Ever dreamed of starting an RIA because it meant you could finally run your own firm, your own way? Building your own business means a lot of freedom and flexibility. That freedom to create what you want applies not only to when and how you work, but also to who you work with, the services you offer, and the values you want to follow while serving your clients. There’s plenty of promise in the opportunity to live the life you want while teaching your clients to do the same. But being your own boss and running your own financial planning firm isn’t all sunshine and rainbows.
You already know it takes a lot of hard work and long hours. It’s a big commitment, and you may need to hustle for months—even years—before you start seeing results. But there are other sides to being your own boss that you may not have thought about yet, including facing failure, realizing you need to change course, and facing the loneliness many experience when striking out on their own.
Entrepreneurship presents an amazing opportunity to be your own boss and create something new in the industry. It’s a great path, but you should be aware of the potential pitfalls along the way before diving in headfirst. Consider the good, the bad, and even the ugly of running your own show as a new RIA owner.
There is no more senior advisor pushing you around and telling you how to do your job...no more firm owner failing to recognize your brilliance and not letting you implement your innovative planning ideas. You’re on your own, baby!
This is your opportunity to build the business as you think it should look and run. You get to design everything, from the back office setup to the client experience and planning process. You choose your ideal target market, the clients you accept to work with, and the services you deliver to them. You get to make the decisions and create everything from scratch, as you believe it should be. All the decisions, big and small, come down to you.
This is a double-edged sword for financial planning firm owners, because all the decisions, big and small, come down to you. There’s no one else who is going to tell you what to do. In contrast, there’s also no one else to blame when things go wrong or you make a mistake. All the decisions come down to you...and so does all the responsibility.
That can feel overwhelming and scary, but you don’t need to work in a vacuum. When you work as your own boss, you need to look for different kinds of support systems and guidance, including things like:
Of course, you probably won’t be on your own forever. If your firm succeeds, you’ll reach a point where you need to make hires to help you. The tough part is making the leap to bringing on help for the first time. You’ll likely run into this “chicken and the egg” scenario: you need to hire help in order to manage your workload and continue to grow…but you also don’t feel like you have quite enough revenue to make a hire yet. It’s easy to get stuck in this trap. After all, you’ve spent all of your time up until this point growing your revenue and becoming profitable; to take a step back in what you net may feel like an impossibility.
Plus, there are other challenges to address. Before, when it was just you, you didn’t have to teach anyone how to perform tasks. So you may not have built systems or processes yet—both of which are critical if you want to build a team of more than just one. Not to mention, as the boss, you’re the one responsible for finding and hiring the right person to help you. And you bear the responsibility if you don’t make a good hire.
Needless to say, figuring out how to scale your business when acting as your own boss can get ugly fast. One potential solution is to start small with baby steps: hire a part-time paraplanner instead of a full-time employee. Or work with contractors to outsource specialized tasks to buy some of your time back while still growing your revenue.
The idea of “location independence” has become extremely popular in the last few years, and for good reason. It means you’re not locked into an office and can work when and where you want. For financial planners, this is a big benefit to clients as well. When you can work virtually anywhere and anytime, that gives them the flexibility to meet with you anywhere, anytime.
This is great for families who move often—you can still be their financial planner even if they move across the country, because you’re already setting your own meeting schedule and can use video chats to conduct meetings. The same applies to freelancers or other business owners who choose to be their own bosses. It gives them the freedom and flexibility to choose their own hours and work locations. This doesn’t mean you have to work virtually or untraditional hours. It just means it’s your choice, and that’s one of the best parts of being your own boss!
Do you want to set up a small office and serve your local community? Do you want to work weekends so you can enjoy quiet Mondays and Tuesdays at home? Prefer to run a virtual practice and do the bulk of your work at night once your afternoon and client meetings wrap up? Or do you like to work early in the morning and free up your afternoons? These are the choices you can make...so go for it!
One of the tradeoffs for all the freedom and flexibility in your time and location is that as your own boss, there are no vacation days or paid time off. When you start your own RIA, and it’s just you, your business doesn’t work unless you do.
For the first year or two, you may not think too much of that. Your business is like your new baby, and you’re happy to pour your time and energy into it. In fact, many new entrepreneurs feel like work becomes more of a hobby. It is different than sitting at your desk in someone else’s office, working in someone else’s business. But when you start getting into year 3 or 4 of no vacations, no sick days, no “playing hooky” days…that “freedom” can start looking a whole lot more like a ball and chain.
As your own boss, who is responsible for everything, you carry a heavy burden. And you may look around and see that there’s no one else around to help you. This is especially true if you seek to start a new or novel type of business. If you’re a pioneer in your field, you lead the way and the rest follow. But as they say, it’s lonely at the top.
You might miss out on the normal networks and connections you relied on as an employee with bosses and coworkers. You no longer work for a company that might provide access to events, professional development, and more.
You may literally be alone during your workdays before you hire someone to help you (and this is especially true if you work virtually). The loneliness can seep into your personal life, too, if your business requires a lot of your time and energy. You may struggle to make room for your family, friends, social activities, and time away from work.
Nothing in this article is meant to discourage or dissuade you from starting an RIA on your own. But it is important to understand the realities of being your own boss. It might help to write out a simple pros and cons list to help you gain clarity on the good and the bad (or just downright ugly). Here’s what this might look like:
|Ability to build something on my own||Responsibility for being my own boss and running my own firm|
|Opportunity to create a lasting income stream that, one day, could be sustained without my direct involvement||Potential for failures, from small and occasional to systematic|
|Potential to sell the business down the road (potential asset)||Increased costs and expenses|
|Can provide the services I want to and work with just the clients I want to work with||No real ability to take time off or away from the business|
|Can create everything exactly how I want it and choose to give myself (and my clients) options, such as working virtually||No built-in support network or system; I have to build it myself or go without|
|Can set my own schedule and control my time more than I can as an employee||Need to face a number of challenges I don’t have to deal with as an employee|
|My business has the potential to support my life (instead of having to try to fit my life around my job)||Hard to “leave work at work”; if I don’t work, revenue stops flowing|
If you decide the potential pitfalls that come with firm ownership are worth it, and you’re willing to deal with them as they come up, go for it. The same determination and dedication that led you to open your financial planning practice will serve as an asset when you deal with any problems or challenges you face along the way. You can certainly succeed as your own boss!