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Four Steps to Starting Your Own Advisory Firm


Four Steps to Starting Your Own Advisory Firm

In November 2013, after two years of preparation and planning, Marguerita Cheng and I co-founded Blue Ocean Global Wealth, an investment advisory firm that strives to be a trusted partner and educational resource. We deliver comprehensive financial planning and wealth management solutions to families, entrepreneurs, and executives. Based upon our experience, we provide a simple framework to help you make the most-informed decisions when considering your own firm.

1. How do you want to service your clients? Investment management or financial planning?

As a CFA charterholder or CFA candidate, you may have a natural affinity for portfolio construction and asset allocation. It is important to note that creating an investment portfolio in isolation is not the same as financial planning. Determine if you want to simply focus on the investments or if you identify with a financial planning process, which integrates additional areas of financial life above portfolio management, including taxes, insurance, liabilities, budgeting, succession planning, estate planning, and charitable giving.

Identify Your Sources of Revenue

Source: Blue Ocean Global Technology

2. What is your future revenue model, advisory fees or brokerage commissions?

The products and services you offer, and associated compensation received, will determine the optimal legal structure for your business.


  • Investment Management Fees
  • Financial Planning Fees
  • Consulting Fees

If you prefer fee-based or fee-only compensation, you will need to join an existing or create a Registered Investment Advisor (RIA). If you earn income from fees, you are considered an investment adviser. Depending on their size, investment advisers have to register with either the SEC or the state securities agency where they maintain their principal place of business. For the most part, investment advisers who manage $100 million or more in client assets must register with the SEC. If they manage less than $100 million, they must register with the state securities agency. Please note that fees may be structured as a flat amount or a percentage of assets under management.


  • Mutual Fund 12b-1 Fees
  • Life Insurance
  • Long-term Care Insurance
  • Term Insurance
  • Variable Annuities
  • Fixed Annuities
  • Real Estate Investment Trusts (REITs)
  • Structured Products

If you plan to receive commissions, you will need to affiliate with an existing broker-dealer to offer such products, which requires passing licensing exams, such as the Series 7.

In forming Blue Ocean Global Wealth, we sought a more comprehensive product offering and anticipated receiving compensation from both fees and commissions. As a result, dual or hybrid registration was most appropriate. Advantages include:

  • Flexibility to serve clients from a brokerage and advisory standpoint.
  • Enhanced ability to consolidate client relationships.
  • Versatility to provide options for both retail and institutional clients.

Identify Your Sources of Revenue

Source: Blue Ocean Global Technology

3. Consult a reputable compliance provider.

Following the compliance rules and regulations is fundamental to the daily viability of your business. Navigating the regulatory landscape, at the state and federal level, can be complex and time consuming. Maintaining an in-house compliance department is often neither practical nor feasible. Establish best practices from the onset of your business so that you can focus on engaging clients and strategic partners.

4. Develop a business and marketing plan with a detailed timeline to prepare you for when you go live.

Every business, particularly within the financial services industry, is unique. Your business model (RIA vs. broker-dealer vs. hybrid/dual registration) will dictate next steps and resources available to support your vision. Begin with the end in mind and recognize that your business will evolve as your realize success and learn from mistakes. Below are some of the key factors we recommend you consider:

Business Incorporation: If forming an RIA, name and register your entity after determining the right legal structure.

Custodian: Selecting a reputable custodian is critical. Bernie Madoff, for example, held client assets in custody and was therefore able to manipulate values and account statements. We selected the Bank of New York Mellon (BNY), through their subsidiary Pershing Advisory Solutions, because they are the world’s largest custodian. BNY administers more than $29 trillion, or 20% of the world’s securities. We also found their global presence in key markets, such as London and India, advantageous for our long-term strategic plan.

This line from history resonates with me and validates the importance of planning.

“Success depends upon previous preparation, and without such preparation there is sure to be failure.” — Confucius

Prepare for the opportunity. No matter how prepared you are, you may never feel you have prepared enough.

When you have a flexible framework, it’s easier to stay focused on reaching your goals. An integrated plan will help you measure short- and medium-term progress toward realizing your long-term vision.

Just as portfolio management may stipulate that an asset manager implement an “active” strategy within the guidelines of the investment policy statement, entrepreneurship will require you to adjust your plan on an ongoing basis. Educate yourself to be as knowledgeable as possible.

By understanding your options, you’ll be better prepared to make informed decisions.

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