By: Charlie Latimer, Director of National Recruiting
Published November 16, 2016
My friendly advice to those who care: Remember that Latin term we all learned in high school, caveat emptor? If you’re looking to launch an RIA, be aware of the risk that such an endeavor may fail to meet your expectations.
Over the last eight years, I have helped dozens of financial advisors go independent by launching their own RIA firms. As much as I believe that the RIA model is the best conduit in the industry for fiduciary advice delivery, it has become more difficult and technical to run an RIA firm than ever before. And with a reinvigorated SEC competing with the DOL (volume 1.0), the daily operation of an RIA is getting profoundly more complicated.
Aside from daily compliance distractions and the headaches of technology management, the cost of running an RIA is noticeably increasing. This fact is obvious from simply reading the onslaught of daily headlines. At Private Advisor Group – a $10.6 billion RIA with 600+ advisors working across 34 states – we see things unfolding firsthand at all levels. Through our deep automations and process-driven solutions, we have the scale to effectively deal with DOL 1.0 and what is yet to come.
Do Your Due Diligence Before Launching an RIA
All I want to say is that if you are seriously considering launching an RIA and braving the new world by yourself, caveat emptor. Buyer beware. Please do your research and attune yourself to people telling you what you want to hear, or minimizing the difficulties or realities of running an RIA (something that sales people with sales goals tend to conveniently overlook). Will they tell you that E&O is going to double in cost at some point? Will they be there when the SEC knocks on your door and demands a list of 100+ information items by the end of the week?
We are talking to more and more RIAs who want to give up their ADV and roll up under ours. While they still want to “dba” themselves, they prefer to work with a partner who has compliance expertise and cost control. My prediction is that we will see a modest but persistent consolidation of RIAs, especially those at the sub $150mm AUM level. And while I have focused on compliance for this piece, please know that we offer far more than compliance support at Private Advisor Group. Visit our website at privateadvisor.wpengine.com or give me a call for more details. Then you can enjoy life with less anxiety knowing you’re in good hands with a partner you can trust. We have plenty of references and examples of financial advisors who look just like you!
SEC Exams Could Cost RIAs Thousands – or Even Millions – InvestmentNews.com
Want to Start Up an RIA? Expect These Hurdles – Investopedia.com