This is the latest installment of a regular column to answer questions from advisors who are considering transitioning to an RIA model. To see Brad’s previous articles, click here. To submit your question, please email Brad here.
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A broker who competes against RIAs is about as likely to win as someone who plays one-on-one basketball with one hand tied behind their back.
I challenge you to a game of one-on-one basketball.
We each use the same equipment.
The rules of basketball apply to both of us.
The points per basket will be the same.
One caveat: You must play with one arm tied behind your back.
Sound fair?
If such a scenario seems preposterous, consider if you’re currently a one-armed player as an advisor.
Attracting and retaining clients is hard. Competition is everywhere. Margin compression abounds. Value propositions are ever-expanding.
Would it make sense to voluntarily handicap your chances as you compete for clients? Would you play with one arm behind your back? Or would you want a level playing field?
Consider two advisors:
One can make a podcast to reach prospective clients; the other is not allowed to have a podcast.
One can make videos demonstrating their expertise; the other is not allowed to make videos.
One can send an update email to clients after a volatile day in the market; the other doesn’t bother as, by the time the email is approved, the message is no longer timely.
One can respond to inquiries from the media to help build their brand; the other must defer to their firm’s PR department.
One can use software tools like Calendly to make it easy for current/prospective clients to set appointments; the other is not allowed.
One can choose from the universe of technology tools to make their practice more efficient; the other can only use what their firm approves.
One can start a blog to demonstrate their thought leadership and build an audience; the other can only use canned commentary created by their firm.
One can post on any social media platform; the other can only post on approved and monitored accounts.
One can offer multiple fee structures for clients to choose from; the other can only offer what their firm allows.
One can choose from any accessible investment management solution; the other is confined to a limited set of options chosen by their firm.
One can offer additional auxiliary services such as tax planning, insurance, etc.; the other is limited to almost none of these.
One can service clients of any size; the other receives reduced or zero compensation on some relationships.
One can create a custom website demonstrating their subject matter expertise; the other must use the same undifferentiated website as thousands of their firm peers.
How many of these are you allowed to do? And if allowed, do you have to ask for permission first?
The RIA model makes it possible to do them all.
If you’re not in the RIA model, you’re competing for clients against advisors who are.
Maybe you have no interest in producing a podcast or building a blog. But when your competition can do everything on the list, and you are limited to only a few, if any, you are at a disadvantage.
You’re playing a basketball game with one hand tied behind your back.
The RIA model is not for everyone. But when it’s a fit, its advantages are vast.
Brad Wales is the founder of Transition To RIA, a consulting firm uniquely focused on helping established financial advisors understand everything there is to know about WHY and HOW to transition their practice to the RIA model. Brad utilizes his nearly 20 years of industry experience, including direct RIA related roles in compliance, finance and business development, to provide independent advice regarding how advisors can benefit from the advantages of the RIA model.
Read more articles by Brad Wales
This is the latest installment of a regular column to answer questions from advisors who are considering transitioning to an RIA model. To see Brad’s previous articles, click here. To submit your question, please email Brad here.
