Financial advisers who launch their own firm often see themselves as entrepreneurs. But some of them dial it up a notch. An enterprising few start a technology company on the side. And a lack of knowledge about software development doesn’t stop them.
Given their background and training, advisers are well equipped to embrace entrepreneurship. They understand how to evaluate risk, allocate capital, and manage their time. If they run their own practice, they also have experience delegating, marketing, and enlisting outsiders for help — skills that tech entrepreneurs must master.
“To become a successful entrepreneur, you need passion and to surround yourself with others who share your passion,” said Michael McDaniel, an adviser who co-founded Riskalyze, a fintech firm, in 2011.
McDaniel spent 12 years as an adviser — including the last five running his own wealth management firm — before helping launch Riskalyze. “At the time, I was running a thriving practice and I had knowledge of intellectual property driving some of my success,” he recalled. “It was gnawing at me that I was using this technology and other advisers weren’t.”
Eager to make his software — which engages clients in the risk-reward discussion — available to a wider audience, McDaniel and two co-founders set up shop with their own seed capital along with investments from family and friends. Based in Auburn, Calif., McDaniel continued to operate his wealth management firm as well.
In 2013, McDaniel decided to trim his practice and retain a smaller number of clients. He also became chief investment officer of Riskalyze. “I didn’t think anything would ever take away from my passion for my practice,” he said. “But I also had a passion to do something that would outlive me and my practice.”
Similarly, Sheryl Rowling morphed into an entrepreneur when she created tax-rebalancing software that enhanced her financial-planning practice. She figured that other advisers would like it too.
“I thought I’d be able to do it in a few months,” said Rowling, a CPA who still runs her own advisory firm in San Diego, Calif. “But it took one-and-a-half years. I’m not a software expert, and I had no idea the extent of effort involved in running a second company. I essentially had two full-time jobs.”
Through word-of-mouth referrals, Rowling connected with a team of outside experts — from programmers to marketing and business strategy consultants — to achieve her entrepreneurial vision. But the venture came at a cost. “I didn’t have time to sleep,” she recalled. “I couldn’t focus on my health. It varied from being fun and exciting to pressuresome.”
Rowling’s persistence paid off. In 2015, eight years after launching Total Rebalance Expert, she sold it to investment research firm Morningstar. She advises would-be entrepreneurs to gird for a wild ride. Before starting a side business, she suggests that advisers ask themselves, “Can I afford to take this chance at this stage of my life?”
“It will be much more time-consuming and expensive than you can imagine,” she warned. “And for me, it was risky. I had to keep putting money into it as I dug in. I bootstrapped, but I also got loans from friends and family. It would’ve been a hit to my finances if it didn’t work.”
Rowling also cautions advisers to prepare for the long haul when launching a tech business. Even if you develop a winning product, you’ll need to update it continually. For example, after rolling out the first version of her software, Rowling concluded it was exactly what she wanted: affordable, easy to use, and applicable to any tax strategy. But as cloud computing emerged, she needed to rewrite the whole program to make it web-based.
“Technology changes all the time,” Rowling said. ‘To be successful, you need to be on the cutting edge.”
Source : MTV
