Financial Advisory Firm SWOT Analysis

Financial advisory firms are able to generate substantial recurring streams of revenue on a monthly basis by providing wealth management services to their clients. A vast majority of financial advisors take a fee equal to 1% to 1 1.5% of the aggregate amount of capital managed on their behalf. In order to have the interest of the financial advisor more closely aligned with that of their client, some businesses operate on a fee-for-service only basis. However, there are a number of ways for financial advisors to earn fees not only from assets under management services, but also from commissions on life insurance and other related products that are needed by individuals on an ongoing basis. There are numerous ways for a financial advisor to structure their fees so that they are able to produce a substantial amount of income while acting as a fiduciary for their client base. These businesses typically have low startup costs and these costs typically range anywhere from $30,000 to $100,000 depending on the underlying operating expenses at the onset of operations.


For weaknesses, financial advisors are subject to a host of laws and regulations regarding how they can provide their services to the general public. There are substantial registrations that are required by the Securities and Exchange Commission in order to operate in this capacity. One of the biggest issues with most financial firms, which is also their biggest weakness, is that there are a substantial number of compliance issues that must be dealt with on a daily basis. Depending on the size of the office and personnel, the underlying operating cost for these businesses can be substantial as well.


For opportunities, most financial advisory firms expand simply by increasing their marketing in order to obtain new clients. These companies can also expand by developing an expanded referral base among area accountants and attorneys that have clients with substantial assets. One of the other ways that these businesses can expand through non-organic means is to acquire existing financial planning practices that are already in operation. These businesses can typically be acquired for amount equal to about two years of billable revenues. Most financial institutions are willing to provide the necessary capital to complete the acquisition of a financial advisory firm.


Beyond competitive threats, the biggest challenge faced by these businesses is a negative economic climate where asset prices can declined. As such, a qualified financial advisor that is seeking to establish their own business must have a number of strategies in hand in order to minimize financial losses on behalf of clients during times of economic recession. Additionally, one of the other threats faced by these businesses is the ongoing changes in regulations that guide the way that these companies conduct their operations. A qualified attorney should be hired in order to assist the financial advisory firm with managing all aspects of their compliance.

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