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Setting Up Your Own Practice

There is so much to take care of before hanging out a shingle. Here's a list of what you need to do to stay on track and out of trouble.

By Janet Arrowood

So you’re thinking you want to set up your own practice. Whether you continue as a career agent or become an independent advisor, here are three key considerations:

  • Have a plan before you make a move.
  • Become a specialist and an expert.
  • Follow compliance and licensing requirements to the letter.

Your business plan
You need a number of different plans before you break away from your current office or employment arrangements. You need a business plan, a relocation plan, and a plan for getting the training and resources you will need. Your business plan is the heart of the matter. Starting a business without a business plan is much like starting on a drive through Europe without a roadmap—essentially crazy. How will you know where you are going and whether you are on the right path without a plan?

Business plans address several key areas:

  • What your business is and is not.
  • Who/what your market is and is not.
  • How you will get start-up funding.
  • What your income projections and sources will be.
  • Where you will locate and why (analysis of the competition).

How you will market your services
Business plans are not just for businesses looking to raise capital; they are for business owners who want to succeed and grow. They can contain lots of information or be just a few pages (maybe an outline) to help you focus. For examples, visit the Small Business Administration website at It is also worth spending time at your local chamber of commerce and Small Business Development Centers (an SBA program that provides management assistance to small-business owners). In addition, you can check out the SBA’s SCORE program a national network of volunteers who are experienced entrepreneurs, managers and executives who provide advice for small businesses free of charge.

Business plans are not just for businesses looking to raise capital; they are also for business owners who want to succeed and grow.

The logistics
Here are some suggestions for getting yourself up and running:

  1. Choose your office location with care. If you will have foot traffic, make sure you have free parking. Ensure the location can support the telecommunications you’ll need: high-speed internet, multiple phone lines, voice mail, cellular connectivity, etc. The best solution for the near term may be an “executive suite” or a home office.
  2. Hire good advisors. If you don’t have a business attorney and a tax advisor, now is the time to start the search. Remember that the doctor who treats himself has a fool for a patient. Unless you are an attorney and CPA, hire a professional. After all, that’s what you expect your clients to do—hire you!
  3. Consider your business form: S corporation, LLC, sole proprietor, etc. This is where the opinions of an accountant and attorney are essential. Have the entity paperwork drawn up by an attorney, and have a tax professional handle your taxes, books and other filings. Your time is valuable; it should be spent with clients.
  4. Look for discount furniture resellers. New stuff is too expensive, so check out office furniture liquidators. Consider leasing expensive items like copiers and computer systems.
  5. Secure your records. Find a place to store your paper and electronic (back-up) records off-site. This service should also be able to shred documents for you (at your office) if you don’t have a shredder.
  6. Evaluate and choose the appropriate software and hardware. Insurance companies and your broker-dealer can be great resources in this process. Many times they will supply much of the software you will need. Make sure you have a client and prospect-tracking system and a back-office system.
  7. Establish your corporate identity. Don’t go overboard with branding—have a logo, cards and stationery, but be judicious with other branded items (pens, magnets, brochures) since they are often throwaways.
  8. Affiliate wisely. Choose the right companies for the products and services you plan to offer, if you are not going to be a career agent. And get the right insurance in place for yourself. That means:
  • Choosing (and transferring to) a broker-dealer.
  • Getting errors and omissions insurance (E&O).
  • Getting a business owner’s insurance policy (BOP).
  • Getting workers’ compensation if you will have employees.
  • Exploring health insurance, retirement plans and other benefit plans.
  • Contracting with three or four insurance companies for each line of business you plan to offer (life, long-term care, health, disability income, property and casualty insurance, etc.).
  • Registering as an investment advisor (RIA) if necessary.
  • Maintaining your own state insurance licenses.
  • Getting licensed to sell variable products (if necessary). And the list goes on.

The biggest mistake newly minted professionals make is trying to be all things to all people in the desperate scramble to make ends meet and gain clients. Big mistake. Even though you’ve probably been in the industry for a number of years, you are (almost) starting over when you hang out your own shingle. Pick a few areas and become an expert.

Once you pick your areas, evaluate the top providers (insurance and mutual funds) in each one, and get your contracts with them. Consider joining a producers’ group. These groups have contracts with top insurance companies and independent broker-dealers. This is a great way to get excellent payouts, access to E&O insurance, training and maybe even free or low-cost continuing education programs.

Make sure you join the right organizations to ensure access to potential clients, centers of influence, and fellow professionals. That means joining (or staying with) NAIFA, other professional organizations, at least one chamber of commerce, a business leads group, and as many networking and business groups as you can afford and manage. Being a specialist is important—the professionals you meet will want one or two simple ideas to take away when they have talked to you.

Compliance, licensing and insurance
You can’t get a lease without a BOP. You probably can’t find a reputable broker-dealer or contract with top insurance companies unless you have E&O.

Compliance is going to be much harder because there is no one watching over your shoulder anymore. So:

  • Become very good friends with your broker-dealer compliance officer.
  • Subscribe to as many industry publications as you can.
  • Maintain and read all the compliance documents from your broker-dealer, your state and the insurance companies with which you are contracted.

Make sure you have the right active licenses before you solicit the sale of any product—you need variable, insurance, and/or securities licenses in all appropriate states before you try to place a product or service. You may need to be an RIA.

Keep up with continuing-education requirements. You may not have a supervisor to do this for you any more.

You are still subject to compliance and NASD review of communications. Don’t overlook the review and approval process.

Other considerations
If you are going to hire staff, make sure you can afford to pay them. Make sure they have the appropriate licenses. Consider doing a background check and/or other prescreening tests before hiring anyone.

Safeguard client data and your computer systems. Shred, don’t trash, anything with identifying information on it. Have and use firewalls, encryption and antivirus software.

Be a success story
There is a lot to do if you want to set up your own practice, but there are thousands of resources out there to help you. In real estate the key to success is location, location, location. In business, it’s plan, plan, plan.

Useful websites

Janet Arrowood is the managing director of The Write Source Inc. She can be reached at

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