If you’re considering making the move to becoming a registered investment advisor, this article is for you. An increasing number of individuals are making the switch from their roles at big corporations to start their own firms. It comes with the opportunity to spend less time being encumbered to optimize your personal services and more time connecting with clients, along with countless other benefits of being your own boss.
Registered Investment Advisors operate under a slightly different set of rules than traditional financial advisors. They work with high-net worth individuals to provide recommendations for how to strategically and tactically manage their wealth. RIAs are registered with the Securities Exchange Commission or the state they work in and required to only make suggestions with their client’s best interests in mind.
Should the idea of breaking away from a corporate investment advisory excite you, these six benefits might be the push to make it happen. It’s important to keep in mind that starting your own RIA firm is not a one-size-fits-all process, but the benefits you’ll reap as a RIA business owner are consistent regardless of what your individual path looks like. Here are some of the reasons why you should consider starting your own RIA firm.
As owner of your RIA firm, you choose everything from who works at your company to what kind of clients you accept. This also means that you’re responsible for marketing or PR that is necessary to grow your business. While this might sound daunting, it invites an opportunity to showcase yourself as the best option to potential clients. This helps ensure that only clients who are good fits for your business model reach out for a potential partnership.
Whether you want 100+ clients or fewer clients who you have close ties with, you can create your business model to reflect your goals. Hours, types of clients, and industry niches are all in your control. As you’re kicking off your RIA firm, consider connecting with those who have already successfully started their own business or consider reaching out to us here at tru Independence to help you create a plan that works for you.
Fiduciary Responsibilities Required
One of the key differences between RIA firms and standard brokerages is the fiduciary responsibility required by each business model. As an advisor at an RIA firm, you are required to have fiduciary responsibilities to your client, which means that you must offer advice that is truly in their best interest. This is not required of typical brokerages. And even with the recent passage of the controversial Regulation Best Interest by the SEC, in an attempt to level the playing field between brokerage houses and RIAs, they are NOT the same.
RIAs must disclose to their client any potential risk or conflict of interest involved with particular investments. Advisors at RIA firms are either registered with the Securities Exchange Commission or their state, depending on their size of the firm. They are considered to be an acting fiduciary figure which mandates that they are always held to a higher standard and expected to work for their clients.
Choose Your Technology Staff
Choosing your own technology for your RIA firm means you select the products that best suit your business. As the owner of your RIA firm, you know your business needs better than anyone and can work with products that support your interests. Technology can also be a challenging topic if you aren’t already savvy, make sure that you do diligent research.
When choosing your tech, start with a CRM. Choose one that has a variety of integrations. Make sure it connects with your email and is a reliable place to store meeting notes, new client contacts, and track tasks. You will also want to have your own website, domain name, and logo. Your business website can act as a complete business introduction, featuring your team, your culture, your mission, and your values. It also is one of the first places potential clients go when considering working with you. Make sure you have a CMS that you’re comfortable making updates on. Tools like MailChimp support your marketing pursuits through periodically emailing subscribers with a newsletter or promotional materials.
Finally, you’ll want a reliable billing system that is easy to use and both you and your clients trust. Choosing a billing system that integrates with your primary custodian and performance reporting system will make your process a lot easier.
Freedom and Flexibility
As the owner of your own RIA firm, you make the decisions. You do not need to seek approval from superiors before making these choices. You get to serve clients the way you want to serve clients. Likewise, you only need to take on the kinds of clients you want to work with, the ones you connect and can have a strong relationship with. You’re registered with the SEC as an independent advisor who is free to make your own business decisions and work in your client’s best interests.
As previously mentioned, owning your own RIA firm means you decide what kind of technology you use. You also choose a primary RIA custodian. There are custodians that specialize in working with the RIA community such as Schwab, Fidelity, Pershing, Raymond James and soon, Goldman Sachs, to mention a few. Each offers some unique and some similar features to support your business endeavors. Vet these options and choose which is right for your business.
Personal and Professional Growth
There are few things more frustrating than reaching a place in your career where personal and professional growth is stymied by the company where you work. Starting your own RIA firm means you quickly move from employee to business owner. You will be in a position to identify your strengths and use them to the greatest benefit of your business. On average, those who start their own RIA firms and become their own bosses make a 40-50% higher income than they did as an employee.
As a business owner, you know the value of your firm. You know the message that you want your brand to send and the kind of clients you want to work with. Your marketing tells potential clients what you offer in the marketplace and why you are the best option. Because you determine all this, business acquisition becomes much easier. You’ll have a clear understanding of who you are, who your business is, and the clients you want to work with. And when it comes time to retire, you own a major asset – your business. Succession plans, exit strategies, and monetizing a lifetime of hard work are much more valuable when you own your business.
Owning your own IRA firm comes with several benefits that can’t be matched by working at a large corporation. Whether you’ve just started exploring beginning your own IRA firm or have already begun taking steps to make it happen, these have been several reasons why this could be the right path for you. If you’re overwhelmed by the thought of handling all of this on your own, reach out to us at tru Independence to see how we can help manage your transition.