You provide a lot of value to your clients. Save them from making even a single catastrophic financial mistake and your fees will forever be a moot point.
When weighing the decision to move to the RIA model, advisors must consider the catastrophic consequences to them if they are terminated by their broker-dealer.
The economics behind the “super OSJ” brokerage model are unsustainable. Those firms are destined to transition to RIAs.
I am often asked by advisors who are RIAs or are considering the model how they should explain that choice to their clients.
Do you fear looking back at your career one day and asking yourself “what if” you had made a move to independence?
Here are two lessons to double the value of your practice…
This nonsense is non-existent in the RIA model.
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 proclaim the pending demise of the independent broker-dealer model.
I’ll be the first to say that the RIA model is not for everyone.
The following framework illustrates how the time to make a transition to independence impacts the solutions available to you.
I will provide several examples of how to reduce your real estate expenses, thus increasing your practice's profitability.
The dirty little secret of office expenses is you should never pay for it as a variable expense.
Imagine running the restaurant you envisioned while outsourcing the non-customer-facing tasks to McDonalds.
What if a broker/dealer tiered their approach to compliance?
I am not a practice management guru, but the value proposition I provide parallels the value being provided by advisors. Many don’t give themselves credit for the value they’re providing.
If you have your own independent firm (i.e., RIA), you are not immune to the macro effects of the downturn either. You will be squeezed as well.
I am not implying that brokerage firms that pay their advisors via a “payout” are lying, but there is no shortage of misleading when it comes to payouts.
To the brokerage firms that require their branch managers have their own production, did you really think you’d be the first in nearly 500 years to find a way to have your cake and eat it too?
What can you do about an overly restrictive compliance department? Or a non-responsive compliance department? Or one where you get different answers depending on who you ask?
While I am not a practice management guru, an experience I had this past year warrants sharing. it led to adding value to your clients in a way few of you do.
Comparing advisors to big-rig truck drivers makes more sense that you think, once you consider the eerie similarities in their business models.
Consider the upfront bonus checks often paid to advisors leaving one broker/dealer to join another. That “bonus” is not a bonus at all.
Why do we still refer to so many firms in the advisory profession as broker/dealers?
Some observers assume I tell everyone that they should go down the RIA path. That is not the case.
Sourcing your own E&O policy is not complicated or intimidating if you understand how to navigate the process.
If you transition your practice to the RIA model, it is not a matter of whether you will outsource, but how much.
Imagine if universities started crafting their coach’s compensation plans the way broker/dealers draft plans for their advisors.
A large portion of the advisor community would be far better off under the RIA model, yet many of those advisors will never take advantage of it.
When guiding advisors on how to transition their practices to the RIA model, this is a question I commonly address.
There is no shortage of vocal advisors and observers ready and willing to dive into any conversation about how you should set your fees.
The firm owns the trucks, owns the client relationships, owns the goodwill created, owns it all. The driver – the steering wheel holder – is an important but ultimately expendable resource that will one day be replaced by the next person in line.
There are two important takeaways regarding compensable revenues for any advisor in a broker/dealer affiliation.
Let’s address the pros and cons of joining an existing RIA.
No matter how happy you are at your job. No matter how happy you are with your compensation. Without fail, go on at least one interview a year.
Should every financial advisor “go independent” with their practice?
Ask 10 people in the advisory profession what a “hybrid” is and you will get 10 different answers.
A common question I am asked by advisors who want to learn more about the RIA model is how do the payouts work? Is it really 100%?
If you think building a big RIA firm is the sure path to success, the history of the rental car industry proves otherwise.
Taking the highest upfront check or calculating out your apparent newfound riches from a suspiciously high payout will undoubtedly be mentally rewarding in the short term. Over the long term, you are assured to be disappointed, though.
What is the AUM needed to be my own RIA?
Custodians, technology vendors, compliance firms, service platforms, TAMPs, etc., all make for a wonderful ecosystem of solutions from which advisors can choose. But it also makes for a complex and intimidating review and selection process. It doesn’t have to be.
The initial hoopla, particularly over the expanded use of client testimonials, has been overdone.
Ask someone a question in which the respondent has a vested interest in how it is answered, and you know what the answer is before asking it. I see this when I am talking to advisors about the RIA model.
I want to share a math formula I often discuss with advisors. This is for anyone considering transitioning their practice to the RIA model or is already working through those steps but is struggling to reach the finish line.
Unwritten rules have as much power as written ones. That is true of padding a big lead in baseball and of whether RIAs need to have the CFP designation.
No advisor has asked me about the plight of the prisoners in The Shawshank Redemption. But I am frequently asked what an advisor should expect as they leave their current firm to transition to the RIA model.
The overlords of clickbait said I need to make this a highly partisan article to maximize readership.
You absolutely can start your own RIA even if you are not yet or never desire to become 100% fee-based.
This question is not only one of the most frequent questions I get from advisors, but it is also one of my favorites.
