For advisors, the allure of having their own RIA may have never been greater than it is today. Wirehouse bureaucracy, broker-dealer consolidation, and regulatory pressure have conspired to make going fully (or more fully) independent a tempting choice.

On the surface, a stand-alone RIA appears to offer advisors complete freedom to determine how to spend their resources and develop the practice they want while creating equity value. For some, this is exactly the right step.

The hard truth here, however, is that many advisors who run their own RIA struggle to manage infrastructure development and operations while keeping pace with an ever-changing industry. Specifically, the two biggest hurdles for RIA owners today are keeping up with financial technology and compliance requirements.

Financial Technology

The pace of fintech evolution over the past five years has forced RIA owners to continually question whether they are providing the most effective back-office and client-facing solutions. Unfortunately, implementing new “killer apps” requires substantial capital and time in order to determine which tools are the best fit for an advisor’s practice—not to mention testing and training.

Even worse, these applications tend to quickly become antiquated when new tech surfaces and client demands shift. For too many RIA owners, it’s neither practical nor cost efficient to dedicate the resources needed to keep up with each new development in fintech, although not doing so obviously carries its own risks.

Compliance Chores

RIA compliance obligations have gotten exponentially more onerous over the last two decades, making life steadily more complex for RIAs’ chief compliance officers. Especially among mid-sized to smaller independent RIAs, many of these executives also fill other critical roles, requiring them to multi-task while they rewrite agreements for client-derived billing, run share-class reports for the SEC, work to serve clients while meeting new custody rule guidance, and more.

Moreover, state-registered firms often find multi-state registration and exam management too onerous to grow anywhere but locally.

In short, perfectly honorable, intelligent and expert financial advisors frequently find it difficult to stay current with fast-evolving regulatory expectations.

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