12 Tips to Survive Your First 12 Months as an Independent Advisor

Editor’s note: In this article, first-year financial planner Shawn Tydlaska shares survival tips for getting through his first year, on track for more than $100,000 of recurring revenue(!), which he achieved in large part by heavily reinvesting in himself. Shawn shares the kinds of conferences and courses he attended to accelerate his growth, how he structured his marketing, what materials he takes into a typical prospect meeting, what he tracks in his business, how he leverages his study group, and more!

Before I get into my 12 tips, let me give you an overview of where I am today, more than a year into being an independent RIA. My journey as a newly independent advisor has evolved through many stages:

• The excitement of the launch
• Landing my first client
• The fear of not knowing what my financial planning deliverable was
• Realizing at around six months that “this is working” and I won’t go out of business
• Increasing my fees (a few times)
• Losing my first client
• Eventually paying myself my first paycheck.

As I write this, I am about 20 months into the business and have worked with 63 clients. I have 40 ongoing monthly subscription clients and have done financial planning projects for 23 other clients. Seven subscription clients have “graduated,” one more will graduate shortly, and I suspended the monthly payment for one client until they get back on their feet.

I have $4.3M in AUM, although that doesn’t mean much for me because I don’t charge an AUM fee. My average upfront fee is about $1,200 and my average monthly fee is $235. Even if I don’t get another client, I am projected to generate $110,000 of revenue over the next 12 months.

My total annual expenses are about $40,000. About $14,000 of that go to things like travel, meals and entertainment, my own financial planner, tax prep, a business coach, utilities and so on. I expect my fixed costs will go up, as I just hired a remote client service associate who will work about 20 hours per week. Fortunately, with new clients continuing to come in, my revenue is on track to grow more than enough to make up for that cost.

OK, that’s where I am so far. Here are my top tips for surviving your first 12 months as a fee-only independent RIA, based on my own experience. I should note that I am a member of XY Planning Network (XYPN), an organization of fee-only financial advisors who specialize in working with Gen X and Gen Y clients, and their resources have been extremely helpful.

1. Invest in yourself

Here’s how much cold hard cash, time and energy I spent on improving myself as an advisor in that first year.

After being in business for two months, I was getting a decent number of good leads. But I was frustrated that I was only converting about 30 percent into clients. I made the conscious decision to reach out to experts to help shorten my learning curve on two key aspects of my business. (In my first two months I received 11 leads from the XYPN Find an Advisor Portal and 17 leads from family, friends and other professionals. So I was getting pretty decent lead flow.)

When I listened to Nancy Bleeke on the XYPN Radio podcast, her approach to sales really resonated. It was a mind shift to think of sales not as a sleazy or dirty word, but as a process to help prospects make the decision to help themselves (by working with me!). I hired Nancy for a few private coaching sessions and she immediately provided great feedback. She applied the fee to her sales training course, where I learned her entire sales approach. The results were immediate and significant; my conversion rate increased from 30 percent to 75 percent.

The investment for the course was $2,000 (now $3,495, although XYPN members get access for 10 percent off). This is tough to swallow when you are starting out. But sales skills are something you can use for the rest of your life. The investment quickly paid for itself with the increased number of prospects who agreed to work with me.

At the same time, I wanted to learn the softer side of the business. I had heard great things about Money Quotient, so I enrolled in the three-day training course in San Francisco. In this course, you learn to use the life planning tools and practice them with a partner. I found this experience really helpful, because it taught me to be a more active listener and ask good questions.

Going through this process made me appreciate how cool it is to feel that you have been heard. This investment was a one-time fee of $950, then a licensing fee of $60 per month to use the materials. I think the future of our profession will incorporate more aspects of life planning, so whether you use Kinder’s three questions, Susan Bradley’s Sudden Money Institute, Think2Perform Values Card deck, or something else, I would put some effort here.

I also attended a number of conferences early on. Two weeks after I launched in May 2016, I was at the National Association of Personal Financial Advisors (NAPFA) national conference in Phoenix. I recommend joining NAPFA (which is included in XYPN membership), and scheduling a peer interview with Bernie Kiely. He is awesome; he offered to sponsor me to attend the conference. I had to pay for my flight (using miles) and lodging (slept on the futon of Andrew Davis’s Airbnb), but the conference fee was paid out of pocket.

At this conference, I met six or seven other XYPN members and peppered them with questions about how to run my business. One member introduced me to someone who did my initial bookkeeping for $60/month. He helped me understand what I can deduct as a business expense and how to track receipts. He answered the many, many other nagging little questions I had.

Next, I attended the FPA NorCal conference at a cost of $699. This conference is a bit stuffy and more old-school. If I had to do it over again, I would probably skip this one.

I went on to attend the Far West Round Up at UC Santa Cruz. I had just moved to San Francisco a few months before launching my firm, so I wasn’t established in the local financial planning community. This was a great chance to network in an intimate setting; about 75 people attend each session.

At this conference, another mind shift happened. I went from being a financial planner who had launched a firm, to a firm owner. It was great being a CEO and having conversations with leaders in the industry like Tim Kochis and Dave Yeske. This conference was $519, which included lodging, programming and meals.

Finally, I went to the XYPN16 Conference in September in San Diego. It was $199 for the conference and $399 for hotels; I booked my flight using points. It was great to meet XYPN members from around the country, but I was a little disappointed by the content of the conference itself.

I hired a business coach about eight months after launching. One of the biggest things the coach provided was focus on where to spend my time and energy. He got me to embrace my CRM, which I wasn’t using fully. Instead of letting myself “get distracted by shiny objects” (like creating webinars, blogging, writing an eBook, pursuing speaking engagements), he helped me focus on signing two clients per month, with the goal to get 60 retainer clients by the end of 2018 (which I am still on track for).

The business coach cost $700/month for two 30-minute sessions. Eventually we moved to one 30-minute conversation per month for $350/month. While he helped me a lot, he wasn’t the right business coach for me in the long run. Just like finding a financial planner, it is hard to find a coach you really click with. But it was a good learning experience.

This means that if you’re going to invest aggressively in yourself, you will spend a lot more than $10k (as Sophia Bera did) in your first year to start your RIA. Expect to spend $20k-$25k, depending on how much training you pursue and the number of conferences you attend. I found it was worthwhile in turbo-charging the growth of my firm (entering my second year with a revenue run rate of over $100,000/year!).

2. Speak from the heart on your website

An XYPN member recommended taking one or two days to bang out the copy for my website, going somewhere picturesque where I feel inspired. I spent one day in Half Moon Bay at a Peet’s coffee shop, and another day at a Marriott hotel overlooking San Francisco Bay.

Create an FAQ page that describes your services. I spoke from the heart and used natural language. This helps prospects figure out if they are a good fit for my firm and they can sign up for a meeting directly on my website. It’s OK if you turn some people off. The ones who are a good fit will find that what you say really resonates and they will be more likely to sign up with you. Those are the people you want!

Create a services and fees page that shows what you provide and how much you charge. This helps prospects understand the financial commitment before they make an appointment for a discovery meeting with you.

Make it easy for your prospects to set up a meeting. I use Calendly (though there are a lot of other options), with a page where prospects can put an appointment directly on my calendar. Make yourself available when your prospects are. For me, that means opening up my calendar to meetings at nights and on the weekends. It works! Over my first 12 months, I met with 101 prospects.

3. Don’t over-analyze

Don’t spend too much time trying to develop the perfect process. What you need are clients and a “test lab” to develop your perspective, refine your approach and see what tools are useful.

Most of your clients have never worked with a financial planner before—especially if you’re serving younger professionals—so this is all new to them. This means if you try something new, they won't know it's brand new for you, too! Don’t be afraid to take risks and ask new questions, try new tools or techniques, and try new deliverables to see what resonates with your clients.

For example, at my last firm, if I told someone to open a savings account at Ally Bank, I would fill out the paperwork, send it to them with sticky notes and a return envelope, then fax it in. Now I empower my clients by giving them a task and sending them off to do it on their own. The first clients I tried this with just accepted it. They didn’t complain that I was giving them “less service” by not doing the paperwork for them, because they had no idea that I used to do it a different way with clients at another firm!

4. Shut up and listen

I had never been in a business development or sales role before. It was weird to be doing all the talking in those first meetings with prospects. I was trying to prove my knowledge, talk about my pedigree and demonstrate my expertise.

But what I found is that prospects already assume you are an expert, because they are the ones who set up the meeting with you. Embrace that role and own it. Don’t try to dominate the conversation with bullet points from your resume. Ask good questions and aim to listen for at least 80 percent of the meeting.

My initial prospect meeting is 60 minutes. Guide the conversation, but give prospects space to talk for the first 45 minutes. In the last 15 minutes, explain your service model and how you can alleviate the financial pains they just shared with you.

Here are some of my favorite questions in the order that I ask them:

• Tell me why you set this meeting up, and why you reached out to a financial planner.
• What are some of your short-term, one- to three-year goals?
• How are you currently managing your finances? Mint? Spreadsheet? Or just winging it?
• What did you observe about money growing up? (my favorite question)
• How do you think that impacts your relationship with money today?
• Is there anything about your finances that keeps you up at night?
• Have you ever worked with a financial planner before?
• Do you have any concerns or fears about working with a financial planner?

After this last question, the conversation normally transitions nicely to a discussion about your services and fees. Most people will say something like, what services do you offer and how much is it going to cost me?

5. Peer review your first few financial plans

I had to figure out what my financial planning process was going to look like when I started. I didn’t know what I would include in my financial plan. For the first few plans I created, I had someone from my study group as my peer reviewer.

I only charged $200 for the first plan that I did. One of my reviewers said to remember that I am not running a charity. I didn’t have a reference point, so I had no idea if what I was producing was valuable. I spent a lot of time on these initial plans. (Tip: remove the confidential info from one of your first plans and keep it at your fingertips to show prospects what a sample financial plan looks like.)

Having someone you respect look at your stuff gives you confidence before you present it to a client. It also helps make you a better planner, because others can find blind spots in your planning that you may miss.

6. Have a few good pieces of marketing collateral

XYPN has a thriving community of planners who post in the members-only forums. PJ Wallin wrote a post about what he would do differently if he started over. One of his comments: don't get too bogged down with making the perfect marketing materials. I took that advice to heart.

The three key pieces of collateral I use are my Services and Fees handout, “12 Tough Questions To Ask A Financial Advisor” (to use when a client says they are thinking about interviewing other advisors), and a sample financial plan. Having a sample financial plan was reassuring when I was starting out. I think it was because I didn’t know what my financial plan would look like. It was reassuring to know I could produce a valuable deliverable.

Part of our job as financial planners is educating people on what “real financial planning” is. If you need feedback, have someone from your study group peer-review it.

As the year progressed, I developed a cash flow module and spending plan. I often break this out after I ask the question about how the prospect is managing their finances. I show them how to create a spending plan that aligns their finances with their values. The cash flow tab has a great data visualization graph. Here is a link to my spending plan and cash flow template.

7. Measure your activity

Michael Kitces and Alan Moore say that in your first year, it is more important to measure activity than to measure results.

I use this Google Doc that I update every Sunday night. For more details on how I use this doc to track my KPIs (Key Performance Indicators), listen to my interview on XYPN Radio. It is a great way to track your progress. How do you know your conversion rate unless you track it? How can you tell if a change had an effect? It’s crucial to track your KPIs from the very beginning.

Here are some key metrics that are important to track:

• Number of discovery meetings
• Number of “plan design” meetings (proposal delivery meetings)
• Number of retainer clients
• Number of one-time clients
• Conversion rate of prospects to clients
• Number of meetings with professionals
• Number of meetings with large RIAs (If I had to do this again, I would focus on NAPFA firms specifically and not just RIAs in general. They were more likely to give me referrals as a fellow NAPFA member, in large part because larger firms tend to have higher minimums and turn more people away who need to be referred out.)
• Source of your prospects
• Average revenue per client.

In addition, it is important to me to track the total number of lives I have impacted. My personal goal is to eventually touch the lives of one million people using personal finance as a tool for empowerment.

Another item I track is the recommendations I make to my clients that have quantifiable value. These include paying off credit card debt, minimizing taxes, reducing investment fees, getting a rewards credit card or getting out of a crappy insurance policy. This helps me feel like I am worth the financial investment my client is making. I make it a game, to come up with ways I can save my clients more money than they spend on my monthly fee. On average, I help my clients save $470/month (as compared to my average monthly retainer fee of “just” $235/month), and have helped my clients pay off a total of $400k worth of bad debt.

Another thing to track early on is how much time you spend on your financial plans. If someone pays you to do a one-time financial plan for $1,000, keep track of how many hours you put into it. Do the same thing for a comprehensive financial plan. After a while, you will get a sense of how much you need to charge. A good planner should value their time at least $150-$250/hour when they are quoting a prospect for work on a one-time project.

It was helpful to see how much time I spent on my prospecting process. I used to spend about six hours on prospects before they reached a decision on working with me. This included one-and-a-half hours of face-to-face time, one hour of prep before each meeting, one hour of writing notes after the first meeting, and another half hour of back-and-forth communication. Given the lifetime value of the client, I was happy with this investment of my time, since my conversion rate was about 75 percent.

I recently switched to a one-meeting proposal process. Since I have about eight prospect meetings per month, my new goal is a 20-30 percent conversion rate. That will enable me to reach my goal of two clients per month. I also recently raised my fees. When you combine those changes, I will be happy with two clients per month, since my new process only takes about two-and-a-half hours.

8. Develop a strong support system

My wife, Jen, was, and still is, very supportive, both financially and emotionally. She is just as invested in this business as I am, and I couldn’t have done this without her. Each day she is excited to hear about the progress I am making.

Make sure you and your partner are on the same page, because building a business is a slow process. My initial goal was to net $100k from my business within three years.

It is important to have a strong study group. XYPN puts every new advisor who is starting their own firm into a “Launchers” study group. Although my XYPN Launchers group was great initially, eventually I was ready to move on. I kind of regret this decision, though. It took me a long time to find another one that clicked, and I felt alone for a long stretch of my first year. Fortunately, now I have a good study group; we meet each week for 90 minutes and everyone is very committed.

Another way to keep motivated is to keep track of your accomplishments. Sometimes in the day-to-day grind, it doesn’t feel like you are accomplishing very much. When you step back and see everything you have done for the month, it gives you perspective. Keep track of things like mentions in the press, the number of new clients, putting on a seminar, giving yourself your first paycheck, when you cross over 10 clients, etc. I write notes on my iPhone, then once a month upload them to something I call my “rap sheet,” a Word doc with all my accomplishments.

9. Keep a Celebration Folder (aka a“Smile File”)

I give Nancy Bleeke credit for this one. As part of the Sales Pro Insider program, they send you a box of swag. One of the items is a bright yellow celebration folder. You’re supposed to use this folder to collect nice notes from clients, thank you emails and other positive feedback.

The idea is to bring this folder out if you are having a bad day. I haven’t had to dig it out yet, but having a place to collect nice feedback helps with the mental game.

Don’t forget to celebrate successes. Sometimes when I signed a new client, I would buy myself something for my office. It could be something as nice as an Apple wireless mouse or a good camera for video conferences, or as cheap as a multi-color office pen from Target.

10. Do an off-site retreat

Many business leaders like Steve Jobs, Bill Gates and Mark Zuckerberg schedule “think weeks” where they get away from it all to read, think and plan. I like this concept and apply it on a small scale. I spend 1.5 days per quarter working “on” my business and not just “in” my business (see The E-Myth Revisited by Michael Gerber).

In fact, I wrote this on my fourth quarterly off-site retreat at the Portola State Redwoods Park. I left Thursday afternoon and came back Friday night. You don’t have to spend a lot on lodging. Going camping costs about $40 to reserve the site. But it is important to get out of your home so that you can focus.

My basic off-site agenda looks like this:

• Review one-page business plan and update financial projections
• Review Quickbook numbers for the latest month and quarter, and make sure all expenses are categorized properly
• Read, read, read. I collect interesting articles throughout the quarter and print them to PDF so I can read them if I don’t have internet access. I also have some business books that I am working my way through. Right now I am reading “The E-Myth Revisited.”
• Set 90-day priorities that support one- and five-year goals
• Review “Profit First,” target allocations (see below)
• Focus on something major to work on at the retreat, like starting an operations manual, ironing out the details of the first three client meetings, a financial planning concept to explore more, or creating a business mission statement
• Set the date for the next retreat.

It is nice to get away from all the distractions around your apartment or home. I find myself tidying up (that dish doesn’t belong there), which distracts from my business focus. It’s good to unplug and focus on thinking about the business.

11. Set your prices just beyond what you feel comfortable with

Alan Moore said this on one of his XYPN Radio podcasts and it really stuck with me. He said to price your fees at just beyond the point where you feel comfortable. If you know you can sell your plans at $1,000 all day, maybe you are getting too many yeses and not charging enough for your expertise.

My average fee is over $1,100 for onboarding and $235/month for ongoing services. I still get nervous quoting those fees, but I know I provide a ton of value to my clients. Since I help my clients save $470/month, I feel confident charging them at least half that.

Remember to follow your heart and do what feels right. You will be more successful if you try to sell something you believe in. Initially I tried charging an AUM fee, but it just didn’t sit right with me. Investment management is a commodity, and I don’t add much value after setting the initial allocation with my client. I outsource my portfolios to Betterment For Advisors.

When I launched, the Betterment platform fee for advisors was 0.25 percent. If a client went directly to Betterment, the fee could be as low as 0.15 percent if they invested over $100k, and they could get up to six months managed for free if they went to www.betterment.com/planetmoney. As a fiduciary, I couldn’t stomach charging a fee for investment management when they could get the same exact portfolio for cheaper. (Betterment has since raised its top pricing tier to 0.25 percent and XYPN advisors get access to the platform for only 0.20 percent.)

Since asset management is included with my services, I simply charge a reasonable monthly retainer fee to cover the value of my time, to a point where I can include investment management for free.

12. Get involved with your local financial planning community

Not only was I a new firm owner when I launched, but I was also new to the Bay Area. So I got involved with my local FPA chapter, and highly recommend that you do, too.

I volunteered for pro bono events at my local library, like Financial Planning Days. I sat on the board for the FPA NorCal conference as a speaker liaison. This gave me an opportunity to network with other professionals and with NorCal, you get a free ticket to the conference worth $699!

Set up meetings with other advisors, especially fellow NAPFA and XYPN members. Pick their brains. If there isn’t anyone local, set up virtual meetings. Members of the “secret society of financial advisors” are very willing to help, so don’t be scared. There are 75 million millennials, and there are only 550 XYPN advisors, so it isn’t like we are competing against each other.

A key realization that hit me like a ton of bricks: prospects aren’t asking themselves, “Do I want to hire Shawn or another financial planner?” They are asking themselves, “Do I need a financial plan at all?” Once I had that realization, it helped me with my approach to prospect meetings.

When you meet with other advisors, practice your pitch for when people ask, “So what do you do?” The more you verbalize it, the more you start believing it. It just feels real when you say “I provide financial planning for young professionals,” even if you don’t have a single client yet.

13. Bonus tip: pay yourself—profit first

It is important to treat your business like a business, not a hobby. Pay yourself and be proud of that.

Although I invested in conferences and professional training, I kept my fixed overhead low and I was fortunate to be cash-flow positive from almost the beginning. However, I didn’t pay myself until Month 10. I wanted to make sure my business was sustainable and I wasn’t going to run out of cash. I waited until I had about $20k in my business checking account before I thought about giving myself a paycheck. I didn’t know how much I should distribute, so I did some research.

I read the book “Profit First,” and the premise is this: Take whatever balance you have in your checking account and multiply by 50 percent. That is what you should take home as owner’s pay. Fifteen percent should go to a sub-account to pay for taxes. Five percent should go to a profit sub-account to pay yourself quarterly distributions. The remaining 30 percent is for operations and overhead expenses. You pay yourself first and whatever is left over is how much you should spend on your business expenses.

Do this every 10th and 25th of the month. I like to keep $10k in my checking account at all times. My first paycheck looked like this: $20k—$10k emergency fund = $10k x 50% owner’s pay = $5k.

Be proud of your first paycheck. Frame it. Take a picture of it. Go out to dinner to celebrate. You have worked hard and earned it.

Final thoughts

I feel very fortunate to be where I am. In 2017, I grossed $109k in revenue with about $40k in expenses. I had 99 prospect meetings, and started off 2018 with about 40 ongoing clients. I haven’t even done very much marketing. My experience over these first 20 months was “build it and they will come.” Though I don’t think that should necessarily be your expectation.

What I have going for me is life experience (I was 34 when I launched), business experience (I earned my CFP in 2009, joined the financial planning profession in 2010, and earned an MBA from a top-10 program in 2015), and living near a major city. The last point is crucial to your success. There is an appetite for good financial advice, but with personal finance people still want to work with someone who is local.

I have worked with 63 clients and only seven are people I have never met in person. If you are trying to build a completely virtual practice, I think it can be done, but it will require a lot more time to build credibility in your niche (blogging, posting to relevant forums, networking with centers of influence, etc.) so people can find their way to you. If you’re in a dense metropolitan area, it can be easier because they’re already around.

The first year is a wild ride. If you are committed to your practice and take it seriously, I am confident you will make it. This is an amazing profession, definitely worth the effort.

So what do you think?

Did you employ any of these strategies in launching your own advisory firm? How did it work out? Any suggestions of your own that aren’t included here? Please share your thoughts in the comments below!