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Being a financial advisor comes with several perks, including the personal fulfillment of helping individuals and families establish, pursue, and meet their goals. Young professionals with a knack for interpersonal relationships and a firm grasp of wealth management principles can position themselves for a long, successful career.
But first, they need to get their feet off the ground. Let’s take an honest, no-frills look at what financial advisors can expect in the first year of launching a wealth management practice.
Key Takeaways
- The first year of a wealth management practice is challenging but essential for building systems, brand identity, and client relationships.
- Client acquisition is slow, often marked by rejection and dry spells, but trust-building and referrals are powerful growth tools.
- Tight margins and heavy compliance requirements can be overwhelming, making budgeting critical.
- Celebrating small wins and staying focused on long-term goals helps advisors push through the early growing pains.
The Truth About Client Acquisition
Even the most socially skilled individuals may discover that client acquisition isn’t as natural as they thought it might be. After all, it’s one thing to charm people at a party, and it’s another thing to get people to allow you to manage their wealth. So, if you’re relying on having a big social circle to get your business off the ground, you may be in for a rude awakening.
Cold Calling and Rejection
Building a client base doesn’t happen overnight. Many established wealth managers look back on their first year as a humble scramble of client acquisition. But most will agree that the scramble was worth it—and that mistakes were made.
Rejection will happen, and it’s important not to take rejection personally. Your lifelong friend who won’t allow you to manage their wealth? Perhaps they’re embarrassed about the student debt they’ve all but given up on ever paying off. Simply put, a rejection of your services often isn’t about you as a person but rather is about the person doing the rejecting.
Generating Leads and Building Trust
Client acquisition can feel like an uphill battle. Consistency and persistence do pay off, but the process can feel exhausting. Client acquisition can also be expensive, whether paying for leads or spending money on dinners and outings with prospects.
That’s a big reason why word-of-mouth can be one of the most effective marketing tactics to enhance client acquisition efforts. “This is my financial advisor” is an incredibly powerful statement and indicates a level of trust that can’t be earned in a cold call.
It’s estimated that 90% of people seek out reviews before they make a purchase. Recommendations from strangers can sway a person’s purchase decisions, but personal recommendations can be gold for a new financial advisor.
Tip
Offer personalized attention to clients that makes you an advisor they feel comfortable introducing to others.
Enduring Dry Spells
So, what happens when a dry spell hits? If your client acquisition feels stagnant and you’re frustrated by a lack of growth, take a small step back to consider what you can do in this time to accentuate your business.
Are there processes you can implement to make your operations run more smoothly? Can you better define your team’s responsibilities? Is there continuing education you can pursue? Might you strike up a professional relationship with a local journalist so you become their go-to interview for financial topics?
Primarily, continue seeking out networking opportunities and asking for introductions from happy clients. You may find that your first year is spent with a lot of time digging your heels in and pushing forward, even when you feel a little defeated.
The Reality of Building Your Brand
What’s your brand? It’s what people think of when they hear your name or see your face in a photo.
Here’s what you need to know about building your brand, diluted down into a few very simple principles:
Establish Your Niche
“I’m a financial advisor” isn’t a brand.
“I’m a financial advisor who specializes in helping medical professionals navigate their goals” is a brand, as is “I’m a financial advisor with so many credentials that many consider me an educator.”
Every decision you make as an advisor or firm should first be examined to determine whether it bolsters your brand. For example, “Should we sponsor the middle school essay contest?” is an easy question to answer if your brand is an advisor who serves educators within public schools.
Furthermore, it’s not unheard of for an advisor to realize they enjoy working with a certain group of people (such as retirees, or military, or high-net-worth individuals) after their first year in practice. When you discover your niche, embrace it and make it part of your brand.
Managing Your Finances
It seems almost silly to urge financial professionals to mind their finances in the first year, but many advisors are caught off guard by the tight margins they’ll experience as they get established. Between startup, operational, and marketing expenses, cash flow can be a big headache.
The uncertainty of monthly revenue, partnered with the high costs of maintaining a practice, can create a stressful scenario. So many factors can impact profitability. Are you starting your own firm or joining an established team? Are you starting from scratch or inheriting a book of business from a retiring advisor?
Either way, new firms can expect to hit profitability after the first year. Consider your first year to be laying the groundwork for many profitable years to come.
You already know how to manage finances (you wouldn’t be an advisor if you didn’t!). The trick is to create and follow a budget and to look at your finances with a critical eye, anticipating lean times in the first year.
Compliance and Paperwork
If you became an advisor primarily because you enjoy dealing with people, you may be surprised by the sheer volume of paperwork, regulatory filings, and compliance rules you’ll need to navigate.
Compliance is no joke. Establishing a relationship with a compliance professional, whether a compliance attorney or another advisor well-versed in compliance, is pivotal. Expect to devote several hours weekly to staying compliant with logs and other paperwork.
Establish a culture of compliance and don’t deviate from it.
Dealing with the Daily Grind
Simply put, the first year of your career is a lot of grunt work. Expect to hustle and learn a lot about the industry and yourself.
It will probably feel overwhelming, but look at the first year as your time to build what will someday thrive. Visualize your career as a messy, chaotic garden that you need to attack with rolled-up sleeves to someday enjoy the bounty of produce you grew.
Small Wins Matter
Just as you’ll encounter stress in the first year, you’ll also encounter many small wins. Look for them and celebrate them as they happen.
Tip
It’s easier to recognize small wins when you put short-term goals into place.
What Is the Most Unexpected Challenge New Financial Advisors Face in Their First Year of Business?
Many financial advisors try to do everything themselves and underestimate the benefits of a team. A team approach is important, and delegating (whether to team members or outsourcing) can make life easier in that first year.
How Can a Financial Advisor Stay Motivated During the Tough First Year When Clients Are Slow To Come In?
Stay focused and remember you’re laying the foundation for a multi-decade career. The book “The Gap and the Gain: The High Achievers’ Guide to Happiness, Confidence, and Success” by Dan Sullivan is a must-read in the first year.
What Are the Most Common Mistakes New Wealth Management Practices Make in Their First Year?
Failing to put systems in place can be problematic. Create a situation that can scale as you grow and add people. Leverage technology to its highest capability to streamline processes.
The Bottom Line
The first year is tough, but it’s also your opportunity to set the foundation for the type of advisor you will be. Focus on relationships, establish processes, and set good habits into motion so you’ll look back on your first year gratefully as the time that allowed you to create a successful career.
This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal, and/or tax advice. Investment advisory services offered through CWM, LLC, an SEC Registered Investment Advisor
