Financial Advisor Business Plan
Starting or growing a financial advisory business requires a solid business plan.
The following template outlines the essential elements to include in a formal business plan for any type of financial advisor, including but not limited to comprehensive financial planning, retirement, investment strategies, tax planning, and wealth management.
Sample Business Plan Template For Financial Advisors
I. Executive Summary
Business Overview
[Firm Name], located at [Location], is a new wealth management firm providing financial advisory and investment services to its clients, helping them reach their financial goals. The Company will operate in a Professional setting, conveniently located next to [notable bank] in the center of the financial district. [Firm Name] is headed by [Founder’s Name], an MBA Graduate from UCLA with 20 years of experience working as a financial advisor in such firms as Merrill Lynch Wealth Management.
Products Served
[Firm Name] will focus on close client relationships. It has a full-time assistant who, among other things, will focus on answering clients’ daily questions and drafting newsletters to increase client communication.
The founder, [Founder’s Name], will also focus on answering his clientele’s needs. In addition to newsletters and email updates, [Founder’s Name] will hold seminars on financial strategies and investment presentations for his clients.
[Firm Name] provides private wealth management, retirement services, and other financial planning service offerings.
Customer Focus
[Firm Name] will primarily serve the residents within a 20-mile radius of our location. The demographics of these customers are as follows:
- [Number of residents]
- [Average or median income]
- [% married, % families]
- [% professional occupations]
- [Median age]
In addition to this prime adult demographic for a wealth management firm, there are four large banks in the area. Working professionals, especially those in the financial sector, realize the importance of early retirement planning and investment advice and creating the perfect target market.
Management Team
[Firm Name]’s most valuable asset is the expertise and experience of its founder, [full name]. [First name] has been a certified financial advisor for the past 20 years. He has spent much of his career working at Merrill Lynch’s Wealth Management division. He spent the more recent portion of his career at a smaller firm, Century Asset Management, where his client base doubled and his assets-under-management tripled in 8 years.
[Firm Name] will also employ an experienced assistant to help with various administrative duties around the office. [Assistant’s name] has experience working with C-level executives and has spent significant time as an administrator.
Success Factors
[Firm Name] is uniquely qualified to succeed due to the following reasons:
- The Company will fill a specific market niche in the growing community we are entering. In addition, we have surveyed the local population and received extremely positive feedback saying that they explicitly want to make use of our services when launched.
- Our location is in a high-volume area with easy access from multiple residential and commercial district zones.
- The management team has a track record of success in the private wealth management business.
- The local area is currently under-served and does not have specialized financial advisors.
Financial Highlights
[Firm Name] is currently seeking $125,000 to launch. Specifically, these funds will be used as follows:
- Store design/build: $60,000
- Working capital: $65,000 to pay for Marketing, salaries, and lease costs until [Firm Name] reaches break-even
Top-line projections over the next five years are as follows:
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $1,080,000 | $2,472,768 | $2,830,825 | $3,240,728 | $3,709,986 |
| Total Expenses | $962,000 | $1,539,107 | $1,719,742 | $1,901,321 | $2,112,641 |
| EBITDA | $118,000 | $933,661 | $1,111,082 | $1,339,407 | $1,597,344 |
| Depreciation | $25,600 | $25,600 | $25,600 | $25,600 | $25,600 |
| EBIT | $92,400 | $908,061 | $1,085,482 | $1,313,807 | $1,571,744 |
| Interest | $29,946 | $26,202 | $22,459 | $18,716 | $14,973 |
| Pre Tax Income | $62,455 | $881,858 | $1,063,023 | $1,295,091 | $1,556,772 |
| Income Tax Expense | $21,859 | $308,650 | $372,058 | $453,282 | $544,870 |
| Net Income | $40,595 | $573,208 | $690,965 | $841,809 | $1,011,902 |
| Number of locations | 1 | 1 | 1 | 1 | 1 |
| Average customers/day | 20 | 22 | 23 | 25 | 27 |
| Number of orders | 3,600 | 7,776 | 8,398 | 9,070 | 9,796 |
II. Company Overview
Who is [FirmName]?
[Firm Name], located at [Location], is a new wealth management firm providing financial advisory and investment to its clients. The Company will operate in a Professional setting, conveniently located next to [notable bank]. [Company Name] is headed by [Founder’s Name], an MBA Graduate from UCLA with 20 years of experience working for Merrill Lynch.
[Firm Name] was founded by [Founder’s Name]. While [Founder’s Name] has been in the financial services sector for some time, it was in [month, year] that he decided to launch [Firm Name]. Specifically, during this time, [Founder] met with a former friend and fellow independent financial advisor in Fort Lauderdale who has had tremendous success. After discussing the business at length, [Founder’s Name] clearly understood that a similar business would enjoy significant success in his hometown.
Specifically, the customer demographics and competitive situations in the Fort Lauderdale location and his hometown were so similar that he knew the business would work. After surveying the local population, [Founder’s name] went ahead and founded [Firm Name].
[Firm Name]’s History
Upon returning from Fort Lauderdale, surveying the local customer base and finding a potential retail office, [Founder’s Name] incorporated [Firm Name] as an S-Corporation on [date of incorporation].
The business is currently being run out of [Founder’s Name]’s home office, but once the lease on [Firm Name]’s office location is finalized, all operations will be run from there.
Since incorporation, the Company has achieved the following milestones:
- Found office space and signed a Letter of Intent to lease it
- Developed the company’s name, logo, and website located at [website]
- Hired an interior designer for the decor and furniture layout
- Determined equipment and fixture requirements
- Began recruiting key employees
[Firm Name]’s Products & Services
[Founder’s Name] will be able to provide clients with the following services:
- Asset Management: investing and managing clients’ savings depending on portfolio preferences.
- Financial Planning: Detailed planning and a structured layout for retirement or child’s funds for college.
- Hourly Advice: advising clients that do not have assets with [Firm Name] on an hourly basis.
- Life Insurance: providing the option of life insurance to clients as part of their long-term and retirement planning.
As [Founder’s Name] understands, the key to a successful advisory business is being accessible and staying in contact with clients. [Founder’s Name] will have a full-time assistant on hand who, among other things, will manage client phone calls and answer questions as much as possible.
[Firm Name] will also feature a Bloomberg Terminal and several major publications to stay informed on important news and market trends.
III. Industry Analysis
The financial advisory services industry is strongly correlated with the strength of the economy as a whole. Last year, industry revenues fell as the market fell, declining by 34% to $37.6 billion. Revenues are expected to recover again this year, reaching the $38 billion mark.
Most of the industry consists of small, independent financial advisors and firms. The lion’s share of the private wealth management industry is composed of these individual advisors. Large firms often pay significant amounts for an independent advisor to join them and bring their client base along. Overall, employment in the industry is currently declining. It is estimated that 225,000 people were employed in financial advisory services last year and that only 213,800 will be employed this year.
The market served by financial advisors is a diverse one. 47% of the client base is made up of High Net Worth Individuals, HNWIs for short. These are classified by the Securities and Exchange Commission as people with at least $750,000 in investment-ready assets or $1.5 million in investment-ready assets held in a marriage. These clients tend to be aging individuals who are beginning to consider retirement. This fits with the industry trend toward retirement planning services. Financial advisory services are not reserved exclusively for HNWIs, however. There are an estimated 120 million households with $17 trillion in assets in the United States, many of which require such services.
The next largest customer segment served by financial advisors is made up of businesses and the US government, holding 23% of the business. Retail clients make up 13% of the business, followed by hedge funds and other clients with 7% and 10%, respectively.
IV. Customer Analysis
Demographic Profile of Target Market
[Firm Name] will serve the residents of [company location] and the immediately surrounding areas, as well as those who work in [company location].
The area we serve is populated mostly by the middle and upper-middle class; as a result, they have both the need for financial advisory services and the means to pay for it.
The precise demographics of the town in which our location resides are as follows:
| Wilmette | Winnetka | |
|---|---|---|
| Total Population | 26,097 | 10,725 |
| Square Miles | 6.89 | 3.96 |
| Population Density | 3,789.20 | 2,710.80 |
| Population Male | 48.04% | 48.84% |
| Population Female | 51.96% | 51.16% |
| Target Population by Age Group | ||
| Age 18-24 | 3.68% | 3.52% |
| Age 25-34 | 5.22% | 4.50% |
| Age 35-44 | 13.80% | 13.91% |
| Age 45-54 | 18.09% | 18.22% |
| Target Population by Income | ||
| Income $50,000 to $74,999 | 11.16% | 6.00% |
| Income $75,000 to $99,999 | 10.91% | 4.41% |
| Income $100,000 to $124,999 | 9.07% | 6.40% |
| Income $125,000 to $149,999 | 9.95% | 8.02% |
| Income $150,000 to $199,999 | 12.20% | 11.11% |
| Income $200,000 and Over | 32.48% | 54.99% |
Customer Segmentation
The Company will primarily target the following customer segments:
- Aging Baby Boomers: The area in which the Company will operate has a significant population of baby boomers. This generation is rapidly approaching their retirement age and has a great deal of disposable or discretionary income. After experiencing a life of great financial prosperity, these are often married couples or empty nesters. They seek to ensure that their own nest eggs will support the lifestyle they want to live after they stop working and that their wealth will be preserved appropriately for future generations of family members. These customers typically have extensive networks of individuals in similar economic circumstances, and as such, will be an excellent source of referrals.
- Middle-aged Professionals: [Firm name] is located along a well-traveled commute route. By offering a convenient location, effective advertising, and a strong product mix, the Company will draw in a significant crowd of professionals with rising earning power who wisely seek to manage their money for the future.
- Young parents: There is a growing population of young parents with small children in the surrounding area. These people will seek solutions to provide for the future economic well-being of their new families, purchasing services such as life insurance.
V. Competitive Analysis
Direct & Indirect Competitors
The following financial advisory firms are located within a 20-mile radius of [Firm Name], thus providing either direct or indirect competition for customers:
Prudential Financial
Prudential Financial is the city’s only major financial advisory firm. The company focuses primarily on the sale of life insurance, however, and offers financial advice as a support to its primary business.
As the second largest US life insurer, Prudential focuses its efforts on maintaining top position through the sale of individual life insurance, long-term care, and disability insurance.
Prudential also offers financial advice. This includes asset management services, mutual funds, and retirement services.
Internet Brokers
Many internet brokers have emerged since 2001 and cater to those individuals looking for minimal advice while having more felt control over their investments. These firms often offer personal banking and investment tools for stocks, mutual funds, ETFs, and other securities.
Furthermore, internet brokers offer professional advice and software products, such as ratings on securities and articles from industry experts. However, they leave the final act of investing in the hands of the individual.
These online brokers commonly refer to themselves as discount brokers and charge anywhere from $5 to $13 per trade. Premium accounts may be charged flat rates or given a number of free trades per month but typically require a certain amount of account activity.
Some of the more notable online brokerage firms are E-Trade, Scottrade, and Charles Schwab.
Competitive Advantage
[Firm Name] enjoys several advantages over its competitors. These advantages include:
- Location: [Firm Name]’s location is near the center of town, in the financial district of the city. It’s visible from the street with many working professionals walking to and from work daily, giving passersby a direct look at our firm, most of which are part of our target market.
- Client-oriented service: [FirmName] will have a full-time assistant to primarily keep in contact with clients and answer their everyday questions. [Founder’s Name] realizes the importance of accessibility to his clients and will further keep in touch with his clients through monthly presentations, seminars, and updates per email and newsletters.
- Management: [Founder’s Name] has been extremely successful working in the financial services sector and will be able to use his previous experience to grant his clients detailed insight into the financial world. His unique qualifications will serve customers in a much more sophisticated manner than [Company Name’s] competitors.
- Relationships: Having lived in the community for 25 years, [Founder’s Name] knows many of the local leaders, newspapers, and other influences. Furthermore, he will be able to draw from his ties to the community to build up a heavy asset base in a short amount of time.
VI. Marketing Plan
[Firm name] will use several strategies to promote its name and develop its brand. By using an integrated marketing strategy, [company name] will win clients and develop consistent revenue streams.
The [Firm Name] brand
The [Firm Name] brand will focus on the Company’s unique value proposition:
- Client-focused financial services, where the Company’s interests are aligned with the customer
- Service built on long-term relationships
- Big-firm expertise in a small-firm environment
Promotion Strategy
Targeted Cold Calls
[Firm Name] will initially invest significant time and energy into contacting potential clients via telephone. In order to improve the effectiveness of this phase of the marketing strategy, a highly focused call list will be used, targeting individuals in areas and occupations that are most likely to demand the services of a financial advisor. As this is a very time-consuming process, it will primarily be used during the startup phase to build an initial client base.
Referrals
[Firm Name] understands that the best promotion comes from satisfied customers. The Company will encourage its clients to refer their friends and family by providing economic or financial incentives for every new client produced. This strategy will increase in effectiveness after the business has already been established.
Additionally, [Firm Name] will aggressively network with local area banks that do not offer the same product mix—banks that do not offer life insurance, in particular. This network will generate referral leads from banking clients. In return, clients who seek services that [Company name] does not provide will be redirected to these banks.
Internet
[Firm Name] will invest resources in two forms of Internet promotion: organic search engine optimization and pay-per-click advertising. The Company will develop its website in such a manner as to direct as much traffic from search engines as possible. Additionally, it will use highly focused, specific keywords to draw traffic to its website, where potential clients will find a content-rich site that presents [Firm Name] as the trustworthy, well-qualified financial advisory business that it is.
Publications
[Firm Name] will place print advertisements in key local publications, including newspapers, area magazines, and local sports programs. Additionally, we will print brochures and place them in specific locations frequented by target individuals, such as premium stores and professional service providers.
Direct Mail
We will use a direct mail campaign to promote its brand and draw clients, as well. The campaign will blanket specific neighborhoods with simple, effective mail advertisements that highlight the credentials and credibility of [Firm Name] as a financial advisor.
VII. Operations Plan
[Firm Name] will carry out its day-to-day operations primarily on an appointment basis. Clients will make regularly scheduled appointments to review the contents and progress of their investment portfolios. These will primarily occur in-office or in-home to increase the strength of the client relationship. If necessary, appointments can be conducted over the telephone. Walk-in financial advice will also be provided on a limited basis. Walk-in clients will be billed on an hourly basis.
[Founder’s name] will work on an as-needed basis but can be expected to be present in the office during normal business hours. The company will also employ an administrative assistant who will also support marketing and client relationship development efforts.
Milestone Targets
[Firm Name]’s long-term business goal is to become the number-one provider of financial planning services in the [city] area. We seek to be a household name and the standard by which other providers are judged. We seek to do this by ensuring customer satisfaction and developing a loyal and successful clientele.
The following are a series of steps that will lead to the vision of long-term success. [Firm Name] expects to achieve the following milestones in the following [xyz] months:
| Date | Milestone |
|---|---|
| [Date 1] | Finalize lease agreement |
| [Date 2] | Design and build out [Company Name] storefront |
| [Date 3] | Hire and train initial staff |
| [Date 4] | Kickoff of promotional campaign |
| [Date 5] | Reach $10M of assets under management |
| [Date 6] | Reach break-even |
VIII. Management Team
[Full Name]
[Title]
[Firm Name]’s most valuable asset is the expertise and experience of its founder, [full name]. [First name] has been a certified financial planner for the past 20 years. He has spent much of his career working at Merrill Lynch’s Wealth Management division. He spent the more recent portion of his career at a smaller firm, Century Asset Management, where his client base doubled and his assets-under-management tripled in 8 years. [Name] has acquired a reputation for success and has earned the respect and trust of his clients. Before working in the financial services industry, [name] worked for the private equity firm Bruns & Potter Partners and earned his MBA from UCLA. He began his career as an intern at an integrated consulting and investment banking firm in El Segundo, California.
[Firm Name] will also employ an experienced assistant to help with various administrative duties around the office. [Assistant’s name] has experience working with C-level executives and has spent significant time as an administrator in the financial services industry.
IX. Financial Plan
Capital Requirements and Use of Funds
[Firm Name] is seeking a total funding of $125,000 of debt capital to open its office. The capital will be used for funding capital expenditures and location build-out, hiring initial employees, marketing expenses, and working capital.
Specifically, these funds will be used as follows:
- Store design/build: $60,000
- Working capital: $65,000 to pay for marketing, salaries, and lease costs until [Firm Name] reaches break-even
Key Assumptions & Forecasts
The following table reflects the key revenue and cost assumptions made in the financial model.
| Number of clients | Average |
|---|---|
| Year 1 | 42 |
| Year 2 | 57 |
| Year 3 | 69 |
| Year 4 | 78 |
| Year 5 | 86 |
| Hourly Fee | $150 |
| Life Insurance | $1,200 |
| Fee of Assets | 1.30% |
| Annual Rent | $60,000 |
Budget and Financial Projections
5 Year Annual Income Statement
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||
|---|---|---|---|---|---|---|
| Revenues | ||||||
| Product/Service A | $151,200 | $333,396 | $367,569 | $405,245 | $446,783 | |
| Product/Service B | $100,800 | $222,264 | $245,046 | $270,163 | $297,855 | |
| Total Revenues | $252,000 | $555,660 | $612,615 | $675,408 | $744,638 | |
| Expenses & Costs | ||||||
| Cost of goods sold | $57,960 | $122,245 | $122,523 | $128,328 | $134,035 | |
| Lease | $60,000 | $61,500 | $63,038 | $64,613 | $66,229 | |
| Marketing | $20,000 | $25,000 | $25,000 | $25,000 | $25,000 | |
| Salaries | $133,890 | $204,030 | $224,943 | $236,190 | $248,000 | |
| Other Expenses | $3,500 | $4,000 | $4,500 | $5,000 | $5,500 | |
| Total Expenses & Costs | $271,850 | $412,775 | $435,504 | $454,131 | $473,263 | |
| EBITDA | ($19,850) | $142,885 | $177,112 | $221,277 | $271,374 | |
| Depreciation | $36,960 | $36,960 | $36,960 | $36,960 | $36,960 | |
| EBIT | ($56,810) | $105,925 | $140,152 | $184,317 | $234,414 | |
| Interest | $23,621 | $20,668 | $17,716 | $14,763 | $11,810 | |
| PRE-TAX INCOME | ($80,431) | $85,257 | $122,436 | $169,554 | $222,604 | |
| Net Operating Loss | ($80,431) | ($80,431) | $0 | $0 | $0 | |
| Income Tax Expense | $0 | $1,689 | $42,853 | $59,344 | $77,911 | |
| NET INCOME | ($80,431) | $83,568 | $79,583 | $110,210 | $144,693 | |
| Net Profit Margin (%) | - | 15.00% | 13.00% | 16.30% | 19.40% |
5 Year Annual Balance Sheet
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||
|---|---|---|---|---|---|---|
| ASSETS | ||||||
| Cash | $16,710 | $90,188 | $158,957 | $258,570 | $392,389 | |
| Accounts receivable | $0 | $0 | $0 | $0 | $0 | |
| Inventory | $21,000 | $23,153 | $25,526 | $28,142 | $31,027 | |
| Total Current Assets | $37,710 | $113,340 | $184,482 | $286,712 | $423,416 | |
| Fixed assets | $246,450 | $246,450 | $246,450 | $246,450 | $246,450 | |
| Depreciation | $36,960 | $73,920 | $110,880 | $147,840 | $184,800 | |
| Net fixed assets | $209,490 | $172,530 | $135,570 | $98,610 | $61,650 | |
| TOTAL ASSETS | $247,200 | $285,870 | $320,052 | $385,322 | $485,066 | |
| LIABILITIES & EQUITY | ||||||
| Debt | $317,971 | $272,546 | $227,122 | $181,698 | $136,273 | |
| Accounts payable | $9,660 | $10,187 | $10,210 | $10,694 | $11,170 | |
| Total Liabilities | $327,631 | $282,733 | $237,332 | $192,391 | $147,443 | |
| Share Capital | $0 | $0 | $0 | $0 | $0 | |
| Retained earnings | ($80,431) | $3,137 | $82,720 | $192,930 | $337,623 | |
| Total Equity | ($80,431) | $3,137 | $82,720 | $192,930 | $337,623 | |
| TOTAL LIABILITIES & EQUITY | $247,200 | $285,870 | $320,052 | $385,322 | $485,066 |
5 Year Annual Cash Flow Statement
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| CASH FLOW FROM OPERATIONS | |||||
| Net Income (Loss) | ($80,431) | $83,568 | $79,583 | $110,210 | $144,693 |
| Change in working capital | ($11,340) | ($1,625) | ($2,350) | ($2,133) | ($2,409) |
| Depreciation | $36,960 | $36,960 | $36,960 | $36,960 | $36,960 |
| Net Cash Flow from Operations | ($54,811) | $118,902 | $114,193 | $145,037 | $179,244 |
| CASH FLOW FROM INVESTMENTS | |||||
| Investment | ($246,450) | $0 | $0 | $0 | $0 |
| Net Cash Flow from Investments | ($246,450) | $0 | $0 | $0 | $0 |
| CASH FLOW FROM FINANCING | |||||
| Cash from equity | $0 | $0 | $0 | $0 | $0 |
| Cash from debt | $317,971 | ($45,424) | ($45,424) | ($45,424) | ($45,424) |
| Net Cash Flow from Financing | $317,971 | ($45,424) | ($45,424) | ($45,424) | ($45,424) |
| SUMMARY | |||||
| Net Cash Flow | $16,710 | $73,478 | $68,769 | $99,613 | $133,819 |
| Cash at Beginning of Period | $0 | $16,710 | $90,188 | $158,957 | $258,570 |
| Cash at End of Period | $16,710 | $90,188 | $158,957 | $258,570 | $392,389 |
