The Case for Joining an RIA and the Considerations You Need to Make

The Case for Joining an RIA and the Considerations You Need to Make

Published October 19, 2016

The next four blog posts will focus on how and why an advisor should think about moving to an RIA. Or, more specifically, what an advisor should consider when thinking about joining an existing RIA. With all the change about to occur in our industry, it will be more critical than ever for independent advisors to understand their options. This is the first part of a four part series to be published weekly. Please remember to share it if you find anything of value here.

PART 1: Focus on the Obvious

Size Matters

RIAs come in all shapes and sizes. However, what is changing is that RIAs are finding it harder and harder to operate in this ever oppressive regulatory environment. The trend started a few years ago when FINRA and the SEC started competing over which standard of care was the best for investors: suitability vs. fiduciary. Then the DOL decided to expand its scope with retirement accounts, and now we have a perfect storm (volume 1). Yes, you can outsource compliance if you run your own RIA, but this cost will surely be increasing (faster than your revenue growth), as will the time you spend on daily, monthly and annual compliance routines. An RIA that supports advisors should be at least $3-5 billion in size to be able to turn the variable cost of compliance into a fixed cost, in our opinion.

Firm History and Reputation

We are constantly amazed by how small our industry is. It seems like everyone knows everyone in finance, or they are separated by only one degree. Firms that have something to hide or downplay can be easily found out with some simple due diligence. Ask for references, talk to wholesalers, read that ADV and be sure to check social media.


Business models come and go. RIAs in the “roll-up” space do, too. Some experience strong growth for a few years and then sputter along indefinitely. Others merge themselves out of existence. A few thrive. A good baseline of longevity for a roll-up firm is at least 10 years. That said, how has that firm performed over those years? Consistency is absolutely key here, with steady gains in advisor headcount and very low turnover (“Net New”). Erratic gains one year followed by a recruiting drought is a red flag.

Depth of Management Experience

If the RIA you are joining has been operating for 10+ years, has had the same management in place and has performed in a consistent normal pattern, it’s safe to assume that the management of such an operation is indeed competent. They are likely folks of integrity with a reputation that precedes them, which will also likely be highly positive. View the talent at Private Advisor Group.

Firm Vision and Direction

As the industry tilts in favor of fee-based advisory management and open architecture, so goes advisors’ freedom and flexibility to choose their own course. That said, growth solves for a lot of questions in evaluating an RIA. If the firm is growing, especially when competing channels are consolidating, then that holds a great deal of efficacy. Listen to and digest how the firm’s management explains their vision and direction. From their perspective, chances are their success has more to do about doing the right thing for their clients (the advisor) and far less about growth goals. Growth simply becomes the “incidental result” of executing their unique value proposition in the marketplace, one advisor at a time – much like you have grown one client at a time doing what you are good at, building trust and relationships.

Hands-on Industry Knowledge

When you Google the firm, what do you see? Are they writing articles in the press, quoted in interviews or weighing in on industry panels? Are they active on social media and does their website give the feeling that they are highly engaged? More importantly, when you interview them, are they in command of current financial industry issues at an expert level, but able to talk about it in an easy-to-understand way? Can they show how they have positioned their firm for the new DOL regulations and what they expect to come?

Stay tuned for Part 2: Look Under the Hood of the Car, coming next Wednesday