Ultimate Guide for How Fractional CFOs Partner with Financial Planners

A financial advisor for a financial advisor? 

That doesn't make sense... or does it? 

At FinTeam, we've partnered with a number of financial planning firms and RIAs to support them with their financial management and processes. 

Here's why it makes sense and how we help add-value to their businesses:

The Components of A Financial Planning Firm

Financial planners do incredibly valuable work, but internally they operate like many service companies; they are groups of people that perform high-value services for paying clients, doing so by leveraging their skills, technology, and relationships. 

From a financial perspective, they have a couple of key inflows / outflows of cash based on their operations:

• Revenue-Components
  • Invoicing based on a % of AUM or fixed fee model on a monthly, quarterly, or annual basis.
  • Hourly consulting work. 
  • Commissions and other revenue-items. 
• Expense Components
  • People: Advisors, client service associates, marketing professionals, etc. 
  • Education & Training: Fees for CFP and Series exams, continuing education, etc.
  • Software: eMoney, Money Guide Pro, Morningstar, Orion, Envestnet, etc. 
  • Marketing & Advertising: Going to conferences, buying Google Ads, sponsoring events, etc. 
  • Other Operating Expenses: Meals, traveling, rent, office supplies, client gifts, etc.
• Other Components
  • Debt: Loans that are amortizing, lines of credit that need paid off, etc. 
  • Overrides: Typically a % of revenue that an IAR must pay to the RIA they operate under. 
  • M&A: If the firm has bought another financial advisory practice, there may be promissory notes, earn-outs, or retention payments the practice must still pay out (in additional to the financial and operational integration of those firms). 

Each component is moderately straightforward to plan for and anticipate; combining all of these in a firm with dozens of software, several employees, and multiple loans can become a cumbersome task. Here's a visulation of how the revenue and expenses of your business will feed into your budget:

Here's a quick visualization of how your budget will impact your broader cash flow forecast:

Why Do Financial Advisors Need Financial Advisors?

We think most financial advisors could assemble this type of forecast and integrate it into their operating plan. Our key questions are:

• Do you have time to do it?
• If so, is it worth your time?
• Even if it is worth your time, would it be worth having someone in your corner to watch your blindspots and provide "sanity checks" to make sure you're going the right direction? 

Even if it is worth your time, each component of your cash flow planning becomes increasingly more complex over time - are you prepared for the corresponding increase in time required for planning?

What Type of Financial Support Do Financial Advisors Actually Need?

We're not trying to "boil the ocean" here, so what exactly do Fractional CFOs need to do to add-value to a financial advising firm? 

Here's a full guide to what Fractional CFOs should be doing for you. For financial advisors specifically, Fractional CFOs should be:

• Helping you set monthly and annual goals (typically through a budgeting process).
• Supporting you as you plan to hire additional staff, evaluate new marketing opportunities, integrate new software, and consider avenues of additional growth. 
• Taking your projected revenues, expenses, owner distributions, debt payments, and other information to create your cash flow forecast. 
• Partnering with you as you evaluate M&A opportunities (both for selling your business and buying other businesses). 
• Ensuring that your accounting, bookkeeping, and software integrations are correct, accurate, and optimized. 

If you're a financial advisor and would like a partner to join you in helping you plan for success, feel free to reach out here or drop us an email at [email protected]. We're excited to help your business financially flourish.