Independence advantages. Like clients, advisors want better service, pricing and the ability to move assets to new platforms, something that’s easier to do when they have direct relationships with RIA custodians. Better access to multiple custodians can give an advisor more flexibility and allow him or her to take advantage of the best of the custodians’ features.
Many reps with broker-dealers, meanwhile, have seen their service deteriorate as the B-Ds struggle with a weak economy and attendant staffing issues (many firms are poaching one another’s employees). By going with a turnkey RIA instead, they could minimize the heavy hand of the home office in business processing, save more time and deal with fewer mistakes, and it would be much easier to move client accounts. In fact, if clients stay with their custodians when a rep moves from one RIA to another, the clients can keep their account numbers, which is convenient and comforting for everyone if you ever need to change firms again.
Advisors can expect inclusive and robust tech stack offerings at an RIA firm as well as better compliance and customer support (offerings that are often better than those at a broker-dealer and can be more quickly implemented). Affiliate advisors with RIAs can also add fintech applications to complement their standard platforms (for a reasonable out-of-pocket expense).
When affiliating with any firm, you will want partners who support your brand, marketing, investment offerings, website, etc. You should be able to market your own firm’s name and beware those companies that only want you to support theirs.
Some advisors who move to the RIA world would like to retain at least some commission accounts, (because they feel that offering both fees and commissions will provide the best client solutions). Advisors can keep their commission business and revenue by adding an external (and usually smaller) B-D relationship.
Compliance advantages. When you affiliate with a firm, you’re going to want to know its compliance mentality and culture. A lot of partnerships fail when a rep and their RIA are not on the same page. So you should learn step by step how your business will be processed. How will the RIA firm handle those things you currently find most challenging? Where does it make its money? What’s its revenue mix, including the contribution of higher risk products like alternatives? How many of its advisors have run into trouble with compliance?
The good news is that an established RIA can provide a buffer between you and regulators. Smaller RIAs can provide better compliance help because they will know you better, something that’s lost at many larger broker-dealers.
Partnership advantages. Many turnkey RIA firms have fewer than 100 advisors, so they foster more personal relationships.
But it’s important, if you want to join one of these firms, to learn about their roots and the owners’ backgrounds. How long have they been in business? Are they planning to sell in 10 years? Are family members the succession plan? What’s their end game? Are they running business as you would, or even better? Some of these RIA owner-advisors stay grounded by servicing a short client list while running their firms.
You can also benefit by working with these firms’ chartered financial analysts, who can review your investment strategies. Turnkey RIAs also likely offer competitive in-house investment advisory models that allow you more time with clients.
Independent-Minded Advisors
Turnkey RIAs are increasingly attracting independent-minded advisors, including those who might even already have an RIA of their own but want to simplify their lives and do what they enjoy more—helping others.
So there’s never been a better time to consider an RIA-centered model like this one. It lowers client expenses dramatically. The net revenue is better for advisors. And it’s fiduciary friendly.
A wide spectrum of options await. It can be a short-term challenge, but the rewards are plentiful.
Simon Hoyle is a strategic business director at Henschen & Associates, a recruiting firm based on best-match introductions to RIAs, independent broker-dealers and hybrids.