Setting Up An RIA And Starting A New Financial Planning Practice On Less Than $10,000

Posted by Michael Kitces on Tuesday, September 17th, 7:02 am, 2013 in Practice Management

Taking a leap to start your own financial planning practice can be a scary proposition. Not only is there the stress of starting up the business and figuring out how to market and find your own clients, but there's also the responsibility of making a huge number of key decisions about the business model and companies and services to engage, and just the outright cost of setting it up in the first place.

In this guest post, financial planner Sophia Bera shares what she went through in recent months in going out on her own and setting up her own financial planning practice from scratch, and managing the expenses to keep them at only $5,000 in start-up costs and another $5,000 in ongoing costs in her first year. Sophia also shares some of her own thoughts about why she decided an entrepreneurial path was right after spending years as a financial planning employee, and other tips she's found useful in helping to facilitate her early success.

If you've been thinking about what it costs to go out on your own - or to make a transition into financial planning for the first time - and wondering what the key issues and decisions are to consider, I hope you find today's guest post to be helpful!

Sophia Bera headshot(Michael's Note: This post was written by guest blogger Sophia Bera, CFP®. Sophia is passionate about bringing financial planning to Gen Y to empower her generation.  She is the Founder of Gen Y Planning which aims to deliver affordable and accessible financial planning advice to people in their 20s and 30s across the U.S. She has been quoted on various websites and publications including Forbes, Business Insider, AOL, Yahoo, Money Magazine, The Fiscal Times, InvestmentNews, and The Huffington Post. She was recently named one of the “Top Financial Advisors for Millenials” by the website:  You can view Sophia’s LinkedIn profile or follow her on Twitter @sophiabera.)

In April 2013 I quit my job at a start-up and launch my own RIA, Gen Y Planning.   By the end of May I was a Registered Investment Advisor in the state of Minnesota and starting working with clients.  In the beginning of July, my website launched.  Now, I have a dozen clients across the country that are in their 20s and 30s.  A lot of financial planners have been contacting me to ask me how I did it.  This is all quite new for me, but I’ve learned a lot in the past few months.  This is one of the best things I’ve ever done and I have never been happier.  It’s been a roller coaster ride, but that’s how I work: my life is filled with extremes.  You don’t get the highest highs, without the lowest lows.  So if that makes you want to vomit, then you might want to keep your desk job.  However, if you know that your talent isn’t being maximized at your current company and you are willing to pull yourself up by your bootstraps to live the life you’ve envisioned then hang on!  Today, I will give you an inside look at what I did to launch my own firm, including the costs associated with my choices.  I’ll also tell you how I think I could do an even better job, and how technology has made it much more affordable to launch a business than ever before.

This year I spent $5,038 in one time start-up costs to launch Gen Y Planning.  In addition, I spend about $224 in monthly recurring costs and $4,241 in annual costs.  For 2013, my business expenses will come in right around $10,000.  (This doesn’t include any conferences, travel costs, or food costs related to business).  If we project these costs forward they would be around $7,000 annually, but I plan on hiring a Virtual Assistant next year so they’ll likely be higher.  Plus, I’d like to add a video to my website and I’m considering paying for a Co-working space.

Envision Your Ideal Life

Before you set off on your own, spend some time dreaming.  Remember what that is?  It’s that thing you used to do when you were 10 years old.  Take some time to really think about what would your ideal life looks like.  How would you structure your time?  Where would you live?  Who is in your life?  These things are all important because this shapes the way you design your business.  For example, I love working remotely. I like opening my laptop and being at work.  I like working in yoga pants instead of a suit and heels.  I want to make enough money so my husband can be a stay at home dad when we decide to start a family.  We want to spend at least one month a year traveling.  We want to be based in Minnesota because that is where our families are, but ultimately two weeks of vacation time a year wasn’t cutting it.  I knew I wanted to spend more time seeing my friends and family.  I also wanted to start singing again.  Just like I used to do when I was 10 years old.

Why Entrepreneurship Works for Me

This totally shaped why I wanted to leave my old company and how I wanted to structure my new company.  It also made me realize that I didn’t want to go back to working at a local financial planning firm.  I knew that I wanted more time to travel, more time away from the computer, more time with my friends and family, and I needed more time to be creative.  Therefore, I wanted to build a practice working with Gen Y clients across the country rather than only working with clients locally.  I don’t ever want to pay for a permanent office space.  It’s just not my style, and it’s also expensive.  Yes, I am a financial planner without an office.  If you do need a meeting space, I encourage you to look at Co-working spaces which are much more affordable than a private office.

Choose a Niche

Your niche should be something that comes very naturally to you and that you’re great at.  Think of the client meetings that end and you think, “Wow, I wish I had 100 clients just like that!” because you had so much fun!  Yep, I said fun!  You should enjoy working with the niche that you choose.  I have always LOVED working with clients in their 20s and 30s.  Why?  Because I can relate to them!  I’m really good at helping Gen Y organize their finances to reach multiple goals so that they can achieve their dreams.  Plus, I try to keep it fun!  Why?  Because there are a lot of boring financial planners out there and just by being interesting I set myself apart.  The clients that tend to want to work with me are: single businesswomen, entrepreneurs, and young couples because I can relate to them.

Find Your Special Sauce

Maybe you’re awesome at working with families, or helping people through transitions, or working with people in the medical profession?  If you’re having trouble figuring out what makes you unique, Derek Halpern from Social Triggers suggests answering these questions:  How do you help people?  What do you give them?  What is your secret ingredient?  What is your special story?

I know that most financial planners are “generalist.”  They use phrases like “wealth manager” and “retirement specialist,” therefore, if you choose a niche, you will set yourself apart from 99% of financial planners.  (How’s that for a quick way to make it into the top 1%?!?)  Here’s the thing, if you don’t choose a niche, how will other people know what type of clients to send to you?  They won’t.  Therefore, most people won’t send you any clients.  I am very clear about whom I work with and this has been a huge benefit.  This will also help you gain recognition in the media and press is a great way to build your brand.  I’m now seen as a “Gen Y Expert” because I’ve made my focus Gen Y.  I gear my content towards this demographic and I learn as much as I can about millenials so I can stay up to date on what is important to my niche.

The Details You’ve Been Waiting For

Compliance And Setting Up The Business

Choose a Business Name:  I did a variety of different searches to ensure that no one else had my business name or anything close to it.  See if you can also do a trademark search in case you decide to trademark your business name, logo, and tagline at a later date.

Determined Your Business Structure: I formed an LLC in the state of MN for $155.  I was also advised to file a Doing Business As (DBA) in the state of MN for $50.  Find out what business licenses you need in your city, county, and state.

Set Up a Business Checking Account: Once you’ve determined your business structure and received your Tax ID number (if needed), then you can sign up for a business checking account.  I also decided to get business credit card.

Get Your IARD Number: It takes two weeks so do this early in the process.  That way you can work on other business items while you’re waiting for this.

Hire a Compliance Company: I made an early decision to hire a company to file my initial compliance documents.  This was one of the biggest expenses in my initial start-up costs.  This can cost between $1,800-$3,000 depending on your state, the size of your firm, the type of firm you’re creating and you are going to think you are smart enough to do this yourself.  After staring at the forms for a week, I finally bit the bullet after a strong recommendation from Blair Hodgson DuQuesnay, and I hired Comprehensive Securities Compliance Solutions, better known as CS2 (another alternative is Jim Cullen of WB Compliance at  It was the best money I spent.  Let me repeat: this saved me time and money!  If you only take away one piece of advice, let it be this: pay someone who specializes in this to set up your compliance docs (especially if you’re in the state of California and it takes them 54 days to even look at your initial application.  No joke).  This cost me $1,800 and saved me a ton of headache.  Keep in mind that you also have to pay for yearly compliance costs.

A few things to note:

  • Once your information is sent to the state it could be anywhere from 2 weeks to 3 months before you are registered.  It took me just over two weeks.
  • You may be required to buy a surety bond.  A $25,000 surety bond is required in the state of MN and the cost was $386.25 through Professional Liability Consultants, which was a recommendation from CS2.

Choose a Custodian: I decided to go with Scottrade because they have low fees for my clients and no minimum asset under management required for advisors.  (FYI: Schwab and Fidelity have $10M AUM minimums).

Update Your Info: Update all your information on the CFP Board websiteFPANAPFA and any other organizations that you’re a part of.  I’m a part of FPA which costs $399 per year.  In addition, I pay $325 per year for my CFP® dues.

Buy E&O Insurance: I decided to go with Calsurance because it was affordable and I could purchase it online.  The policy was $1,250 plus taxes for a total of $1,323.25.  It provides $1M in coverage and has a $5,000 deductible.  You can often times get a discount through your custodian or the associations you’re a part of.

Decide on Invoicing and Accounting Software: I’m currently using WaveApps because it’s free, but I might switch to Quickbooks Online because the starter package is only $12.95 a month and it would be easier to outsource at a later date.  I also allow my clients to pay through PayPal and I can send invoices through PayPal which I love!  PayPal also allows you to set up buttons for recurring payments.  Just call their customer service number if you need help setting this up.  It was easy to do and you can even email your client a link to set up the recurring payment if you don’t want to have it directly on your website.

Write It Down: Develop processes and procedures so that as you grow you are also able to scale your practice.  (I’m working on getting better at this).  In addition, this will make your life much easier once you decide to hire an intern, Virtual Assistant or Para-Planner to join your firm.  Start documenting and tracking things in your CRM so that others will understand your notes.  I also recommend having a standard “notes template” so that you documents notes in the same order for each client.

Technology (Part 1): Hardware & Tools

Tools of the Trade: I bought a new MacBook Pro.  It was expensive but I love it.  I paid $1,708.97 including Apple Care.  I am entirely Mac based and it works great for me.  You might not need to buy a new computer but I had to return my work computer so this was one of my biggest expenses.  I also bought a DoxieGo, which is a portable scanner with wi-fi and a case so that it fits easily in my laptop bag.  This combo cost $217.86 from

Cell Phone: I bought a new iPhone 5 for $221.81 and traded in my iPhone 4.  I also pay about $125 a month for cell phone service and a data plan.  You can get a discount on your cell phone plan through FPA.  All of my prospect calls are via phone rather than skype.

Back Up Your Computer: I chose Crash Plan Pro for Business so that my computer is backed up in the cloud daily for $9.99 a month.

Protect Your Network: I work from a lot of coffee shops which is why I set up Private Wi-Fi which encrypts my data on open wi-fi networks for $9.95 a month.

Buy Your Business Domain Name: I bought my domain name from for $17.51 for three years.  I also decided to keep it private so I don’t get a ton of spam and that’s an additional $9.99 a year.  Total cost for 3 years: $47.48.  You also need to get web hosting.  One year of web hosting was included with my web designer so I didn’t have to purchase it initially, but am now switching to WpEngine, which is supposed to provide excellent seucrity in addiiton to being able to deal with large spikes in traffic and costs only $29 a month.

Technology (Part 2): Software Essentials

Free Stuff: I use Skype to have meetings with my clients in other states.  I use Dropbox to create a shared folder with a client and then the client can upload his or her statements.  I then upload the statements to my CRM system.  I have Google Alerts set up for my name and my business name.  Some planners also do this for their clients’ names as well.  I also use LastPass for my password encryption.

Sign Up for PreciseFP: This is an online data gather tool that allows me to send my clients a link to a secure questionnaire.  This costs $239.40 per year.

Financial Planning Software: I decided to forgo financial planning software until a something better comes on the market for Gen Y.  Right now, planning software is either cash flow based or goals based, but they are still geared towards Baby Boomers and beyond.  I did have a friend build me a one-page retirement projection in Excel (I paid him $75).  I write my 5-page financial plans in plain English in Pages and then print it to Adobe.  I’ve found that nobody wants 50 pages of charts and graphs that they don’t understand.

Choose a CRM: I chose Less Annoying CRM because it is exactly what it sounds like.  After years of using Junxure and other robust systems that had too many fields, I really like the simplicity of LACRM with the attention to functional design.  It’s like the Mac of CRMs and since I’m a Mac girl, I heart it.   It allows me to easily store client emails as well for compliance purposes.  Did I mention it’s $10 a month and comes with amazing customer support?  Shout out to Michael!  (  Tell him I sent you!

Online Scheduling System: I’m in a free trial with TimeTrade to see if I want to use this for prospects and client meetings.  It’s $49.99 per year.  I like that I can send an email from the system with times that I’m available or add it to my website and have people click a time to schedule a prospect call.

Electronic Signature: I’m still debating which eSigature I want to use, so I have done a few free trials.  A few popular ones are EchoSign for $14.95 a month and Docusign for $25 a month (or $180 if you pay yearly).

Google Apps and Google Vault: Alan Moore, CFP® already wrote a great guest post about these items and together they cost $10 a month.  Need I say more?  I also added Boomerang for Gmail which is an additional $4.99 a month or $49.99 for the year.  In my opinion, this is the only way to get your email inbox to zero without forgetting to follow up with items later.

Build a Kick-Ass Website in WordPress:  Have you looked at a financial planning website lately?  Did it suck?  Seriously, if you have a halfway decent website you are setting yourself apart from most financial planners.  Start working on your website during the time you are waiting for approval from your state registration.  Pay a bad-ass web designer to do your website for you.  Don’t be one of those people who does their own to save money unless you have been running your own successful blog on the side for the past few years and your undergrad degree was in graphic design and computer engineering.  This is the first thing that people see to decide if they want to work with you.  This is the one area that most financial planners do not spend enough time and money investing their resources.

Marketing & Branding

Ditch Your Bland Brand: Consider hiring a web designer who is also a graphic designer and can do your logo and branding for you.  I am absolutely thrilled with how my website turned out and I have the lovely, Hannah Loaring from Further Bound, to thank.  She’s lovely to work with and affordable.  I call her my “website fairy.”  She will probably be twice as expensive a year from now and you should still use her because she’s that good.  Her current rates are $1,200 for a basic blog to $2,200 for an amazing package.  Contact her today ( because she’s booked out for the next few months.  She also does branding, business cards, Twitter backgrounds, Facebook covers, PDF Design, and newsletter design for email marketing.  You can use her for all of these things and she will make your branding seamless.  You want a clear flow from social media, to print, to your biz cards.   She prepared a business card template for me and recommended that I order them from  I paid $69.99 for 200 cards plus shipping and handling.

I highly recommend that you spend a bit of time developing a brand and marketing strategy:

  • Have a professional design your logo.
  • Figure out a tagline that speaks to your target market.
  • Decide your pricing and fee structure.
  • If you are not an excellent writer, consider hiring a professional copywriter.
  • Develop a social media strategy.  Figure out which social media tools you are going to use, then pay a company to archive your social media.  Arkovi and Archive Social are two to check out.  I chose to go with Arkovi because it was less expensive ($39 versus $49), it didn’t limit the number of social media accounts I could have, and I can archive my blog posts.  I also like that you can schedule content.
  • Blog at least once a week and send out a newsletter.  (Hint: while your website is being built, have your web designer set up a landing page with an email sign up for your newsletter.  This way you start building a list before you even have a website).  I blog every Wednesday and the Gen Y Planning Newsletter goes out every other Friday.  I use the free version of MailChimp for my newsletter.
  • Sign up for Help a Reporter Out (HARO) and start answering reporters requests.  I try to answer at least 3 HARO requests each week so that I can get my name out there.  This is FREE publicity.  You are your best agent.
  • Write guest posts for other sites.  I try to do this twice a month.
  • Consider having an intro video on your website or try video blogging.  Video is an excellent way to communicate to potential clients.  (I’m not currently using video but I should be.  I would like to create a marketing video through Show & Tell Stories in 2014).

Time for New Photos: You need new professional headshots taken, preferable from someone who has experience taking actors headshots and doesn’t just work at the mall.  Danielle Barnum took mine and she shoots in Minnesota, Seattle, L.A. and New York.  So if you’re in one of those places, I highly recommend her.  Her business is called DB Inspired Arts.  Her rates start at $275 which is an absolute steal!  Feel free to email her directly:

Other Tips For Success

Focus on Helping People: Help your friends and they’ll become your clients.  Help your clients and they’ll send you their friends and family.  Help reporters and they’ll quote you in the press.  Here’s another one: help other financial planners.  We’re not reinventing the wheel here.  The only reason I was able to accomplish as much as I did as quickly as I did was because of the help of other people who were already running their own successful practices that helped me out.  Individual planners and mentors passed along the following information to me: the compliance company that they used, the CRM system they recommended, which E&O insurance to buy, and now I’m passing along all of these things to you J.  Here’s a secret: some of them have even passed along prospects to me.  In addition, I refer my prospects to other planners when they don’t fit my target market, so remember to be nice to each other and help each other when we can.  Like Zig Ziglar said, “You can get anything you want in this life, if you spend enough time helping other people get what they want.”

Keep Learning: Go to conferences outside of the industry.  You can learn a lot from other people that are outside of financial planning.  Check out some conferences that have to do with something you’re interested in and you will meet great people and maybe even gain a few clients.  I went to Portland to attend the World Domination Summit this summer (not as scary as it sounds).  The whole theme of the conference was, “how do we live a remarkable life in a conventional world?”  I ended up landed two clients who were other attendees plus I had a fantastic time!

Give Back: Help young planners gain entry into this industry.  We need more great people to carry the torch.  There are many ways to help out whether it’s mentoring another planner, volunteering through FPA, or taking a board position.  Also, consider working with a partner charity so that as your business grows, so too does the charity.  I’m incredibly passionate about financial education and I decided to partner with BestPrep, which is a local organization that I’ve been volunteering with for the past few years.  Their mission is, “to prepare Minnesota students with business, career, and financial literacy skills through experiences that inspire success in work and life.” Each new client I bring on in 2013, I’m donating $50 to BestPrep.  Now that you’re an entrepreneur and can create your own schedule, I encourage you to make time to volunteer.  It helps keep us grounded and realize that even though we help people with their money every day, there are more important things than money.

The Abundance Mentality: I ascribe to the abundance mentality, rather than the scarcity mentality, because I think that there are millions of people that would like to work with a financial planner and I will only be able to work with 100-150 of them.  I’m really not worried about competition.  My closest friends in financial planning have businesses that are very similar to mine.  Therefore, I need your help.  Now you have the tools needed to launch your own RIA and you know the exact costs associated with doing it.  What’s stopping you from launching your own firm?  Are you terrified of entrepreneurship?  If so, maybe you need to read my post on Why Entrepreneurship is the New Job Security for Gen Y.  If I can do this, you can too!  Envision your ideal life, find your special sauce, and go out there and launch your new biz!  We need your unique skills in this world.  Are you up for the challenge?

(Michael's Note: If you enjoyed this guest post, you might want to check out Financial Advisor's Guide To Establishing A Next Generation Financial Planning Firm as well!)

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