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Across all age groups, 68 percent of Americans surveyed in a Harris poll for Northwestern Mutual said they did not have a trusted advisor who offered comprehensive lifetime planning. In addition, 45 percent of those surveyed said they do not know how to get the help they need as they move through life stages and their financial needs change. These statistics position the majority of Americans as potential new clients for the financial services industry.
Changing demographics are likely to affect the financial services industry based on factors affecting the largest U.S. demographic groups that include:
You can find a financial service franchise that may work for you by searching Franchise Opportunities' Financial Services Franchises category.
Industry analysts predict that the financial services industry is positioned for change. Factors including the increased use of mobile financial management and online tools ultimately will produce adaptations to appeal to the preferences of millennials as they achieve financial independence and seek out these services. However, the use of online and electronic tools doesn't necessarily substitute for the advice and expertise of trained and licensed professionals. While 86 percent of tax returns were filed via tax software in 2016, 60 percent of those e-returns were submitted by accountants and other tax preparers, according to a report by USA Today.
Businesses in the financial services industry also are likely to find growth opportunities by catering to the demands of other new and growing client markets. Some of the most lucrative growth opportunities may emerge from clients seeking advisors who have specialized knowledge or services related to the fact that:
Commercial opportunities also are likely to increase for financial services industry businesses. In 2015, alternative small business lenders generated $5 billion in loans and represented a 4.3 percent share of the small business lending market, according to a report by Business Insider. By 2020, these lenders are expected to hold $52 billion in loans and increase their market share of business to 20.7. Research by Intuit forecast a growth in the number of U.S. small businesses, with increases from 30 million in 2016 to over 42 million in 2026, indicating a strong market for lending, as well as other financial services geared to small business needs.
Common Business Models for Financial Services Franchises
Financial services industry businesses include a wide range of models. Some specialize in a specific type of service; others offer clients a one-stop shop for all their needs. In general, the industry is positioned to grow steadily. As unemployment declines, more individuals are likely to pursue investments, retirement planning and real estate purchases, all of which involve the services of financial professionals.
The financial services industry is expected to sustain steady increases for the foreseeable future. In 2016, financial advisory firms reported a median of 13 percent growth in assets and 6.7 percent increase in revenue, according to a report by TD Ameritrade Institutional. Industry analysts at IBISWorld forecast continued growth through 2022, as markets continue to improve.
Other financial services also are expected to fare well. The professional accounting market had a growth rate of 5.9 percent between 2012 to 2016, and has increases of 6.2 percent forecast from 2016 to 2020, according to The Business Research Company. In an industry survey by LIMRA, 34 percent of Americans said they were "at least somewhat likely" to purchase life insurance in the coming year, indicating continued interest in this significant product sector.
Some of the most common business models in the financial services industry include:
It's possible to purchase a financial services industry business for a cash requirement as low as $20,000, though options exist at all investment levels. Since many financial service businesses can be operated as home-based businesses, you also can save on the costs of renting and maintaining a physical location. Similar to all franchises, your initial costs are likely to include a franchise entry fee and ongoing fees for royalties and advertising. Costs for specialized training, proprietary software, mobile apps or other supplemental support vary by franchise.
As the owner of a financial service business, other financial considerations include:
However, you may realize cost savings with a financial service business due to:
In addition, you may find it easier to secure financing to start your financial services business since your money is supported by a proven business plan. This association may mean that you present less risk to wary lenders. In some cases, franchisors may assist in financing your loan or helping to negotiate a loan.
Purchasing a financial services industry business is an opportunity to reduce your investment risk by using a proven business plan. Your association with a successful franchise brand presents your new business with a solid reputation from the start. As a franchisee, you're offering clients a consistent service with the backing of the established franchise organization. Even if potential clients aren't familiar with your franchise, a franchise typically conveys credibility versus an unknown independent contractor.
Franchise ownership also can be a lucrative option for expansion if you have an existing financial services business. Franchising your current business can help you achieve growth quickly with less time and effort than may be required if you pursue expansion on your own. Combining your success with a national or regional industry leader can help your business grow more quickly than trying to expand while also maintaining the status quo with your current clients.
As part of a franchise partnership, your franchisor can provide the support you need to remain competitive and profitable. Your corporate franchise team has the experience and expertise to help you avoid mistakes and recognize opportunities while using the franchise plan. They often are valuable resources for advice regarding areas such as marketing, hiring and franchise management. Your network of fellow franchisees also can offer support and suggest solutions to some of the challenges you encounter at startup and through the life of your franchise.
The financial services industry includes a wide range of business models. While you'll have the backing of your franchisor's reputation, it's up to you as the local business owner to make the best of that advantage. A franchisor's reputation will help you establish your business as reputable, but you'll have to maintain that status with consistent professionalism. In an industry where you're privy to the intimate financial details of individuals and businesses, it's important that your clients are confident in the ability of you and your employees to maintain confidentiality and act in their best interests in all actions.
With so much at stake in services such as tax preparation, asset management or insurance, it's critical that you hire employees who you are confident can maintain the standards set by both you and your franchise. There can't be too much emphasis on getting the details right the first time. The need to stay current and on trend with new financial products and regulations will allow you to give your clients the best possible service. However, you'll have to balance that with servicing your current client base.
Of course, your reputation as an individual franchise ultimately will make or break your success. With a trustworthy reputation, you'll have satisfied clients eager to share their experiences. It's important to encourage referrals to maintain a steady flow of new clients to grow your business. According to a Nielsen survey, 92 percent of consumers trust referrals from people they know and people are four times more likely to make a purchase when referred by a friend.
However, when mistakes occur, even if it's at another location in your franchise, you'll have work to right possible repercussions of guilt by association. Being prepared with a program of proactive intervention, and seeking the support of your franchise experts, can help you salvage your own solid reputation, which is critical in the field of financial services. Keeping tabs on social media can help you identify and rectify potentially damaging situations before they get out of control.
Characteristics for Success: Who Should Consider a Financial Service Franchise?
Franchise ownership in the financial services industry offers a wide range of opportunities, from full-service consulting to specialized tax preparation. Successful franchise owners are prepared for the unique demands and challenges of this industry. As the owner of a financial services franchise, you'll be more likely to reach your professional and personal goals if you possess the following strengths and skills:
Industry Snapshot*:Minimum Cash Required: $ 10,000
*Based on currently active listings at FranchiseOpportunities.com
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