Are Financial Advisers Better Off Working for Themselves?

As financial advisers generate their own business, self-employment would seem the logical goal to strive for. Most people assume that the self-employed are richer and have more freedom than employees – a compelling combination. However, being responsible for everything and the loss of a pay cheque can make some think again.

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Self-Employment Options

There are three choices when working for yourself: be an independent business owner; be part of a network; or be a self-employed staff member in an advisory firm. It’s debatable which pays best.

A self-employed adviser with his own practice shall generally earn the same as a self-employed adviser based within a firm – about 60% of the business that they write. With employed advisers getting around 40%, it would seem logical that a self-employed adviser earns more. However, surveys have shown that some self-employed advisers earn less than employed advisers.

If you become self-employed, you will have to balance the amount of time spent on administration and compliance against time advising. Today software for IFAs such as that from can streamline administration.

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Tax Benefits

The tax benefits of being self-employed can make all the difference. You declare your gross income but are taxed only on a net amount. The ability to write off business expenses and claim for rent, capital outlays, rates and staff salaries is greatly to your advantage.

Travel expenses, professional journals and postage are also claimable should you be self-employed. However, employed staff can claim for relief on business expenses.

Being in Charge

While the financial benefits of self-employment may be hard to quantify, the autonomy and control of self-employment are tangible. Being your own boss has much to recommend it.

However, this might be difficult to achieve if you are self-employed in a firm where you are expected to meet certain targets under supervision and sign a company contract. The same rulings may apply to advisers outsourcing under a contract.

This article cites a revealing conversation with a financial adviser.

Employee Benefits

Staying on the payroll might appear the safest option. However, the target-oriented culture can put you at risk if you don’t meet your set goals.

Self-employed advisers bemoan the lack of holiday pay. However, the tax-deductible benefits of being self-employed can outweigh getting paid for your holidays.

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