Starting An Investment Advisory Firm


How Much Do Ria Charge In Fees

How To Start Your Own Investment Firm and Become an Independent Financial Advisor

RIAs generally charge clients annual fees equal to a percentage of the assets they manage. In 2019, the average RIA fee was 1.17% of assets under management . That means that a client with $100,000 in assets managed by an RIA would pay the firm $1,170 per year for their services.

However, other fee types are becoming common as advisors work with clients in new ways. There are many ways that you can engage with an advisor, such as for an hourly or project-based fee, a retainer, a minimum fee or a fee based on assets or income, says Jennifer Grant, a certified financial planner with Perryman Financial Advisory in Dallas.

With these new models, you may be able to pay $200 for an hour of consulting, a flat fee on a monthly basis or a $1,000 fee for a year of all the advice and guidance you need. During an introductory consultation with an RIA , they will help you determine what kind of relationship and pricing makes the most sense for your needs. Keep in mind that not all RIAs offer alternative pricing models, and you may have to shop around to find one who offers the kind of relationship and fee structure you want.

What Happens During A Typical Day At A Financial Planning Firm

Financial planners do a lot of different things during the day. One of the most important tasks is prospecting and marketing. Even large financial firms need to constantly bring in new clients and service existing ones.

Many firms focus on assets under management or AUM. The more assets under management, the more the firm makes. Thus, most marketing efforts are geared toward bringing more assets to the firm.

Whether thats making phone calls every day to existing clients , sending out direct mailers, or giving talks and lectures or holding seminars, the principal advisor in a firm is busy.

A financial planner also meets with clients or oversees meetings with his or her top advisors . A financial planner also sends faxes, drafts financial plans for clients, does a multitude of calculations on financial planning software, and spends time keeping tabs on the financial markets.

Hire A Designer For Your Companys Logo

I used 99Designs to do my logo design , although my first design brief didnt work out as planned.

I called the customer service department, spoke with a representative, and expressed my desire to cancel my project brief and be issued a refund. What transpired next came as a complete surprise. The representative reviewed my account and then made specific recommendations tailored to my project brief. She provided valuable insights and constructive feedback acting in more of an advisory than sales capacity. Sales representatives take note! What this representative did was far different than other sales representatives Ive dealt with in the past. More often than not when Ive cancelled services Ive been matched with a customer service representative that simply processed my cancellation request, making no effort to overcome objections or prod further to figure out where things went wrong.

This very talented representative and the 99Designs team rightfully earned a second chance to win my logo design business. By providing quality actionable advice, and not rushing to cancel my plan , 99Designs turned what could have been a lost customer into a success story that produced a winning logo design that Im very happy with and youll find on my website for Rapport Financial.

Don’t Miss: Best Investment Accounts For Couples

With Freedom Comes Responsibility

One of the greatest things about operating as an independent RIA firm is the freedom it brings. Moreover, because you will receive a much higher payout than you would working for a wirehouse or bank, you can earn the same money with half the number of clients.

In addition, you are building equity in a business that is more likely to have value and be able to be sold in the future. Freedom, higher payout and building equity in your own business are just a few of the reasons more advisors are moving toward independence.

However, like any good recipe, you can read all about it, even see a picture of the dish, but until you actually try it, you wont know how it tastes. Its similar when going independent but with one major difference: With a meal, you can push it away. Once you leave your current firm and become an independent, youve made a career decision. Therefore, give it careful thought, and I hope you find it to be as good as Ive described.

Up Next

Find A Client Presentations/portfolio Analytics And Optimization Software

6 Proven Ways Financial Advisors Can Grow Their Businesses

Kwanti costs just $80/month , and it integrates with both my performance reporting software, Blueleaf, and my primary custodian, TD Ameritrade. They also have integrations with: Advyzon, Black Diamond, Fidelity, Charles Schwab, Orion, Portfolio Pathway, Redtail, Riskanalyze, TradePMR, and more in the works.

As you can probably tell, integration of software providers is an important theme in my product and vendor selectionand it should be for yours when you set up your independent firm. When youre building your firm, you need to have your outside software providers communicating with each other.

The data Kwanti uses comes directly from Morningstar, so I can be confident in the outputs. I use Kwanti to build my portfolio models, which vary based on my clients risk tolerance and time horizon. The reports Im able to generate using Kwanti are both visually appealing, and provide in depth analytics I rely upon to construct high quality, efficient portfolios for my clients.

Kwanti is offering readers of this article a limited time 30% off their first paid month when using the referral code Aaron.

Read Also: Socially Responsible Investing Robo Advisor

Advertising Content And Marketing Review

Advertising is important to growing your business. Many clients, especially new advisory firms, dont know where to begin or what disclosures are necessary. Let us help take the guess work out of creating proper disclosure content. Well review or draft personalized and compliant content for use in:

  • Websites and Blogs

Select A Client Billing System

Billfin is a simple, cost-effective cloud based billing software that has partner-level integration with both my performance reporting system, Blueleaf, and my primary custodian, TD Ameritrade.

There are so many attributes to like about Billfin:

  • Ability to bill on client assets held with other custodians
  • Flat, Tiered, and banded AUM fees
  • Bill in advance, in arrears, or average daily balance
  • Easy to set up asset exclusions by household, account, asset class, and or individual securities
  • Creates simple CSV/Excel files to upload to the custodians billing system
  • Customizable, professional-looking invoices that are clear, accurate and have my company logo
  • And last but not least, an outstanding customer service team!
  • At prior RIA firms, we used Excel spreadsheets for calculating quarterly billing and generating invoices. But this is both time consuming and cumbersome with different fee schedules, clients joining your practice mid-quarter, prorated billing, etc. What I really like about Billfin is that once its all set up and you learn the user interface, youre no longer wasting hours calculating client management fees and generating professional-looking invoices.

    Don’t Miss: Questions To Ask Before Investing In Stocks

    Investment Adviser Career Paths

    The most common path to becoming an independent investment advisor is to first work as an investment adviser representative at another firm. Using this path, the advisor gains valuable experience working under a seasoned IA before joining the rapidly growing arena of independent advisory firms. After the IAR gains experience and builds a client base, they may elect to open their own practice.

    Advisers who go independent often continue to work with some or all of their existing clients in their newly formed firm. This is a win for clients who usually prefer to continue working with the advisor theyve grown to trust, while also allowing these independent advisers to establish their new business with an existing client base, which should generate enough income to get their businesses off the ground.

    Purchase A Cloud Document Storage Service

    How to Start an Investment Company

    Dropbox is popular for individuals to manage their own personal files, but there are multiple subscription offerings for Dropbox. I originally went with the Business Advanced Plan . But Ive since re-evaluated my cloud storage needs and downgraded to just Dropbox Professional at least for now.

    Most of my clients are Dropbox Personal Users, and have familiarity with the platform, so this choice originally made the most sense of the cloud storage options available. Unfortunately, the Dropbox Business Advanced Plan requires you to purchase a minimum of 5 licenses, which combined adds up to a pretty significant annual expense of $1200. For a solo practitioner like myself this is quite cost-inefficient.

    Running a business is definitely a learning experience!

    Heres a list of The Best Cloud Storage and File Sharing Providers for Businesses in 2017 that I used to help with the due-diligence process.

    Read Also: How To Invest In Lyft

    Investment Advisory Firm Business Plan And Swot Analysis

    Investment Advisory Firm Business Plan, Marketing Plan, How To Guide, and Funding Directory

    The Investment Advisory Firm Business Plan and Business Development toolkit features 18 different documents that you can use for capital raising or general business planning purposes. Our product line also features comprehensive information regarding to how to start an Investment Advisory Firm business. All business planning packages come with easy-to-use instructions so that you can reduce the time needed to create a professional business plan and presentation.

    Your Business Planning Package will be immediately emailed to you after you make your purchase.

    Product Specifications :

    In closing, and investment advisory firm is a great businesses start provided that the individual has a complete understanding of finance and all of the necessary licensure in place. Although these businesses are very difficult start, once established these can be highly lucrative and highly profitable businesses.

    What Will You Offer Your Clients

    With an RIA firm, your companys menu of products and services is wide open. As long as you operate within the confines of the regulatory structure, you have great latitude in terms of offering a wide array of consultative services. Moreover, you may structure your fees in a number of ways. Of course, most RIAs will offer asset management .

    You may wish to obtain the fee schedules from some of your competitors and set your fees accordingly. All RIAs are required to include their fee schedules in their Form ADVs, which are available through the Advisor Search function on the SECs website. Will you offer financial planning? If so, which software will you use and how will you price this service? What about your clients 401 plan? They may want advice but cannot roll over the plan if theyre still working. As an IAR you can charge a fee for advice on that plan. Basically, you should dream of all the possible services you might renderbased on your interests and expertise and the areas where you want to focusand consider adding them to your practice.

    Also Check: What Do Investment Companies Do

    The Benefits Of Starting An Ria Firm

    As interest in the RIA model continues to grow, and support for starting and managing a firm becomes more available, many advisors are upbeat about the possibilities of working directly for their clients as a fiduciary. Much of this enthusiasm stems from understanding the true benefits of starting an RIA firm, which include:

    Autonomy: According to the 2019 Breakaway to Independence Survey conducted by TD Ameritrade, the number one answer advisors gave for moving to the independent RIA model was, more control . The fact is, when you start an RIA you have complete control over every decision related to your business. So, if you are someone who values autonomy, starting an RIA could be the right move for you.

    Income Potential: As an RIA, you determine how much revenue your firm can keep up to 100% as indicated in the chart below. With this flexibility, you have complete control over your fees and expenses so you can choose how to best operate your business to maximize revenue. Also, if you decide to start your own RIA you can build equity in your business for a higher long-term payout should you choose to monetize or sell the firm in the future.

    Ria Licensing And Qualifications

    The Benefits of Starting an RIA Firm for Investment Advisors

    The first step to becoming a Registered Investment Advisor is to pass the Series 65 exam. This test is administered by the Financial Industry Regulatory Authority , a self-regulating, private organization that writes and enforces the rules governing registered brokers and broker-dealer firms in the United States.

    However, test-takers are not required to be sponsored by a broker-dealer, as they are for most other securities-related exams administered by FINRA.

    The test itself covers federal securities laws and other topics related to investment advice. It has 140 multiple choice questions, of which 10 are pretest questions that will not count towards the final grade. Of the 130 scored questions, a candidate must correctly answer 94 to pass the three-hour exam.

    It is important to note that while no other licensure or designations are required in order to become an RIA, most advisors will find it rather difficult to bring in business without additional qualifications, such as the CFP® or CFA designation. In fact, many states will actually allow advisors who carry the following designations in good standing to waive the Series 65. These designations include:

    Recommended Reading: Columbia Business School Value Investing

    Good Life Companies Can Help You Launch Your Business

    Good Life Companies providesa full range of services to help establish, support, and grow independentfinancial advisor practices. From creating a business plan to marketing,compliance, practice management, and more, we provide everything you need tomanage your business efficiently while keeping costs as low as possible. Get intouch today to learn more.

    How I Built My Independent Ria Firm

    Following the publication of my previous article, Advisor Platform Comparison: Wirehouse vs. RIA Aggregator vs. Independent RIA, where I shared my perspective on what its like working as a financial advisor under each, a number of advisors from around the country have reached out.

    The most common requests have been either: 1) Aaron can you help guide me through the process I need to take to start my own independent RIA Firm? 2) Can you help me evaluate some of the firms/platforms Im looking at? or 3) Which technology providers should I be considering as I go out on my own for different practice management needs such as financial planning software, performance reporting, CRM? Understandable questions, because there really is a lot to consider. Personally, I counted over 40 unique tasks taken to build my RIA practice into what it is today.

    As the volume of inquiries about my business has grown to a fairly sizable number, so did my interest in sharing the story of my own journey to independence. How I made the transition. How I actually set up my independent RIA after breaking away from Merrill Lynch . How Ive grown my business over the past year in ways I didnt see possible while working at predecessor firms. And what tools and technology I used to build my practice from scratch.

    So now that youre primed on what Ill be covering, let’s dive in, and start with day 1 of my transition from Merrill Lynch to independence.

    Don’t Miss: Banks That Do Heloc On Investment Property

    Vet The Financial Advisor’s Background

    Always check out the record of the company or person you’re considering by looking up the firm’s Form ADV. Among other things, this form will outline how the firm or advisor charges for its service , conflicts of interest and any past disciplinary actions.

    We also have a list of 10 questions you should ask a financial advisor including whether they hold to a fiduciary standard, which requires that they act in your best interest.

    Financial advisors perform many services, though for the most part they help clients manage their money. Often, this means managing a clients investment portfolio. Financial advisors can help you cut expenses, pay down debt and prioritize your goals. Some financial advisors have additional certifications or expertise that allow them to help with estate planning, insurance needs or tax preparation.

    You can seek out financial help at any time, but its especially important to get financial guidance after significant life changes. Whether youre buying a house, starting a job, getting married or having a child, these life events can have major financial implications, and some upfront financial planning can go a long way toward building a stable financial future.

    While the two terms are often used interchangeably, adviser is the legal term used in the U.S. Investment Advisers Act of 1940 to refer to individuals who must register with either the SEC or with their state.

    Step : Get Business Insurance

    Becoming An RIA Startup Costs And Getting Funding To Start A Financial Advisor Business

    Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your companys financial wellbeing in the event of a covered loss.

    There are several types of insurance policies created for different types of businesses with different risks. If youre unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so its a great place to start for your business.

    Learn more about General Liability Insurance.

    Another notable insurance policy that many businesses need is Workers Compensation Insurance. If your business will have employees, its a good chance that your state will require you to carry Workers’ Compensation Coverage.

    Recommended: Learn what business insurance for your Financial Planning Firm will cost.

    You May Like: How To Invest In Stocks With Etrade


    More like this

    Series 65 Registered Investment Advisor

    Who Needs...

    Best Real Estate Investing Advice

    There Is...

    Merrill Edge Self Directed Investment Account

    Merrill Edge...

    Best Way To Get Income From Investments

    Rebalance Your...