients far easier.
Safeguarding Your Business with Insurance
Don’t neglect insurance — working with a broker to secure the right coverage is critical. Look into general liability insurance, errors and omissions/professional liability insurance, as well as a business owner’s policy. Having adequate insurance safeguards you and your business assets against potential claims or unforeseen disasters.
Marketing Your New Business
Once established, focus energy on marketing your services and attracting ideal clients. Tactics can include networking with other professionals who can refer clients, creating a robust online presence, hosting in-person events or workshops, and strategically placing ads. Deliver consistently excellent service, and happy existing clients will help spread the word.
With careful planning and persistence, you can absolutely achieve your dream of opening a rewarding financial consulting firm. There are challenges, but the process outlined above covers the key steps for getting started. Know that your expertise will allow clients to improve their financial lives in tangible ways — a very fulfilling career path!
Need a Financial Consulting Business Plan?
Create a custom business plan with financial projections and market research in minutes with ProAI’s business plan generator.
Financial Consulting Financial Forecasts
Startup Expenses
Monthly Operating Expenses
Revenue Forecast
Frequently Asked Questions
What qualifications do I need to start a financial consulting business?
To provide financial advice, you will need proper credentials such as Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), or Certified Public Accountant (CPA). Most states require registering as an investment adviser if you give investment recommendations. A background in finance, accounting, economics or a related field is useful.
What is the cost to start a financial consulting business?
You’ll need at least $10,000 to cover startup costs like registration and licensing fees, office equipment and insurance. Ongoing expenses like office rent, marketing, payroll and utilities can cost between $2,500 to $25,000 per month depending on the size of your practice.
How much can financial consultants earn?
According to the Bureau of Labor Statistics, the median annual pay for personal financial advisors is over $87,850. With experience, financial advisors can earn $100,000 to over $300,000 annually. Your income potential rises as your client base and assets under management grow.
How do financial consultants get clients?
Strategies for acquiring financial consulting clients include networking, hosting educational workshops, creating a visible online presence, seeking referrals from existing clients, forming partnerships with professionals like CPAs and attorneys, and advertising. As you demonstrate expertise, more clients will come through referrals.
What services do financial consultants provide?
Financial consultants offer many services including investment management, tax planning, insurance planning, retirement planning, estate planning, college savings advice, debt management, budgeting and general personal finance guidance tailored to each client.
