Sii pointed to the success of an advisor who heads a super-OSJ group within SagePoint who is bringing formerly independent advisors into his RIA.
"It’s because of the value proposition that he has to offer,” she said. “I’m seeing more of that, where smaller independents say they want to be part of a larger group—not necessarily part of the corporate RIA. He’s found that niche in the market and he’s one of our fastest-growing groups within our organization.”
Regulatory Concerns
One of this conference session’s prevailing themes centered on the growing regulatory scrutiny of RIA firms.
“Gone are the days of getting compliance-in-a-box for $5,000,” Sii said. “Advisors truly don’t know what [independence] entails until a regulator is in their office, and then it’s too late.”
At SagePoint, she added, the firm’s three largest ensemble practices are all corporate RIAs, and none have the desire to go independent.
“And when I ask them why, there are a couple of different reasons, but the primary one is, ‘I know you have my back. I know at the end of the day you’re keeping me straight, and I don’t have that stress,’” she said.
Bell pointed to the Securities and Exchange Commission’s announcement on Monday that it charged 27 firms—21 independent advisors and six broker-dealers—with violations pertaining to their failure to file and deliver Form CRS (customer relationship summaries) to investors. Form CRS disclosures were created as part of the SEC's Regulation Best Interest standard that requires broker-dealers to put a client's best interests ahead of their own when making recommendations.
“[The SEC] is not messing around anymore,” she said. “If you’re going to be SEC-registered, you have to make sure you have a continuous process, that you’re updating your policies and disclosures, and that everything is consistent in your policies and disclosures and actions, and that everyone at the firm is aware of the policies and disclosures and procedures, and that you’re delivering those disclosures to your clients. It has to be very systematic. So if you’re a one-person office, I do caution that creating your own RIA probably won’t be the ideal thing for you to do.”
Bell added that firms with an operations manager and compliance manager are better suited for the independent route. But, she noted, an existential question an advisor should ponder is why do they feel the need to start their own RIA?
“Sometimes there are valid reasons why,” she said. "Maybe they want to create a firm that acquires other RIAs. I think that’s a very valid reason. We make sure people are doing it for the right reasons.”