For as long as I’ve worked with advisory firms, the draw of independence has been there. But twenty years ago, the road to creating an RIA looked a lot different - and harder - than it does today.
Today, the independent RIA channel is seeing explosive growth unlike anything I’ve ever seen. According to one set of research, large RIA firms in the Northeast alone grew their assets by 19% in 2021 compared to the same period in 2020.
Also in 2020, financial advisors going independent brough $180 billion in assets to the independent channel. Of that $180 billion, 40% of it was brought into brand-new RIAs (as opposed to moving from captive environments to existing RIAs).
If you’ve been thinking of going independent, I think these numbers should excite you. They show that the RIA market is growing, and there’s room for you to be part of this moment.
But before you decide independence is the right decision, you have to stop and ask yourself an all-important question: “Why do I want to be independent?”
There are many great reasons to pursue a career in an RIA firm. So, like my favorite late-night host, David Letterman, I’ve created my Top 10 list for reasons you may want to consider independence in 2022.
Ten Reasons to Go Independent in 2022
No. 1 - Independence can lead to a higher income: We’ll get this perk out of the way first. When you’re at a wirehouse you don’t get to decide how much you take home from your overall revenues because it’s dictated from the top. When you own your own firm, though, you have much more flexibility both to decide on your income and control your profit margins.
No. 2 - Maximize the enterprise value of your business: It’s a foundational truth that owning your business allows you the opportunity to access more wealth through the value of your company. As an employee, you’ll never have this opportunity.
No. 3 - You can build around your unique vision: When you’re employed at a wirehouse, you’re required to follow someone else’s prescription for how to make investment decisions and deliver customer service. As an independent RIA, you get to call the shots and build a company around the unique way you think financial advice should be done.
No. 4 - You’re in control of investment decisions: At a wirehouse, you may be nudged toward choosing certain financial products over others. As an independent RIA, you pick and choose the investments that are right for your clients, with no influence other than doing what’s best for each person.
No. 5 - Create your own culture: When you’re employed by others, you have to look for culture fit. When you own your RIA, you create and grow a culture according to your beliefs and vision.