What to Know About Working as a Freelance Financial Planner

A few years ago, financial planner Alex Hopkin sought a part-time, flexible position with an advisory firm.

“As a stay-at-home mom, I didn’t want to commit to a full-time job, but also wanted to continue pursuing my career,” says Hopkin, who holds a certified financial planner designation.

As a 1099 contractor, she could work five to 10 hours per week — in the early mornings, while her children napped, and in the evenings, after the children’s bedtime. This arrangement allowed her to be present for her family and clients.

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It also led Hopkin to a lightbulb moment as she identified a need in the workforce. In 2015, she launched Simply Paraplanner, based in Honolulu.

At first, the company offered a job board with listings for virtual paraplanning opportunities throughout the U.S. Since then, the need for part-time and freelance financial services professionals has only grown.

In addition to using companies like Simply Paraplanner, financial freelancers and business owners find each other on platforms such as the CFP Board’s website or job board Upwork.

New or small registered investment advisory firms often strive to minimize full-time staff.

“Hiring someone on a 1099 basis is a low-risk way to test the waters to see if you enjoy managing another team member without having to commit to a full-time salary,” says Shawn Tydlaska, founder and CEO of Ballast Point Financial Planning in Burlingame, California.

He also cites time-leveraging advantages for a “solopreneur” like himself.

“You can outsource the repeatable tasks to someone else and pay them a fraction of what you charge your clients,” he says. “It is a low-risk way to see what you can outsource to a virtual team member.”

[SEE: 14 Things to Know Before Becoming a Financial Advisor.]

Freelancing as a Career Changer

While Hopkin started her company to address her own need as a stay-at-home parent, she realized that financial professionals from all walks of life were interested in part-time opportunities.

“We have a large number of career changers working as 1099 contractors on a part-time basis, allowing them to find their footing in the financial services industry before making the leap from their current career field,” she says.

Her company’s job seekers also include experienced financial planners interested in part-time and freelance opportunities while they launch their own advisory firms.

“The one thing they all have in common is that they value flexibility,” Hopkin says.

That was true for Jeffrey Wenger, a certified financial planner in North Canton, Ohio. Before recently joining a firm as an employee, he was a freelance CFP.

“As a career changer, setting up a side hustle as a 1099 planner provided a way to dip my toe in the water before diving in headfirst,” he says. “With a family of five, it allowed me time to build enough of a clientele to replace previous income before transitioning fully to financial planning.”

For Hopkin, it’s not a surprise that part-time and freelance financial planning is catching on.

“The gig economy is exploding all around us, so it was just a matter of time before it made its way into the financial services industry,” Hopkin says.

Accounting firms are also using this hiring model. Paul Miller, founder of Miller & Company, a certified public accounting firm in New York, has hired part-time and freelance accountants. He points out that it’s a good solution in certain situations.

“1099s are easier to hire, especially for one-off gigs or an assignment,” Miller says. “For a more permanent role, you must use a salaried employee. For my firm, if the freelancer has his own business and signs a noncompete agreement, I am OK using a freelancer.”

[READ: What Financial Advisors Should Know About SEC Rules Allowing Testimonials.]

The Comfort of a Steady Paycheck

The choice between a freelance or staff position also depends on what the financial professional is looking for, Miller says.

“A lot of people like the comfort of getting a secure check with benefits, knowing they have a sound place to work with good morale and colleagues,” he says.

But not everyone craves that certainty.

“The freedom to do what you want, when you want to do it, is hard to overstate,” says Benjamin Daniel, a paraplanner in Columbus, Ohio. He adds that a 1099 position tends to offer a higher degree of autonomy than a full-time job.

That was also an attraction for Wenger. When serving as a 1099 contractor, “you can work when and how you want as long as projects are completed by the deadline and with high quality,” he says.

“The flip side of that is you may not have as many projects on your plate as you would like,” he adds. “Depending on the financial planner’s needs, projects could be plentiful one month and sparse a few months later.”

Juggling Multiple Projects

Wenger points out that freelance contractors may find themselves agreeing to too many projects, due to uncertainty about the timing.

“There are times I’ve taken on too much and then had to work around-the-clock to meet deadlines,” he says.

As a business owner, Tydlaska also understands potential pitfalls of a freelancer working for multiple advisors simultaneously.

“If you need something done quickly, they may have to prioritize work ahead of your request,” he says.

Business Expense Pros and Cons

Another possible downside is that 1099 workers typically command a higher hourly rate than W-2 employees.

“If you bring someone on as a W-2 team member, you can usually pay them a lower rate with the expectation that they will get great on-the-job training,” Tydlaska says. “As they become more valuable to your firm, you can increase their compensation accordingly.”

On the flip side, advisory firms that want to save money over the long term frequently turn to freelance planners and other professionals.

“Hiring 1099 contractors is extremely cost-effective for financial planning firms,” Hopkin says. “Contracting with a paraplanner allows the financial planning firm to pay only for the hours actually needed, which could be as few as five hours per week.”

Tydlaska appreciates the option to bring on a 1099 worker full time if things work out and both parties agree. Part-time or freelance work, he says, “is a great way to try someone out. It is also a great way for the employee to test you out to see if they like your firm.”

Daniel says certain situations work better than others for freelance financial planners.

There are some advisors who want full control, he says. In those cases, a 1099 worker may not be the best fit.

Daniel, who is currently pursuing both the CFP and chartered financial analyst credentials, says the flexibility of 1099 is tough to beat. “If there was a firm where everything clicked culture- and philosophy-wise, I might consider joining as W-2,” he says. “But I love where I am right now.”

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What to Know About Working as a Freelance Financial Planner originally appeared on usnews.com

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