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Calculating the Tab

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What does it cost to get the door open as an independent advisor?

As Scott Slater, managing director of business consulting for Charles Schwab Advisor Services, frames it: “We have 7,000 clients and we joke that we have 7,000 business models. There are so many ways to do this, that’s the beauty of the model.”

Here’s how Slater does the math:

  • With $25 million in assets under management, a sole practitioner with no staff and a home office can expect to pay as little as $2,600 in start-up costs (a trim legal and compliance review) to as much as $5,000 (add in basic technology, branding, a website.)
  • At $80 million in assets, a single principal will pay $15,000 to $35,000. At the low end, the cost will cover legal fees for registration support, some branding work and a client relationship management system. The high end tacks on a more robust technology platform and the leasing of office space.
  • A firm with one principal, one staff member and $150 million in assets is looking at start-up costs of $25,000 to $50,000. Minimally, the cost will include legal fees and leasing a furnished office suite. At the upper end, plan to factor in branding and website design along with additional legal support. (The cost of a sales assistant, $30,000 to $80,000 depending on licensing and geography, is not included.)
  • A firm with $350 million in assets (a couple of principals, two non-owner professionals and two support staff) should anticipate start-up costs of $40,000 to $100,000. Variables at the lower end include routine costs of a legal review, registration filings, leased office space and the purchase of used furniture and supplies. At the high end, tack on website development and robust legal support.

Generally, Slater adds, principals refrain from taking income until there’s a positive cash flow—usually four to six months out. And, he says, the most successful firms are outsourcing categories like daily reconciliation, compliance and technology support.

“We’re finding more advisors from the start are clearly saying I need to be focused on serving clients, developing my business and growing what I’m creating,” observes Slater. “So they are delegating to an individual on their team or outsource partners. These are the firms that are going to make this transition the most quickly and efficiently.”   


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