budget with woman using a smartphone

What Sort of Budget Do I Need?

October 19, 2021 |

shoestringria stacked color

In the previous article, we explored a series of choices you’ll need to make for your new business. These homework items will better prepare you for decisive actions that are critically important to launching.

In this article we explore your budget. What sort of finances do you realistically need? What should you spend your money on?


Check List

Office – To rent or not to rent?

“This is the golden age of lifestyle practices,” says industry practice management guru Michael Kitces, the head of planning strategy for Buckingham Wealth Partners and publisher of the widely read ‘Nerd’s Eye View’ blog. “Twenty years ago you needed to rent an office and have a support staff. Today you can bring your laptop to the beach.”

While that’s a bit glib, Kitces makes a good point — if you have a room where you can work at home (or a nice quiet spot on the beach), you may not need to spend money on an office, at least, not in the beginning.

Office equipment — Computer, printer/scanner, internet access. And don’t forget the old school basics — desks and chairs!

Software — Two ways to go here. You can select, a la cart-style, proprietary Best-of-Breed products from a wide range of third party vendors. Most popular software tools include performance reporting, CRM, financial planning, client portal, risk analysis and fee billing.

You can also purchase an All-in-One suite of software programs that’s already integrated from reputable market leaders including Morningstar Office, Envestnet/Tamarac, Orion, Advyzon, AdvisorEngine, SS&C Black Diamond and CircleBlack.

Marketing — For starters, you’ll need to have a brand and an accompanying design, marketing content and materials, a website and a social media presence.

Organizations — When you’re starting out, it helps to be part of a community of folks with similar issues. The Financial Planning Organization, NAPFA and the XY Planning Network are all helpful.


So how much will it cost to get up and running?

With so many variables at play, there isn’t one answer. Costs vary widely depending on the type of firm you want to have and your location.

In a recently published guide, the XY Planning Network, which provides bundled software and services for small practices for a fee, estimates start-up costs can range from $12,000 to $55,000.

Here are some breakout estimates:

Filing and registration fees: $350 to $400

Business Liability Insurance: $400

Professional Liability (E&O) Insurance: $2,000

Marketing: $1,000 to $3,000

Website Design and Hosting: $2,000 to $5,000

Office equipment: $2,000 to $5,000

Organization fees: $1,300 to $2,300

Software: This category is the wildcard. Really depends on what you get.

A few basic programs could be less than $1,500 but upgraded software expenses to cover more areas is more likely to be $5,000 and up.

Personal expenses: Your expenses are probably going to exceed your revenue for at least half a year or more, so don’t forget how much it costs you to live and make sure you have money set aside.

Benjamin Brandt started Capital Cities Wealth Management in Bismarck, North Dakota in 2014. Brandt recalled advice from Michael Kitces that while you can always bootstrap your RIA, creating Excel sheets from scratch, forgoing expensive software and using notecards instead of CRM, the same can’t be said for your personal life. You actually need money to live.

“Kitces’ point was that your personal expenses could sink your RIA before the actual costs of the RIA, so have enough cash set aside for your personal runway to give yourself a fighting chance,” Brandt says. “I took his advice. My wife and I went scorched earth on our personal expenses to extend that cash runway as far as possible.”

Summary — To be sure, you’ll be facing plenty of difficult decisions, many novel. Breakaways are, after all, “accustomed to end-to-end operational support from a broker-dealer,” as noted in a recent Cerulli Edge report. But keep in mind that the report went on to state that a very high level of support “is becoming more readily available in the RIA space.”

What’s more, the odds are in your favor. Schwab alone has successfully transitioned more than 3,200 advisors to the RIA model in the past 14 years and moved nearly 1 million client accounts. And nearly 80% of breakaways brokers who are now independent surveyed by TD Ameritrade in 2020 said their quality of life was better than before.

You’ve successfully maximized your skills to help your clients and your employer succeed.  Now it’s your turn. Sure there will be missteps and stumbles, but that’s part of any journey. More important is that you’re on the right path. And now you have a guide to help you keep moving towards your goal.


The Shoestring RIA is a series of articles written and published by the BillFinTM team at Redi2 Technologies designed to help RIAs as they start out on their own. We recognize just how challenging it is to venture out and build a successful business. Our articles will be focused on helping these new businesses with a wide range of topics.











Sophia Bera’s Setting Up An RIA and Starting a New Financial Planning Practice on Less than $10,000 

The 26 Steps I Took To Set Up And Launch My Own Independent RIA

First Year Budget Template

Costs to Register as a Registered Investment Advisor Firm

Understanding the Costs of Starting and Running an RIA