How To Become an Independent Financial Advisor

By Indeed Editorial Team

Updated 25 October 2022

Published 16 August 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Independent financial advisors play an important role in the investment and finance industries. These professionals offer expert advice to individuals and businesses at relatively affordable rates. Knowing how to become an independent financial advisor and the duties of the role can help you decide whether to choose the profession. In this article, we explain what independent financial advisors do, how much they earn and how to become one.

What does an independent financial advisor do?

An independent financial advisor provides clients with professional advice on financial planning and investment. Unlike normal financial advisors, they are unaffiliated with big firms and have more freedom when recommending financial products to clients. The independent financial advisor could be an individual or an investment advisory company.

While their independence makes them different from regular financial advisors, independent financial advisors still render typical services like other FAs. Here are some core responsibilities of an independent financial advisor:

  • Helping clients choose the best investments based on their risk tolerance, financial standing and goals

  • Assisting clients in creating financial plans using expenses, income, financial goals, risk tolerance and other relevant information

  • Recommending investment options, including stocks, bonds and mutual funds

  • Consulting in estate planning, tax planning and retirement planning

  • Designing financial management solutions for clients, including plans for budgeting, cash management and debt reduction

  • Evaluating clients' financial data to formulate strategies to achieve their financial goals

  • Preparing investment performance reports, income estimates and other financial documents for clients

  • Identifying and establishing relationships with potential clients, while maintaining a strong client base

Read more: Q&A: What Does a Financial Advisor Do?

How to become an independent financial advisor

Follow this guide on how to become an independent financial advisor:

1. Acquire relevant academic qualifications

As with other professionals in the financial advisory industry, independent financial advisors undergo educational training before getting their first job. The minimum educational qualification required of IFAs is usually a bachelor's degree in business, accounting, marketing or any finance-related industry. While only some employers demand it, a master's degree in business administration (MBA) can boost your employability and ease your transition into the industry.

Related: How To Be a Wealth Manager (With Tips To Advance Your Career)

2. Build client relationships

One of the most important success factor for any financial advisor, independent or not, is getting and holding onto their clients. Securing clients is critical for prospective independent financial advisors, as they are key to earning revenue. To do this, ensure your client relationships are strong enough that clients can still trust you with their money after you leave your advisory firm.

Start building and improving on your relationships with existing clients five to seven months before you resign. You can do that by contacting them regularly, delivering high-quality work and showing interest in helping them meet their financial goals. By doing that, you can start your new business confidently, knowing that you have a steady income stream.

3. Create a business plan

Creating a plan for starting and running your independent financial advisory business increases its chances of surviving and thriving in a competitive environment. Your business plan is a blueprint for your business and includes details of how you intend to establish and manage the operation.

The ideal business plan can have information about the industries you wish to target and how you want to structure the business. It can also contain key information about the business's infrastructure and technology needs. You may also include these elements in your business plan:

  • Company name and branding

  • Hiring and onboarding processes

  • Legal and financial structure

  • Evaluation of existing assets and clients

  • Plans for procurement of equipment, renting an office and creating IT ecosystem

  • Financial status of company and plans for financing

4. Develop expertise

Before clients can trust you, they're most likely confident in your abilities. One way to achieve that is to develop your skill and show your ability to deliver results. Potential independent financial advisors may understand basic financial accounting and complex financial analysis. It's also important to have excellent knowledge of business budgeting and financial planning.

It's important to improve your soft skills if you want to advance in this profession. For example, interpersonal skills are critical for IFAs, as they may interact with multiple clients. Other skills you may need as an independent financial advisor include:

  • Basic IT skills and familiarity with required software

  • Problem-solving

  • Critical and analytical thinking

  • Organisation

  • Time management

Related: Top 10 Accounting Skills To Include in Your Resume

5. Search for clients

Building a client base is important for any individual who wants to transition into an independent financial advisory role. An excellent strategy for creating your client base is to search through your existing one. If your work has been exceptional, your existing clients are more likely to keep your services after you leave your company.

However, you may still source for new clients, especially if your employee contract prevents you from soliciting your company's clients. The usual strategies for securing clients interested in financial advisory include:

  • Selecting an industry or business niche

  • Deciding on your target demographic

  • Creating marketing plans and strategies to expose your business to your target audience

6. Set up your office

When setting up an independent financial advisory business, it's important to consider setting up an office. While a virtual business may help reduce overhead costs, a physical office improves your professional image and makes it easier to attract quality clients. Factors to consider before renting office space include:

  • Cost

  • Proximity to target demographic

  • Company size

  • Budget

7. Buy equipment and IT systems

Your office setup is only complete after you install important equipment and technology critical to the daily operations of your business. Here are the common equipment and technology that your new office may need:

  • CRM: A customer relationship management (CRM) software is important for managing client accounts, tracking leads and building relationships with existing customers.

  • Computers and furniture: Your new business location is likely to require desks, chairs, scanners, desktop computers, scanners, fax systems, telephones and other office basics.

  • Financial planning software: Many independent financial advisors are turning to financial planning software to make their jobs easier and you can do so as well.

8. Invest in promotions

With clients being important to the survival of your business, devise a promotional and marketing plan that can drive client acquisition and retention. Here are some tactics that can prove useful in promoting and marketing your business:

  • Develop a brand: Since it influences customers' perception of your company, your brand is important to the success of your business. Select an interesting brand name that appeals to your target demographic and hire a graphic designer to create sleek, professional-looking design assets for your company.

  • Leverage social media: Social media channels present an excellent opportunity to increase your brand's visibility and attract new clients. It can also help you improve interactions with clients and build a community of loyal customers. The most advisable options for using social media for promotions include paying for ads or building an organic presence online.

  • Build an email list: Email marketing is one of the best ways to reach out to both existing and prospective clients. Consider creating an email list and sending out newsletters, product offerings, deals and discounts and useful information to email subscribers.

  • Create a website: In businesses, appearance matters, and a professional website is key to improving how prospective clients perceive your business. You may have more chances of securing clients faster if you have a professional-looking website. Having a company website means those interested in your services can check if your offerings match their needs.

  • Promote your company at events: If you have the funds, you can organise financial education events to attract new leads and improve relationships with current customers. A more cost-effective strategy is to promote yourself at community events, especially those that attract members of your target audience. You can answer questions about your offerings and value proposition at such events, increasing your credibility and building up trust in your competence.

Related: The Complete Guide to Changing Careers During COVID-19 (With Tips From a Recruiter)

Frequently asked questions (FAQs) about becoming an independent financial advisor

Here are frequently asked questions about becoming an independent financial advisor:

Why should you become an independent financial advisor?

You may transition into an independent financial investor role for the following reasons:

  • Independence

  • Freedom to recommend a variety of financial products

  • Higher income potential

  • Deeper relationships with clients

How much does an IFA earn?

There's little information on how much independent financial advisors earn, given their lack of structure. However, the average annual salary for financial advisors is $72,143, so you may earn close to this range within your first one to three years.

What qualifications do you need to become an independent financial advisor?

There are no specific qualifications needed to become an independent financial advisor, although a polytechnic diploma and degree in a relevant field are important. Passing modules 5 to 9A of the Capital Markets and Financial Advisory Services (CMFAS) examinations is necessary too.

Salary figures reflect data listed on Indeed Salaries at time of writing. Salaries may vary depending on the hiring organisation and a candidate's experience, academic background and location.

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