Transition To RIA Podcast

Participants in our industry often talk about moving to another broker/dealer. But when they say “broker/dealer” they are also often referring to an RIA. Or conversely, you’ll hear voices discussing joining or starting an RIA. Yet that too, could also potentially involve a broker/dealer as well. Confused yet? In this episode (#127) of the Transition To RIA question and answer series I explain the...

The RIA model typically provides far more flexibility with how you can charge your clients for your services. AUM, flat, subscription, hourly are some of the options. Even the most used “AUM fee” comes with additional flexibility. The frequency in which you charge the fee. What pricing tiers you use. Whether you charge in advance or arrears. Whether the fee is based on a single date in time (ex: q...

How difficult is a transition to the RIA model? It’s difficult enough that some advisors and teams can never bring themselves to cross the bridge. Whereas other advisors and teams learn how to navigate the process, and successfully do so. There are nonetheless still “difficult” parts to a transition: Overcoming the uncertainty of a model you’re not yet familiar with. (This is solved through educat...

You don’t have to be 100% fee-only to transition your practice to the RIA model. There are potential ways to “solve” for your remaining legacy commission assets. One potential way is to utilize an “RIA-Friendly Broker-Dealer.” But what exactly is an RIA-Friendly Broker-Dealer? How does it work? Is it available for you to use? How much does it cost? In this episode (#124) of the Transition To RIA q...

So, you want to start an RIA? You want the better economics that come with it? The increased flexibility you’ll have with your practice? But are you aware of the additional responsibilities that come with it as well? As advantageous as the RIA model is, there is no free lunch. It’s important to understand what the additional responsibilities are, to determine if they are something you are able/wil...

Advocates of the RIA model will often passionately proclaim “THE PAYOUT IN THE RIA MODEL IS 100%!!!” With such generous economics, the RIA path must surely be best, right? For many advisors, it is the best path to take. But boastful headline numbers alone are not what determines that. For starters, it’s not a “payout” at all. As your own RIA, you’re simply receiving the fee revenue you generate fr...

You studied for months to take the Series 7. You anxiously sat through the multi-hour test. Perhaps with your livelihood on the line. You finished the test and nervously awaited the result. You passed! Years, if not decades have now since past. You’re considering transitioning your practice to the RIA model, but don’t want to “lose” the 7 you worked so hard for all those years ago. But do you have...

“Platform fees” in our industry are the “resort fees” of the hotel industry. Just as a hotel room rate can be distorted by the addition of mandatory resort fees……payouts (particularly at independent broker/dealer models) are frequently distorted by additional platforms fees. The existence of a fee by itself is not necessarily a bad thing, provided the value and services received in return are comm...

If you are an advisor at a firm that utilizes deferred compensation as part of the comp plan, ask yourself why your firm is doing that. If the value and resources they provide you are as superior as they claim to be, why would they need arbitrary barriers to keep you from leaving? Wouldn’t you simply want to stay? Regardless of the spin, deferred compensation is a retention tool to benefit the fir...

I am often asked, “How large a practice do I need, to have my own RIA?” Equally important is the other end of the spectrum as well, “Is my practice too large to potentially join an existing RIA?” There are three main pathways to transition your practice to the RIA model: Start your own RIA. Join an existing RIA. Utilize a solution that is essentially in the middle of these two. There are pros/cons...

A common misconception about the RIA model is that you must be 100% fee-only with your practice. While many RIAs are indeed 100% fee-only, and others aspire to eventually be, there is no requirement to do so. Many RIAs operate under a hybrid arrangement, allowing them to continue servicing legacy and/or new brokerage relationships. Other RIAs work to slowly transition their current fee/commission...

You’ve spent months researching the RIA model. Months performing due diligence. Months planning for the actual transition. The day to transition arrives. You resign from your firm. You pick up the phone and call your first client to tell them about your new plans. But what do you say? How should you say it? What might your clients say? In this episode of the Transition To RIA question and answer s...

What is the payout in the RIA model? Simple question, not so simple answer. To perform an accurate comparison, you must: Properly calculate your current payout. Understand how payouts are expressed in the RIA model (spoiler: there is far less uniformity in the RIA space.) Consider what value is provided to you for the payout, and what you’re responsible for sourcing yourself. Consider how the resu...

Transitioning your practice to the RIA model involves a lot of work, and at times, a fair amount of stress. But ask anyone that has made the transition, and they’ll tell you the destination is worth the journey. You should prepare yourself, though, for what the journey will entail. In this episode of the Transition To RIA question & answer series I explain what the most stressful parts of a tr...

If you start your own RIA, will you be able to participate in your custodian’s client referral program? First starters, do you know what these programs are? Or which custodians have them? Or who is eligible, and likely to be able to participate in them? In this episode of the Transition To RIA question & answer series I address these questions, and more! Come take a listen! P.S. Prefer video?...

Whether in our personal or professional lives, most everything in life revolves around motivations. What motivates you to run your advisory practice as you do? What motivates you to pursue certain hobbies and passions? What motivates your kids to make the decisions they do? When financial advisors and teams reach out to me to explore the RIA model, I typically start by asking what has motivated th...

How long does a transition to the RIA model take? The time needed is impacted by variables such as the circumstances of the advisor/team, which pathway into the model is chosen, etc. It is complicated further due to certain steps in the process being out of the control of the advisor/team as to how fast they can be completed. In this episode of the Transition To RIA question & answer series I...

There are several reasons advisors choose to join an existing RIA versus starting their own. But that’s not the only decision to be made. There are a wide variety of “flavors” of RIAs to then choose from. Differing economics, flexibility, approach to branding, taxation, succession solutions, are just some of the many variables that can differentiate them. But of all the options, which is the most...

When a new client comes to you for help managing their financial life, there are many steps involved. Some are more exciting for the client than others. Opening accounts. Pulling old statements. Filling out financial profiles. Those are some of the important, though less glamorous steps. Talking through life goals. Travel plans in retirement. Ways to help family and important causes. Those are the...

"Fee-based" revenue is often "reoccurring" revenue..... .....but "reoccurring" revenue is not necessarily "fee-based" revenue. Confused yet? Often incorrectly used interchangeably, these two phrases can mean entirely different things. Depending on the profile of your practice, it's a difference that could determine whether your practice is a fit for the RIA model….or not! In this episode of the Tr...

You’ve likely heard it before, the economics are better in the RIA model. But why is that? To name a few: Higher top line revenue Ability to control expenses Operating leverage Tax advantages Flexibility to grow your practice faster Higher enterprise value It’s important to understand how these variables compare to your current affiliation model. In this episode of the Transition To RIA question &...

Do you own or rent your home? What advice do you give your clients about owning vs renting? While there are exceptions, owning typically has far better long-term advantages over renting. Yet, many advisors don’t practice what they preach when it comes to the real estate they use for an office. An advisor that spends their entire career in a W2 model (ex: wirehouse), experiences the same real estat...

Will the marketplace assign a higher valuation to your practice in the RIA model? While there are multiple variables that go into a valuation calculation, there are some basic economic truths involved. Consider an analogy. You own a house and desire to sell it. Naturally, you’d like the highest price you can get for it. Imagine if you lived in an HOA community and the HOA got to dictate how your s...

You want to transition your practice to the RIA model. You are currently affiliated with a multi-channel firm. One of those options is their “RIA channel.” Should you make the “internal” transition of your practice to it? This question is more complicated than it seems: Are you sure you know what your firm is referring to when they say “RIA channel?” Firms use the same vernacular to refer to diffe...

“I don’t want to join a firm that’s owned by private-equity?” Why is that? “They just want to build it and sell.” But isn’t your current firm (whatever that may be) for sale and susceptible to change? “No, not with the kind of firm I’m at.” Are you sure about that??? Advisors often overweight the risks involved with joining a firm that has private-equity backing, while underweighting in comparison...