Over the past decade, the wealth management industry has changed profoundly. I speak with financial advisors daily and have seen firsthand how demographics, consumer preferences, digital innovations, heightened regulations and consolidation have transformed our industry. One of the most significant outgrowths of this evolution is the burgeoning desire among advisors to serve as fiduciaries—an aspiration firms have a responsibility to support.
Yes, many firms offer a variety of affiliation options, including dual registration, IAR-only, hybrid RIA and RIA only. However, that doesn’t mean they are equipped to support all of these models effectively. Such shortfalls have prompted many advisors to contemplate transitioning to a firm or business model better positioned to support their goals.
With the number of choices available, you need to determine what model works best for you and your clients. It’s not a decision to be made lightly. That’s why you must take the time to assess where you are now, what you hope to gain by making a change and how it may impact all of your stakeholders, especially clients. This takes time, research and some self-reflection. Critical elements to consider include:
What Is Best For Your Clients … And Your Business?
Do a sizable number of your clients rely heavily on commission products? Do you have clients who would benefit from a holistic service model? Are you equipped to have meaningful client conversations and execute the administrative tasks associated with a move?
Look at your business and look within to determine what’s best for your clients and your practice … and if they are compatible. If you’ve come away from this exercise knowing the RIA path is the right one, your success will be impacted by a broad range of other considerations.
Getting From Here To There
For instance, regardless of how you decide to run your business—unless you want to go out on your own and establish a standalone RIA—your new partner firm needs to support your preferred affiliation model and provide a glidepath to move away from being commissioned-based or dually registered and become fee-only.
For example, relinquishing your Finra registration comes with a host of business implications. Approaching this decision alone may not yield the best results for you. Ideally, your firm will have an RIA transition team to help with the analysis, identify your Finra business and assist you in deciding the best course of action.
Moreover, does the firm have the ability to buy this business from you and put it in a house account where you can maintain visibility? If not, perhaps it’s not the right platform for your business.
Does The Firm Have An RIA Compliance Team?
The RIA regulatory framework is unique and complex. So, putting a comprehensive compliance program in place is a top priority for your independent RIA. A partner firm with compliance support can show you how to stand up an independent RIA, teach you how to be a chief compliance officer (CCO) and advise you when you hire your CCO or outsourcing the function. Many independent broker-dealers, RIA aggregator, and custodians leave independent RIAs to fend for themselves when it comes to compliance.
It’s a heavy lift, especially if you are new to the business model. If you’re planning on starting your own RIA, you may want to find a partner that will share its institutional knowledge and provide broad-based, high-level support—whether you are part of their corporate RIA or working under your own independent RIA. These services should include:
• Compliance support
• Access to capital
• Unified and integrated technology
• Practice management consulting
• Research, investment management and advanced planning experts
• Assistance with operations
In my more than 20 years working with advisors, I’ve learned that whether they are already independent or looking to leave an employee model, they all crave choice and the flexibility to run their businesses and serve clients on their own terms.
Whether you are a wirehouse advisor, a bank representative or an independent financial professional, finding a firm with the resources and culture to help you transition to fee-only—even if you aren’t thinking of going that way right now—is the foundation for long-term success and personal satisfaction.
Becca Hajjar is managing principal and chief business development officer at Commonwealth Financial Network.