Part Time CFP/ New Business Idea

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Allan12
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Part Time CFP/ New Business Idea

Post by Allan12 »

All,

I am passionate about personal finance (as many of us are).

I am really thinking about becoming a CFP and starting a small tax, consulting business out of my house.

I am interested in attracting a niche of municipal workers.

I no longer work in finance, but I have the work experience requirements completed, and 4 out of the 6 required classes to sit for the CFP completed. I previously had planned on taking it. I currently have downtime, so I was thinking of completing the 2 remaining classes and then plan on sitting for the exam.

Thoughts, on feasibility? Ideas? Any help is appreciated.

-A
Bobbybell
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Re: Part Time CFP/ New Business Idea

Post by Bobbybell »

Why would someone go to a CFP for tax consulting advice as opposed to a CPA?
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Allan12
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Re: Part Time CFP/ New Business Idea

Post by Allan12 »

100% right. I should have been clearer. I have access to family members that are CPAs that can assist if needed. However, I am not planning on doing anything beyond helping a city worker learn about deductions, and benefits of 401ks, iras, etc.

I want to help people out, and pursue my hobby focusing on student loans and budgeting, along with basic financial planning concepts.

In doing so, I can deduct my home office, which is my basement.
Leesbro63
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Re: Part Time CFP/ New Business Idea

Post by Leesbro63 »

You had better make sure you have good liability insurance.
carolinaman
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Re: Part Time CFP/ New Business Idea

Post by carolinaman »

I considered this as a post retirement venture but decided against it because I felt it would take too long and would be hard to build a good customer base. Why will people come to you as opposed to people who have been doing this for many years? If you are able to attract workers from local govt where you have a connection, it may work. But you really need to assess how you will attract clients and sustain the business through marketing, networking, etc. I recommend developing a comprehensive business plan so that you fully understand what is needed to operate this business. Best wishes.
rjbraun
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Re: Part Time CFP/ New Business Idea

Post by rjbraun »

How would you charge for your services -- hourly rate, by project, e.g., $x to prepare financial plan, etc. or as a percentage of total assets? How willing and able would your target clientele be to pay for these services? Your subject heading says "Part Time" and you mention in your OP that you have some downtime currently. If you're really talking about opening a for-profit business venture, you will likely find that you will need to work around your clients' schedules; when they are free may or may not coincide with your schedule (weekends, after work and so forth). Unclear from your post whether that's what you have in mind.
MN Finance
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Re: Part Time CFP/ New Business Idea

Post by MN Finance »

If you have the vision and a good market niche, then it sounds great. Go for it! Municipal workers, I'm guessing, are undeserved so if you're the go to guy/gal that group uses, 1) your skill set will continue to improve and 2) your name recognition will grow. And if this is part time and making money is only of modest importance then that means a decent model for the investor to benefit. As for the CFP, if you've taken some classes and have experience already, it will solely serve as a resume builder (so is that the idea?)

Edit: I met with a planner on wed who has a niche that's people with small account balances. He has a modest income compared to the industry and had to have quite a few clients to make it work, but he has basically zero competition and has built his name as the expert. Good spot to be.
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Allan12
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Re: Part Time CFP/ New Business Idea

Post by Allan12 »

johnep wrote:I considered this as a post retirement venture but decided against it because I felt it would take too long and would be hard to build a good customer base. Why will people come to you as opposed to people who have been doing this for many years? If you are able to attract workers from local govt where you have a connection, it may work. But you really need to assess how you will attract clients and sustain the business through marketing, networking, etc. I recommend developing a comprehensive business plan so that you fully understand what is needed to operate this business. Best wishes.
I feel people would come to me because this venture is a side business, and I am not trying to make a career out of it, and I can offer economically priced, helpful advice outside of the traditional financial planner/advisor relationship.

I will of course develop a business plan, but fully expect that many clients come from word of mouth, and the community.
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Allan12
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Re: Part Time CFP/ New Business Idea

Post by Allan12 »

rjbraun wrote:How would you charge for your services -- hourly rate, by project, e.g., $x to prepare financial plan, etc. or as a percentage of total assets? How willing and able would your target clientele be to pay for these services? Your subject heading says "Part Time" and you mention in your OP that you have some downtime currently. If you're really talking about opening a for-profit business venture, you will likely find that you will need to work around your clients' schedules; when they are free may or may not coincide with your schedule (weekends, after work and so forth). Unclear from your post whether that's what you have in mind.
Definitely not as a percentage of assets. Probably by project or like $250 to review student loans for instance.

I feel the target clientele are willing to pay for a tune up without the high pressured sales pitch. I completely understand that I have to be flexible regarding their schedules, which is perfect for me!
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Allan12
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Re: Part Time CFP/ New Business Idea

Post by Allan12 »

MN Finance wrote:If you have the vision and a good market niche, then it sounds great. Go for it! Municipal workers, I'm guessing, are undeserved so if you're the go to guy/gal that group uses, 1) your skill set will continue to improve and 2) your name recognition will grow. And if this is part time and making money is only of modest importance then that means a decent model for the investor to benefit. As for the CFP, if you've taken some classes and have experience already, it will solely serve as a resume builder (so is that the idea?)

Edit: I met with a planner on wed who has a niche that's people with small account balances. He has a modest income compared to the industry and had to have quite a few clients to make it work, but he has basically zero competition and has built his name as the expert. Good spot to be.
Thanks for the support! I feel the CFP builds my résumé for sure in addition to my MBA. I am pursuing it because I am eligible for tuition reimbursement through my job, and mainly because I've met almost all the requirements except actually passing the test.

I'm planning on being in the same spot as the planner you met with on Wednesday. I want to work with small accounts and advise people on making smart choices. I'm viewing it as a hobby, pt job.
rjbraun
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Re: Part Time CFP/ New Business Idea

Post by rjbraun »

Allan12 wrote:
MN Finance wrote:If you have the vision and a good market niche, then it sounds great. Go for it! Municipal workers, I'm guessing, are undeserved so if you're the go to guy/gal that group uses, 1) your skill set will continue to improve and 2) your name recognition will grow. And if this is part time and making money is only of modest importance then that means a decent model for the investor to benefit. As for the CFP, if you've taken some classes and have experience already, it will solely serve as a resume builder (so is that the idea?)

Edit: I met with a planner on wed who has a niche that's people with small account balances. He has a modest income compared to the industry and had to have quite a few clients to make it work, but he has basically zero competition and has built his name as the expert. Good spot to be.
Thanks for the support! I feel the CFP builds my résumé for sure in addition to my MBA. I am pursuing it because I am eligible for tuition reimbursement through my job, and mainly because I've met almost all the requirements except actually passing the test.
Best of luck if you decide to go for this. Just be sure your employer doesn't take issue with the outside work. Also, as I think was mentioned in a prior thread be sure that you will not have personal liability in the event you have an unhappy client who feels they received advice that led to financial losses they then seek to recoup, etc.
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Rick Ferri
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Re: Part Time CFP/ New Business Idea

Post by Rick Ferri »

Go for it. There are many part-time CFPs who are doing exactly what your doing, Consider membership in the Garrret Planning Network. They have a turn-key program that can get you started along with many other benefits for new advisers.

Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
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Peter Foley
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Re: Part Time CFP/ New Business Idea

Post by Peter Foley »

If I were to consider being a part time financial planner, the niche I would try to serve would be those nearing (or early in) the withdrawal stage. A fair amount of tax knowledge is needed. I think one could specialize in 5 year plans for baby boomers. Referrals might come from persons and businesses who do tax preparation.
MN Finance
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Re: Part Time CFP/ New Business Idea

Post by MN Finance »

I'll echo again, that since you confirmed this is really part time (income wise as well) that's about the best arrangement for a planner since it means low fees for investors. Agreed e&o insurance is a decent idea, will maybe run 500-1000 yr (guessing). You can buy planning software if you want for 1000 yr. I recommend having a couple packages, like loan analysis 250 overall retirement plan 500 portfolio review 500 etc. Or hourly of course. Despite being a bogelhead, don't go too cheap on the fees. Make it worth your while, because the advice you give will save people tens of thousands. Garrett will cost you 5000 yr but I have to believe it generates a lot of referrals. Though that's certainly a bit of a commitment.
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Re: Part Time CFP/ New Business Idea

Post by gwrvmd »

I agree with Rick Ferri---Go for it. With an MBA, business experience and a CFP you should be a great financial advisor/planner.
If you have 4 of the 6 segments done finish it!
I have been fascinated for several years on becoming a CFP as a personal achievement but when I investigated it and saw the 6 page list of topics covered by the exams I realized that my enthusiasm and personal fortitude would probably not last through all those 6 pages. So I am jealous of you having done 2/3 of it already (I hope that means having taken the exams not just read the material)
Good luck!...Gordon
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Allan12
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Re: Part Time CFP/ New Business Idea

Post by Allan12 »

gwrvmd wrote:I agree with Rick Ferri---Go for it. With an MBA, business experience and a CFP you should be a great financial advisor/planner.
If you have 4 of the 6 segments done finish it!
I have been fascinated for several years on becoming a CFP as a personal achievement but when I investigated it and saw the 6 page list of topics covered by the exams I realized that my enthusiasm and personal fortitude would probably not last through all those 6 pages. So I am jealous of you having done 2/3 of it already (I hope that means having taken the exams not just read the material)
Good luck!...Gordon
Gordon, thank you so much for the encouragement!

My wife just reminded me that I took a Federal Income Tax class for my MBA. Hopefully, I can transfer my class into the CFP program. If that's the case, I would only need to complete an estate planning class and take the test. Once I pass the one or two remaining classes, I am eligible to sit for the CFP.

Everyone is really motivating me!
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Re: Part Time CFP/ New Business Idea

Post by LadyGeek »

If you are looking for reasons to become a CFP, look no further than this post from Bill Schultheis. See: Subject: What are the requirements for managing other people's money? (Aug 18, 2012)
bschultheis wrote:I would like to respond to the comments of mlipps and K*ya who expressed interest in becoming an investment advisor. I am sure there are lots of other folks on this forum who are contemplating the same. I get about 3-5 inquiries a month at the Coffeehouse from folks across the nation who contact me, wanting my input on a career of providing investment and financial advice, and how to best get started in the business.

First, to dispel a myth that seems to have evolved in some circles, advisors are not “bad” people. I would suggest instead that “Bad” advisors are “bad advisors.”

On the contrary, advisors who help people achieve their financial goals in an ethical manner are incredibly valuable in today’s world. As John Bogle has said, “This is a most difficult time to invest.” When you work with a client to create an authentic financial plan, guide them in sticking with that plan in all types of markets, help educate them and help them navigate the myriad of investment choices out there, you can have a profoundly positive impact on their emotional and financial well being throughout their lives.

Keep in mind that the average investor can barely explain the difference between a stock fund and a bond fund, has no idea of the correlation between bond prices and interest rates, has only a vague understanding of index funds, thinks ETFs are extraterrestrial foreign beings, has no idea who John Bogle is, and in fact when you run “bogleheads” through MSFT spell-check, it prompts you with “bugleweeds.”

I am a huge proponent of embracing the “Coffeehouse” or Bogleheads, or passive investment philosophy when working as an advisor. I continue to be amazed at the small number of advisors who embrace the same – but lucky for our firm, as our approach continues to stand out amid the traditional Wall Street model.

My guess is that most advisors stick to the traditional model because they haven’t figured out how they can add value to clients’ lives within a passive structure. They still feel their main purpose as an advisor is to “beat the market,” and feel that is what the clients want as well. In reality, clients want something far different. They want to clarity on whether they are or aren’t on track to reach their financial goals.

Quick story – I was visiting a new client/couple in the Southwest last spring, early 50s, and presented to them a rough draft of a financial plan. The wife’s response was, “I have been asking my (ex) stockbroker for this for six years!”

Here are some reasons I embrace the Coffeehouse philosophy when working with clients. . .

Performance is never an issue. Clients get what the markets give them, and know that they are maximizing their return potential in each asset class. It goes back to the game of “Outfox the Box,” and when clients get that little game, they begin to understand the futility of trying to beat the market over the long haul.

More importantly, the Coffeehouse philosophy allows you, as an advisor, to focus on the financial planning aspect of your job, which is the most important part of the relationship. Anybody can go out and buy a couple of index funds and own an intelligent portfolio. Don’t really need much help in doing that, as we are frequently reminded on this board. ;-) But owning a bunch of index funds is only a small component of living out your financial goals in a meaningful way.

It is all the other decisions that come in to play and where you, as an advisor enter the picture. If working, how much should you be saving to reach a financial goal? If retired, how much should you be spending so you don’t run out of money before you die? Does your asset allocation reflect the same? Is your portfolio tax efficient? When should you start taking Social Security? Should you pay down a mortgage? When can I retire? How should I fund college educations for our children? Do you think the market is going to crash again? (The answer is yes, by the way).

A financial plan is not a “set it and forget it” exercise. It is a living and breathing document called YOU that changes over time as aspects of your life changes and as markets change and evolve.

Where to start in your journey to become an advisor? Here are some random thoughts.

Choose a financial planning software that you become intimately familiar with, and can explain to clients. That will be the heart of your relationship with your client. When considering financial planning software, my rule of thumb is that the usefulness of the planning software is inversely correlated with the number of pages in the output. The software we use has output of about 5 pages, and big print to boot. I came across a plan created by the raging bull a while back, and OMG, the thing was like over 50 pages long in small print, and the investor’s head was spinning trying to make sense out of it.
Our planning software isn’t perfect, but remember, the downfall of a good plan is the pursuit of a perfect plan, or something like that.

Keep things simple. Over the past 13 years, I don't think I have ever brought up the words "Standard Deviation, Monte Carlo, or Three Factor Model" in discussion with folks. They aren't impressed by that. They are impressed when you show them that they are or aren't on target to reach their financial goals.

There will be a learning curve in this journey of yours (for the rest of your life). Be prepared to say, “I don’t know,” when a client asks you a question you don’t know. I say “I don’t know, but I will find out, or connect you with someone who does know,” probably 20 times a day. It elevates you in the eyes of a client, and they respect your desire to seek out the correct, or best answer. It also helps if you start to establish professional relationships with folks who you can turn to for answers. It REALLY helps that you have this forum to turn to when you are searching for answers.

How do you develop a clientele? That’s the fun part. My experience has been that people have to hear the message over and over again before they finally tune in to the boglehead wisdom. Fortunately, for me, I landed a column in a few daily papers that allowed for exposure. After reading the same thing for the 29th time, investors would finally get it, and wonder what took them so long.

For instance, if you are fostering a relationship with an investor, you should have sent them the NYT article last week on John Bogle, or Scott Burns’ the week before. Keep the message in front of them again and again and again. Eventually, a good percentage of investors WILL get it, because they are searching for the authenticity that you provide. Nick Murray (for sure, buy his book - The Excellent Advisor) has said that two thirds of investors would like to change advisors, but don't have a smart alternative to choose from.

Vanguard is putting forth a ton of resources to help the advisor. They are really committed to this, as 45% (and growing) of all new dollar inflows to Vanguard are now through the advisor channel. I constantly forward research created by Vanguard to clients and prospective clients - and of course everyone loves the name Vanguard! ;-)

If I were starting out again building an advisory business, I would immerse myself in activities that would allow me to share my wisdom with folks when the opportunity presented itself. Today, when someone asks what I do for a living (I never reveal it unless asked), I can hardly contain my enthusiasm by telling them that I work with an advisory firm that “embraces a unique investment philosophy and we are having a profoundly positive impact on people’s lives at a time when they are screaming for help!”

And people are quietly “screaming” for help. Look at the number of people who tune in to this forum looking for financial help. I have nothing but admiration for folks on this board who freely give of their wisdom and time to help others. I constantly refer people to this board, and am attending the gathering in Philly in October. The reality is that the demand for personal financial advice far outpaces the capacity of this forum, and a huge percentage of investors want and need a more personal connection than the anonymity that this board provides.

You can’t build a business overnight. It takes lots of time and quiet tenacity. I would recommend a marvelous little book, maybe 60 years old now, “How I Raised Myself From Failure To Success in Selling” by Frank Bettger. It has lots of wisdom in it, like taking 30 minutes on a Friday afternoon to prepare for next week. A good book on basic life skills, like the fine art of active listening more than you talk.

If you are “selling” a wisdom that will have a profoundly positive impact on people’s lives, it can be a most wonderful career, and I would encourage anyone who has contemplated either a part time or full time career in this arena to continue exploring it. In my thirty years in the business I have never seen a better time. Good luck!

Bill Schultheis
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
Topic Author
Allan12
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Re: Part Time CFP/ New Business Idea

Post by Allan12 »

MN Finance wrote:I'll echo again, that since you confirmed this is really part time (income wise as well) that's about the best arrangement for a planner since it means low fees for investors. Agreed e&o insurance is a decent idea, will maybe run 500-1000 yr (guessing). You can buy planning software if you want for 1000 yr. I recommend having a couple packages, like loan analysis 250 overall retirement plan 500 portfolio review 500 etc. Or hourly of course. Despite being a bogelhead, don't go too cheap on the fees. Make it worth your while, because the advice you give will save people tens of thousands. Garrett will cost you 5000 yr but I have to believe it generates a lot of referrals. Though that's certainly a bit of a commitment.
Definitely will pick up the e&o.

I will look into Garrett, and see what the opportunities are.

I like your idea of packages. Setting the price points will be tough because as you mentioned I would like to offer inexpensive prices, but I have to realize I may be saving people thousands like you mentioned!
tj
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Re: Part Time CFP/ New Business Idea

Post by tj »

Allan12 wrote:
johnep wrote:I considered this as a post retirement venture but decided against it because I felt it would take too long and would be hard to build a good customer base. Why will people come to you as opposed to people who have been doing this for many years? If you are able to attract workers from local govt where you have a connection, it may work. But you really need to assess how you will attract clients and sustain the business through marketing, networking, etc. I recommend developing a comprehensive business plan so that you fully understand what is needed to operate this business. Best wishes.
I feel people would come to me because this venture is a side business, and I am not trying to make a career out of it, and I can offer economically priced, helpful advice outside of the traditional financial planner/advisor relationship.

I will of course develop a business plan, but fully expect that many clients come from word of mouth, and the community.

I would imagine that this would be a turn off, not a benefit, for the vast majority of people looking for financial advice.
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Jason Hull
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Re: Part Time CFP/ New Business Idea

Post by Jason Hull »

I read somewhere (can't remember, but think it might have been Houston) where a city offers an on-call CFP as part of the benefits package for city workers. Since you're already tied in with the city, assuming that there's no conflict of interest, offering X hours of on-call CFP service to city workers as part of their benefits package would be a good pitch to make for landing a contract. Set a floor and a cap and hours which work best for you. You win with steady, recurring revenue that doesn't reek of AUM or commission fees and they win with having their workers getting good financial advice, which should reduce stress (about money problems) and make them more productive at work.
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