How to Start Your Own Investment Company in 13 Steps

Essential points to keep in mind for a successful investment company:

1. Services — Decide on the types of investment services you will offer, such as wealth management, financial planning, mutual funds, private equity, or venture capital. 
2. Financial regulatory licenses — Register with the appropriate regulatory bodies, such as the Securities and Exchange Commission (SEC) in the United States, and get the necessary licenses to operate as an investment advisor or broker-dealer. This may include passing exams such as the Series 7, Series 65, or Series 66.
3. Compliance with regulations — Ensure compliance with all relevant regulations, such as the Investment Advisers Act of 1940 in the United States, and maintain good standing with regulatory authorities.
4. Choosing a location — Select a location with adequate space for offices, meeting rooms, and storage. Ensure it is easily accessible for staff and clients.
5. Investment management software — Invest in high-quality investment management software to manage portfolios, track performance, and ensure compliance. Popular options include Morningstar Direct, eMoney Advisor, and Bloomberg Terminal.
6. Register your business — A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple. Form your business immediately using ZenBusiness LLC formation service or hire one of the best LLC services on the market.
7. Legal business aspects — Register for taxes, open a business bank account, and get an EIN.
8. Hire staff — Hire experienced and licensed investment advisors, financial analysts, administrative support, and marketing professionals.
9. Develop a sound investment strategy and track record — Create a well-defined investment strategy that aligns with your business’s goals and target market. This involves selecting appropriate asset classes, risk management techniques, and portfolio diversification strategies to meet your clients’ needs. Regularly review and adjust your strategy based on market conditions and performance.

You May Also Wonder:

How can I become licensed to start an investment company?

You’ll need securities licenses including Series 6, Series 7, Series 63, Series 65, and Life and Health Insurance. You must take exams for each one in your state at a physical location. You can find only study materials and courses online from places like Kaplan University. Through Kaplan you can also become a Certified Financial Planner (CFP) with more extensive study.

What are the main types of investments?

The main types of investments include stocks, bonds, mutual funds, real estate, commodities, and alternative investments such as hedge funds or private equity. Each investment type has its own characteristics, risks, and potential returns, allowing investors to diversify their portfolios based on their goals and risk tolerance.

How do I handle client accounts and maintain transparency in my investment company?

To handle client accounts and maintain transparency in an investment company, it is crucial to implement robust systems and processes. This includes accurately documenting client transactions, maintaining proper accounting records, and providing regular reports and statements to clients regarding their investments.

How can I determine the target market and potential clients for my investment company?

Start by evaluating the investment services you offer and identifying the specific demographic, financial profile, and investment objectives that align with your expertise. Conduct market research to understand the demand for investment services in your target market, identify potential clients through networking, and consider leveraging digital marketing strategies to reach a broader audience.

Is it hard to run an investment company?

Running an investment company can be challenging due to various factors such as regulatory compliance, market volatility, client expectations, and competition. It requires a strong understanding of financial markets, investment strategies, risk management, and the ability to build and maintain client relationships.

Can I start an investment company on the side?

Running an investment company demands time, expertise, and resources, so balancing it with other commitments can be challenging. Ensure that you have the necessary qualifications, experience, and knowledge to provide investment services. It is crucial to adhere to legal and regulatory requirements and establish clear boundaries between your primary employment or commitments and the investment company. 

Step 1: Decide if the Business Is Right for You

First, let’s clarify the type of business being discussed. “Investment company” is a broad term that could include a company that creates its own mutual funds or other investment vehicles, a private equity firm, a real estate investment company, a venture capital firm, or an angel investor. 

This article refers to an advisory firm that provides financial advice and planning, makes investment transactions for its clients, and offers investment and wealth management advice. 

Pros and cons

Starting an investment company has pros and cons to consider before deciding if it’s right for you. 

Investment industry trends

Industry size and growth

• Industry size and past growth – The US financial planning and advice industry is worth $59.2 billion in 2022 after expanding 48% in the last decade.((https://www.ibisworld.com/industry-statistics/market-size/financial-planning-advice-united-states/))
• Growth forecast – The US financial planning and advice industry is projected to grow by 4% in 2022. 
• Number of businesses – In 2021, 144,774 financial planning and advice businesses were operating in the US. 
• Number of people employed – In 2021, the US financial planning and advice industry employed 231,230 people.((https://www.ibisworld.com/united-states/market-research-reports/financial-planning-advice-industry/)) 

Trends and challenges

Trends in the investment industry include:

• The pandemic caused people to rethink their futures, and more want to plan for retirement so that they can enjoy that time of their life.
• AI is increasingly being used to create investment strategies by quickly processing market data.

Challenges in the investment industry include:

• Financial regulations are always evolving, and financial advisors must keep abreast of these changes to make sure they stay in compliance.
• Growing economic uncertainty may cause people to sell their investments and put their money in savings accounts instead.

Demand hotspots

• Most popular states – The most popular states for financial advisors are New York, Massachusetts, and Virginia.((https://www.zippia.com/finance-advisor-jobs/best-states/))
• Least popular states – The least popular states for financial advisors are South Dakota, Nebraska, and Alaska. 

What kind of people work in investment companies?

• Gender – 27.7% of financial advisors are female, while 72.3% are male.((https://www.zippia.com/finance-advisor-jobs/demographics/))
• Average level of education – The average financial advisor has a bachelor’s degree.
• Average age – The average financial advisor in the US is 44.8 years old.

How much does it cost to start an investment business?

Startup costs for an investment company if you run the business from home are about $3,300. Costs include a computer, software, a website, and licensing fees. If you decide to get an office, your costs could be closer to $10,000.

You’ll need the following securities licenses:

• Series 6
• Series 7
• Series 63
• Series 65
• Life and Health Insurance

You must take exams for each one in your state at a physical location. You can find study materials and courses online from places like Kaplan University. Through Kaplan, you can also become a Certified Financial Planner (CFP) with more extensive study. 

You’ll also need to meet the requirements to be a registered financial advisor in your state.

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$150 - $200	$175
Business licenses and permits	$100 - $300	$200
Insurance	$100-$300	$200
Business cards and brochures	$200 - $300	$250
Website setup	$1,000 - $3,000	$2,000
Computer and software	$1,000 - $2,000	$1,500
Securities licenses	$800 - $1,200	$1,000
Office space	$0 - $2,500	$1,250
Total	$3,350 - $9,800	$6,575

How much can you earn from an investment business?

Investment advisors usually charge an annual fee of 1% to 2% of the total amount of assets they manage. You can also earn commissions of 6% to 8% for selling products like annuities. Fees to create a financial plan for clients are between $1,000 and $2,000. Your profit margin should be about 90% when working from home.

In your first year or two, you could work from home and manage $3 million in assets, do six financial plans per year, and sell 12 $50,000 annuities, bringing in $96,000 in annual revenue. This would mean $86,400 in profit, assuming that 90% margin. As you grow your portfolio, those numbers could triple. At this stage, you’d rent a commercial space and hire staff, reducing your profit margin to around 40%. With annual revenue of $288,000, you’d make a fantastic profit of $115,200.

What barriers to entry are there?

There are a few barriers to entry for an investment company. Your biggest challenges will be:

• Meeting all licensing requirements
• The competition from larger investment companies

Step 2: Hone Your Idea

Now that you know what’s involved in starting an investment company, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.

Why? Identify an opportunity

Research investment companies in your area to examine their products and services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing an investment professional who is certified, or a wealth management firm. 

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your services and investment products

As an investment advisor, you’ll be able to offer a variety of investment products and services including:

• Mutual funds
• Index funds
• Closed end funds
• Individual stocks
• IRAs and Roth IRAs
• Annuities
• Plans to help clients meet their financial goals

How much should you charge for investment services?

Generally, annual fees are 1% to 2% of the total amount of assets managed. Products like annuities pay a commission of 6% to 8%. Financial plans can be between $1,000 and $2,000. Your profit margin when you’re working by yourself should be about 90%. 

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will be potential investors, which is a broad category. You should spread out your marketing to include sites like TikTok, Instagram, Facebook, and LinkedIn. 

Where? Choose your business premises

In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out an office. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm an Investment Company Name

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “investment advisor” or “financial advisor”, boosts SEO
• Name should allow for expansion, for ex: “Skyline Ventures” over “Real Estate Investment Group” or “Energy Investment Fund”
• A location-based name can help establish a strong connection with your local community and help with the SEO but might hinder future expansion

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create an Investment Company Business Plan

Here are the key components of a business plan:

• Executive Summary: Summarize the purpose of your investment company, emphasizing your mission to provide investment services and generate returns for clients.
• Business Overview: Provide a brief overview of your investment company, including the types of investments you specialize in, such as stocks, bonds, real estate, or venture capital.
• Product and Services: Describe the range of investment products and services you offer, such as portfolio management, financial planning, retirement planning, and any unique investment strategies you employ.
• Market Analysis: Analyze the investment market, focusing on target demographics, investment trends, and potential growth opportunities in your chosen niche, such as sustainable investing or tech startups.
• Competitive Analysis: Identify key competitors in the investment industry, assess their strengths and weaknesses, and outline how your investment company will differentiate itself.
• Sales and Marketing: Explain your marketing strategies for attracting investors, which may include building a professional website, hosting investment seminars, or leveraging social media to showcase your investment performance.
• Management Team: Highlight the qualifications and experience of your team, including investment professionals, financial analysts, and any relevant certifications or licenses in the finance industry.
• Operations Plan: Describe how your investment processes work, from client onboarding and risk assessment to portfolio management and reporting, outlining how you will ensure the best outcomes for your clients.
• Financial Plan: Provide financial projections, including startup costs, fee structures, revenue forecasts, and investment performance expectations, illustrating your ability to deliver attractive returns to clients.
• Appendix: Include investment case studies, client testimonials, historical investment performance data, and any regulatory compliance documentation to build trust and credibility with potential investors.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to investment companies. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your investment company will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding an investment business. 

Step 8: Apply for Investment Business Licenses and Permits

Starting a investment business requires obtaining a number of licenses and permits from local, state, and federal governments.

You’ll need the following securities’ licenses:

• Series 6
• Series 7
• Series 63
• Series 65
• Life and Health Insurance

You’ll also need to meet the requirements to be a registered financial advisor in your state.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your investment business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks. 

You may want to use industry-specific software, such as Scoro, AdvisorEngine, or eMoney, to manage your leads, portfolios, financial plans, and billing. 

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.

You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.

Marketing

Here are some powerful marketing strategies for your future business:

• Educational Webinars and Workshops: Host regular webinars and workshops to educate potential investors on market trends, investment strategies, and financial planning, positioning your company as a valuable source of knowledge in the industry.
• Content Marketing with a Niche Focus: Develop a blog or produce content that delves deep into a specific niche within the investment landscape, showcasing your expertise and providing specialized insights that resonate with your target audience.
• Strategic Partnerships with Financial Advisors: Forge partnerships with independent financial advisors who can refer clients to your investment services, leveraging their trust and expanding your reach within their client base.
• Client Testimonials and Success Stories: Highlight client success stories through case studies and testimonials, building credibility and instilling confidence in potential investors about the effectiveness of your investment strategies.
• Interactive Social Media Campaigns: Engage your audience through interactive social media campaigns, quizzes, and polls, creating a dynamic online presence and fostering a sense of community around your brand.
• Targeted Email Marketing Campaigns: Develop targeted email campaigns that provide personalized investment insights, market updates, and exclusive offers, nurturing leads and encouraging them to take the next steps.
• Exclusive Events for High-Value Clients: Host exclusive events or webinars for high-value clients, reinforcing their importance to your business and creating a sense of exclusivity that enhances their loyalty.
• Robust Referral Programs: Implement a structured referral program that rewards existing clients or partners for referring new investors to your company, leveraging word-of-mouth marketing to expand your client base.
• AI-Powered Personalization: Utilize artificial intelligence to analyze client data and provide personalized investment recommendations, demonstrating your commitment to tailor solutions to individual needs.
• Innovative Thought Leadership: Position your company as an industry thought leader by regularly publishing whitepapers, research reports, or insights on emerging trends, showcasing your commitment to staying ahead in the ever-evolving investment landscape.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your investment company meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your investment business could be:

• Professional financial planning to protect your future
• Wealth management to make your money work for you
• Let us help you plan for a better retirement

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running an investment business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in investments for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in investments. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for an investment business include:

• Registered Financial Advisors – make investment sales
• Assistants – assist with paperwork, take calls
• General Manager – scheduling, accounting
• Marketing Lead – SEO strategies, social media

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run an Investment Business – Start Making Money!

Investment advisors provide an invaluable service that boosts wealth and ensures financial security and well-being for countless Americans. The financial planning and advice industry has grown tremendously of late and will continue to grow in the future. If you can meet the licensing requirements, you could start your own investment company and make a great living while helping people with crucial financial decisions.

You’ve learned the entrepreneurial tasks involved, so now it’s time to get licensed and launch your successful investment company!