A glimpse into a few of the most focused on, and important, areas to think about when evaluating joining an RIA firm.
You’re ready for change and the paths are many: go independent, create your own RIA, or join an established RIA. Let’s take a deeper look into some areas advisors should consider when joining or “tucking in” to an established RIA. This is a topic that is frequently discussed among those who come to us. As an early adopter in the RIA space, we’ve learned a thing or two along the way to share with you.
What to Think About During the Journey
Know thyself! Be reflective and ask yourself about what’s inspiring your move. Are you seeking more attractive pay, more flexibility in your investor offering, a little less “corporate” and a bit more freedom? Are you truly a “builder” or do you prefer a bit more structure and support? Advisors need to be honest and examine what they love most about the profession, what their strengths are, and the best way(s) for them to create efficiency and scale within their practices. This is not an easy process, so take your time, define your needs, and ensure that your move is going to address what’s inspired your change in the first place.
The client experience. With ever-increasing client demands, you’ll need a defined strategy for communicating your plans to the clients you want to keep and an exit plan for the ones you’ve perhaps outgrown, to help stay focused.
What is your “why?” Where do you add the greatest value? What are you hoping to accomplish through the work you do, and the lifestyle you want to live? In a world where our personal and work lives are more connected than ever, we can better establish healthy boundaries and build upon synergies when we define this at the onset. Knowing your “why” tends to drive loyalty among employees and clients, while inspiring a genuine interest for others to be a part of the journey. (Pro tip: UC Berkeley has fascinating programs to help entrepreneurs navigate work/life integration focused on work, well-being, community and family.
The Must Asks
When you find a top RIA firm you’re interested in, here are some questions to bring up during your discovery phase.
How would you describe your firm’s culture? Go deep in this area in order to understand if the opportunities to connect, communicate, and be supported meet your needs and expectations. For example: Can you access the right people, at the right levels, with the “home office” to help address critical issues when you need it most? Are the interests of the firm aligned with yours? Answers to these types of “culture” questions will be extremely telling, so dig in.
How will you make my life easier when navigating regulatory oversight? In a highly regulated profession, sharp compliance and supervision support will help your practice thrive. Our consultative approach to compliance is coupled with a proprietary compliance support platform, which is an area where Private Advisor Group frequently outshines our peers. The experience in the RIA space comes into play here as we’ve navigated the deeply complex regulatory environment on behalf of our advisors, and are fiercely dedicated to simplifying the compliance experience for independent wealth advisors.
What clearing and custody firm(s) are you using? Where you conduct/transact client business is extremely important, so you’ll want to ask about the clearing and custody platforms that your potential RIA partner firm uses. Size and scale of the partner firm typically drive improved custodian pricing and access to a higher level of servicing team. So, while bigger isn’t always better, bigger can drive pricing efficiencies and an improved client service experience that advisors may not be able to access on their own. It might also be worthwhile to consider a firm that has multiple custodial relationships versus a single one. This potentially opens up the opportunity for expanded organic and inorganic growth without the need to disrupt the client experience resulting from a change in custodian.
What is encompassed in my cost of services? In a profession that is uber focused on costs and expenses, advisors should absolutely have a transparent understanding of what resources and services are embedded within the service fee that is paid to their RIA partner firm. After all, the more you can leverage your partner firm, the more efficient and scalable your practice will be.
Some of the more obvious services that should be included with an advisor’s service fee are items such as supervision/compliance, access to certain technologies, and operational support.
However, there can be, and typically are, many more things that RIAs do for their affiliated advisors. So, be sure to inquire if you will have access to things like:
- An in-house investment management platform
- Succession planning and practice protection solutions
- M&A resources to possibly include the ability for the RIA partner firm to serve as an investor in your practice
- Relationship management and/or business consulting staff that can help you with strategic priorities and serve as a conduit to resources both inside and outside of the firm
- Forums to plug into the community of advisors that serve as the backbone of the RIA firm (these come in the form of conferences, ongoing educational sessions focused on products, planning, compliance, etc., and an Advisor Council to represent the “voice of the client” with the firm).
And, while not every capability that an RIA has available for you to tap into will be free, don’t lose sight of the fact that the firm has invested significantly to build and develop those capabilities to better serve their clients (you!). You will gain by cost reductions and efficiencies, time savings, and risk reduction.
Summary: Advisors that are seeking independence, or simply looking for an improved independent experience, have many options. As a top-ranked Barron’s RIA, we’ve had years of experience to help advisors understand key considerations when exploring a relationship with an established RIA firm, so if you’re curious to learn more or to discuss your unique situation, let’s talk.
