XY Planning Network is excited to announce that we have five of our members launching their own firms in the month of January. We wanted to celebrate these advisors and help promote their brand-new firms by spotlighting their experiences, thoughts, and lessons learned on the XYPN blog this month.
This week, we’re thrilled to hear from Erik O. Klumpp, financial planner and founder of Chessie Advisors, LLC.
Erik is passionate about helping others achieve the lives of their dreams. He specializes in providing financial guidance and investment management to teachers, engineers, attorneys, and young professionals who are 30 to 65.
He explains his story, experiences, and insights on launching his own financial planning firm:
It’s been a long time coming. As a junior in college at Indiana University working on a group personal financial planning project for one of my finance classes, I knew that someday I wanted to start my own firm to help others achieve their financial goals.
After spending nearly 10 years and gaining tremendous financial planning experience at some of the top RIAs in Michigan, I found myself laid off and searching for my next steps.
Should I find something else within the industry at a broker or other RIA? Should I look for employment outside of the industry? What about starting my own firm?
Pursuing the Dream of Owning My Own Firm
I spent the first few months of 2014 weighing my options and hanging out with my two sons. I thought about how my dad had considered starting a business while I was in high school, but opted to continue to be an employee to help support our family with a consistent paycheck.
My dad lost a battle with cancer 5 years ago in his early-50s. He never got the chance to do his own thing.
I could take that secure paycheck or try something that is real, something that’s mine. I wanted to be able to work from home and design a business around my life.
Everything kept going back to articles from Alan Moore about launching his own firm and Sophia Bera’s article on starting a firm on less than $10,000. Reading these over the past few years gave me the confidence that this type of thing could be done.
I have two young boys under the age of 5 and my wife and I felt that starting a business now, before we have to really worry about college costs was best. I also wanted the flexibility that a lifestyle practice could provide, benefits that both Alan and Sophia had talked about in their various articles.
I had been dreaming of my own firm for years -- going as far as naming it Chessie Advisors (after the breed of my dog, Maysie, a Chesapeake Bay Retriever), designing a logo, purchasing web addresses, coming up with a slogan (A Different Breed of Financial Advisor™), and brainstorming my target market long before I made the decision to actually start my firm.
Choosing Between a Client Niche -- or Client Niches
In my previous firms, I had worked with hundreds of clients from all walks of life. I served everyone from automotive assembly-line workers to teachers to engineers to high-level corporate executives to extremely wealthy small business owners.
Trying to decide who to target was a difficult decision. I didn’t want just a general financial planning practice, but I also knew that in starting from scratch with no clients, having a extremely focused niche might make it tough to stay in business through the first few years.
I knew I wanted to have a focus on teachers because my wife and many of my friends are teachers. In my opinion, they are bombarded by 403b and insurance salesman, and don’t have many independent financial planning firms that specialize in their needs.
I also knew I wanted to target engineers, as I test-drove an engineering career, having spent my first year of college pursuing mechanical engineering at Kettering University.
Lastly, I knew I wanted to focus on young professionals and those more my age, Generation X and Y, who are typically overlooked by larger firms because of their asset size.
I chose these groups as my niches in an effort to seek a balance between too general and too specialized.
Side Hustling from the Start
In my previous positions, I prepared and reviewed tax returns as part of the job. So in May 2014, I formed a tax preparation firm, Chessie Tax, LLC.
I started the firm to be an affiliate of my RIA to provide tax preparation services to my financial planning clients, if they chose, and others. The goal is to create stickiness in client relationships.
For now, the idea is that Chessie Tax will provide “side-hustle” income while I work to grow my RIA. It's an important part in the plan to bridge the "income gap" many planners face when launching their own, brand new financial planning firms.
Going It Alone
I read about the waves Alan Moore and Michael Kitces were making after launching the XY Planning Network at the beginning of April. It sounded very appealing, but I wasn’t yet in the position to pay the membership fee despite all of the member benefits.
I got to work on forming Chessie Advisors, LLC, my financial planning and investment management firm. I opted to tackle RIA registration alone, but with the help of some templates I was able to purchase online.
They were relatively inexpensive, compared to a couple thousand dollars to hire a compliance firm to do the same thing. Looking back on it, I would have gladly paid for the contracts but could have done the ADV by myself.
There’s a trove of public information out there on the SEC IARD site to refer to and in my experience working with the State of Michigan, they were very helpful in answering any questions that I had. It wasn’t until June that I got everything submitted to the state and after one revision and about 4 weeks of time, I got approved.
Editor's Note: With XY Planning Network's new turnkey compliance offering, dealing with registration and compliance issues is easier -- and more affordable -- than ever.
Figuring Out What Came Next
I had spent a good deal of time preparing my registration and had been casually looking at the ancillary, but nearly as crucial, components of an advisory firm, technology and applications. There are enough applications out there to make your head spin.
I continued researching, trying to come up with the best host of products and soon found myself at the end of the summer and having wasted a few months of actually building my business.
I looked to do as much as I could using the free and low-cost tools outlined in Sophia’s article. I worked with a friend to build my website using WordPress. I put together a business plan, secured a custodian, continued working on client deliverables and marketing materials, and reached out to potential clients.
The problem was, I didn’t have a network of others in the same situation I was to push me or bounce ideas off of and I found myself falling behind on the goals I had outlined in my business plan.
I was excited to have my own business, but I just wasn’t gaining any traction.
Understanding the Benefits of a Network
In September, I placed a call to Alan Moore to talk more about XYPN and a few weeks later, I joined.
The technology and services available to members was just a small sliver of what the community offers. The forums and dialogue between members has been invaluable to me in getting my firm up and running and taking me from September until now, my “official launch.” Everyone has been through what you’re going through and are more than happy to offer advice or tips on any topic.
I’m excited about 2015 and my “official launch.” I’m also glad that I joined XY Planning Network and believe it has helped put me in a better position to succeed. Hopefully I can check back with you in a year or two and tell you how it has gone.
Do As I Say, Not As I Did
Looking back on the past year and how Chessie Advisors has evolved from an idea I had been talking about for years, into a actual business, I would offer the following tips for those looking to venture out on their own:
- If you’re working at another financial planning firm, learn as many different aspects of the business as you can before you leave. It will prove useful from a planning, investment, compliance and marketing standpoint.
- Join XY Planning Network once you’ve determined you’re ready to set out on your own, have your niche and know how you want your firm to operate. With full support now from your RIA registration forward, it’s a no-brainer.
- Don’t get caught up in “analysis paralysis.” There are so many decisions to make, options to choose, and paths to follow. Your business won’t get going if you don’t put on some form of blinders to block out unnecessary distractions. You could easily get caught up in the new technology and other decisions and never turn your dream into a reality. You can always decide to make a change later, you just need to push forward.
- Network with other advisors in your position. Whether you decide to join XYPN or go it alone, reach out to other advisors who are doing what you want to be doing. It’s easier than ever now to connect with others via LinkedIn or Twitter to start a conversation.
Go out there and build the firm of your dreams!
Have questions about my experience or tips for advisors looking to launch their own financial planning firm — or just want to connect? You can find me on my website, LinkedIn or on Twitter @ErikOKlumpp.