The Advisors Guide to Going Independent: Questions You Need Answers To (Part 2)

The Advisors Guide to Going Independent: Questions You Need Answers To (Part 2)

Handling Compliance and Regulation as an Independent Financial Advisor

Published May 10, 2017

There are many shades of what and how advisors think in terms of going independent. Until advisors actually take on the task of proper due diligence, they will undoubtedly have some misconceptions about it. For some it’s clearly an economic choice, but for the vast majority, economics are coupled with any combination of the following attributes:

  1. Taking full ownership of one’s client base
  2. Being better able to serve clients with a fully open architecture in terms of product access and custodians
  3. Building the advisor’s unique brand
  4. Having access to every third-party technology available on the market
  5. Attaining a higher enterprise value with the “independent” premium
  6. Having more flexibility for succession options
  7. Recruiting and M&A
  8. Designing the service model
  9. Complete expense control


No matter what reason they choose, essentially all advisors who go independent will be running their own business. With that comes much freedom but also a great deal of responsibility. In the recent past, it seems like every advisor I talked to who started an RIA was ultimately very happy with the decision. However, they did acknowledge it was more work than they anticipated. That said, looking back, they would make the decision to go independent regardless. But times are changing and the cost curve and complexity of running an RIA has been growing at an alarming rate, especially when considering the regulatory unknowns and compliance landscape. I call it “regulatory volatility,” and that’s best represented by the U.S. Department of Labor’s new standards where hundreds of millions of dollars have been spent in our industry to prepare for the new rules, only to see them postponed. Ultimately, the DOL may be squashed, but even so, what’s next to come? The SEC was caught sleeping and does not want to lose any of its turf to competing agencies. I therefore expect much more to come as they lock down what they have and expand their powers, far deeper into the RIA world.

How to Handle Compliance and Going Independent

If you’re an advisor looking to start an RIA, you should take great care in what you are signing up for. Make sure you can stomach the regulatory volatility going forward, because it will disrupt everything you know about the business. This is why I shifted my role in the industry to working directly for one of the largest RIAs in the country with rock solid expertise in compliance management and regulatory developments. We’re even seeing RIAs approach us to see how they can work with us to eliminate their compliance burdens.

If you’re experiencing uncertainty about how to handle compliance, you’re not alone. This issue is one of greatest concern for advisors contemplating a move. But there is a better option for you and for your clients in the marketplace, a road that is traveled more and more by your peers. The risk of the unknown has been practically eliminated, and the risk of doing nothing is the greatest risk of all. Why wouldn’t you want to outsource compliance to a firm that specializes in that discipline? Don’t try to reinvent the wheel. Although compliance and regulation are issues too important to ignore, your valuable time would be better spent growing your practice and serving clients.

Staying ahead of the curve is the key to success. It’s the same thing as saying, “I like 95% of everything about the RIA model, but that last 5% (administering compliance) is a killer.” PAG and our peers in the industry take that 5% off advisors’ plates so they can enjoy the business. There’s a reason why people outsource their taxes and hire CPAs, and it’s because doing taxes sucks!

Do you have more questions about compliance and how PAG can help? Send us a note and we’ll be glad to help.