The views presented here do not necessarily represent those of Advisor Perspectives.
For advisors breaking away to start their own practice, there’s no avoiding the risks that come with entrepreneurship — but in the current economic climate that includes high inflation, market volatility and heightened uncertainty — advisors need to be doubly prepared when going out on their own.
“They need to put their financial planning hat on, as if they were talking to a client who was thinking about starting their own business,” said Marci Bair, president and founder of Bair Financial Planning.
“[They should] make sure they have their finances in order. They may be getting some sort of W2, or consistent salary now, but they need to have at least 24 months of capital saved for income and expenses when they launch (their firm), because it could take a good amount of time before money is coming in,” Bair said.
“With our line of business, there’s no income coming in for a certain amount of time,” she added in reference to advisors going independent.
Business expenses to plan for would include technology, such as financial planning and compliance software, but individuals also need to factor in health insurance, as well as disability and life insurance, Bair said.
“Sometimes there’s forgivable loans you can get from broker dealers as some sort of transition assistance, but it comes with some handcuffs of having to stay with that firm for a certain amount of years, or you have to pay that firm back. Or you could do an SBA (Small Business Administration) loan,” she added.
Market Volatility, Job Cuts
In the wake of a year of record volatility, particularly after President Trump’s spring announcement of broad tariffs, advisors aren’t immune to market shocks and the potential fallout.
“With all the volatility in this environment, your income could also be tied to that volatility, when markets go up or down,” Bair said.
“There are different niches to go and work with. If you’re starting out with your own firm, you’re ideally working with a base of people who have a consistent, steady income.”
Also, where an advisor is based, as well as where their clients are based, definitely matters in this current climate.
“You have the shutdowns on the government side, but you also had the DOGE (federal) cuts to so many different jobs. As an advisor, you’re cautioning your clients to have even more savings and emergency savings on hand. The same is true of you as well, if you lose them as a client,” Bair said.
Mentorship and Succession Plans
For the younger generations of advisors, mentorship can put them on a solid track to entrepreneurship.
“It’s a unique time because there are so many senior advisors looking to retire within a handful of years from now,” Bair said. “And it’s a great time for younger advisors to team up. They can get some mentorship from the senior advisor. You do have to have some experience under your belt if you’re going to be advising people. They want to know that you know what you’re doing – and you’re not their first client,” Bair added.
“That could be a step in the [right] direction — at least working with a senior advisor, or on a team, to be more in that independent world. And then maybe you stay in that practice and purchase it, or you go open your own firm.”
Nearly half, or 46%, of financial advisors plan to retire within the next 10 years, according to a 2025 survey by J.D. Power. The study, which was based on responses from nearly 3,700 independent advisors and advisors employed by broker-dealers, also found that over a quarter (26%) of current advisors are aged 65 or older.
The Right Entrepreneurship Track For You
Bair noted that finding the right firm — to both grow in and eventually purchase — may involve some trial and error requiring younger advisors “to kiss a lot of frogs.” But she recommends being “up front and honest with whoever you’re working with [regarding] what your intention is.”
Overall, advisors who think they are ready to start their own practice need to assess which path to ownership they are on.
“It totally depends on where someone is coming from,” Bair said. “Will they have clients day one or will it take a year or two to gain more clients? If you’ve been working on a team and working with a company and have that experience, that’s a whole different pathway (to entrepreneurship),” she said.
“Figure out, realistically, what is all the software going to cost to set up my office, and will I be virtual or pay for office space? Also, will you have a virtual assistant or hire a full-time office assistant? In the beginning, you are the founder, the assistant, and running the marketing and more. But at some point, you can’t do it all yourself,” Bair said.
Danielle Walker is a freelance journalist with 15 years of business reporting experience. She previously worked at Business Insider and Pensions & Investments, among other business publications. Her work has been published in the Financial Times, Barron’s and Chief Investment Officer. Danielle is currently based in Norfolk, Virginia.
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The views presented here do not necessarily represent those of Advisor Perspectives.
