Everything you need to know about building a financial planning practice

Posted by Doug Ronson on April 1, 2021

A career in financial planning is both rewarding and challenging - you have an opportunity to help people achieve financial wellness by reaching their financial goals. On the other hand, it takes a lot of work to get your business off the ground and attract new clients.

How to start your financial planning business

First you need qualifications. In Canada, you should have a bachelor’s degree, preferably in business or finance. Then you must take Certified Financial Planner courses and pass the certification exams. If you have a job in another field, it’s best to keep it while you take the CFP courses so that you have some income.

Once you are certified, you can begin working with clients. Like any other business, it takes a while to establish your client list. At the same time, you must pay for an office and any fees associated with joining an existing financial planning company, should you decide to go that route.

The good news is that if you are able to continue to attract clients, your income potential is substantial.


Building your financial planning business

After you have opened your office, you need to grow your business. The first step is to define what markets you wish to pursue. Do you want to approach recent university graduates and young families? Or perhaps you will address the needs of a particular group in your community, such as dentists and their staff.

This is important because it will help you focus your marketing activities. There is no point in posting constantly on Instagram (a magnet for young people) if your target audience is older professionals.

Here are some marketing ideas on how to prospect as a financial advisor:

  • Host an event: Organize a seminar or webinar on financial planning. Invite your clients and ask them to bring a friend. If you put on some drinks and hors d’oeuvres, you should attract a good crowd.
  • Write a blog: Demonstrate your financial planning expertise by sharing it on your website and via LinkedIn. Send it to your clients and prospects as part of a monthly newsletter. High quality content can help you get a high rank on search engines when people do a search for “financial advisor.”
  • Sponsor conferences: If your prospective clients are small business owners, put up a booth at one of their meetings and network with the attendees.


What makes a good financial advisor?

  • Knowledge: You need outstanding knowledge of the available investment vehicles and tax rules. No one can predict the direction of stock markets with 100 percent accuracy, but you should be able to advise when to invest and when to hold tight.
  • Communication: Financial planners should be great listeners so that you understand client dreams and goals. On top of unparalleled client service, you must communicate your plan for client investments so that they have a clear idea of risks and rewards.
  • Depth: Ideally, a financial advisor should be able to help with minimizing taxes, estate planning and meeting retirement goals. If you don’t have expertise in all these areas, you should have a team of specialists that you can call on. As a financial advisor, you need to offer complete financial planning packages to meet all client needs.


Independent or part of a large company?

Most financial planners work with big companies, such as banks and investment firms. This enables them to take advantage of the marketing strength of a larger organization and the expertise offered by analysts and tax specialists. Advisors who work with a major Canadian bank collect a base salary and are expected to build their client list.

Independent advisors receive 100 percent of their compensation from commission. This means that income will be low at the outset and will be variable from year to year.

To start out, some financial advisors work with a veteran advisor who provides mentorship. This enables newcomers to gain some experience and build up a clientele in the crucial initial two or three years.

A small number of financial planners are called “fee only”. They charge a flat amount to help clients to develop a financial plan, including factors such as retirement, children’s education and life insurance.

Regardless of which route you choose, you will need to build your own clientele through marketing and sales.


How can a financial advisor help a small business?

Ideally, a financial advisor will have a thorough understanding of both the client’s business and personal finances. These are often intertwined. Minimizing taxes is a key part of the financial planning process for entrepreneurs. Sometimes it’s best for management to pay itself a salary; in other cases, dividends may be a better option to reduce tax. That’s why financial advisors must provide strategic financial and tax planning services.

Every business owner needs a retirement strategy that includes an exit plan to sell the business. This should be updated frequently to reflect shifting market conditions. Decades ago, family doctors in Canada could retire and sell their practices to collect a tidy retirement nest egg. Now those practices are not as valuable due to a shortage of family physicians – recently licensed doctors can simply open an office and attract patients.

Financial advisors must also help business owners to plan their estates. What will happen to the client’s company if he or she dies unexpectedly? Businesses need management depth if they are to continue beyond one generation. As well, some companies rely on the expertise and connections of the business owner – if they die all of that is lost.

Many small businesses also have trouble navigating the private health insurance system. As a financial advisor, finding the right fit can be difficult since every client is different. However, there is a health and dental plan in Canada designed specifically for small businesses called the Health Spending Account (HSA). The HSA is a cost-efficient plan that brings high value to any customer. As a result, they are a great starting point for an advisor to build trust in their relationship with the client.


Is financial advising for you?

Being a financial advisor offers many rewards – an opportunity to make a good living, run your own business and help clients achieve their financial goals. However, it’s not for everyone. You have to be able to deal with stress, especially when a market drop has your clients in a panic and calling you for advice. In addition, you need to be a self-starter who is skilled at attracting new business and able to cope with the inevitable rejection of prospective clients turning you down. The first few years are the toughest but once your business is established it can be very satisfying.

Discover how to sell a Health Spending Account:

The Complete Olympia Partner Guide


Related Reading:

Financial Planning 101: Tips for Small Business Owners

How to Choose a Financial Advisor in Canada


Topics: financial planning, advisors