RIA 101: Understanding the RIA Model

Last Edited by: LPL Financial

Last Updated: June 15, 2023

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As a registered investment advisor, you can access in-depth research, non-proprietary products, and a wide variety of investment strategies to create personalized solutions that address your clients’ unique needs.

Why Registered Investment Advisor (RIA)?

In response to investors’ increasing demand for comprehensive financial guidance, many financial advisors are exploring opportunities to elevate their service offerings and create differentiation. The prospect of gaining more control, potential economic advantages, and business development opportunities are just a few of the motivations drawing advisors to consider the RIA model. But perhaps the most compelling factor is having the freedom to bring their vision for their business to life in a way that fosters even stronger relationships with their clients.

Deeper client relationships

As an advisor, one of the most effective ways to build trust with your clients is by demonstrating your commitment to providing independent advice. RIAs are held to strict fiduciary standards by the SEC and are expected to act in clients’ best interests at all times. As an RIA, you can access in-depth research, non-proprietary products, and a wide variety of investment strategies to create personalized solutions that address your clients’ unique needs.

Freedom of choice

Delivering a personalized experience that combines the efficiency of digital integrations with the human touch can be a powerful differentiator. Running your own RIA enables you to customize your tech stack, automate time-consuming workflow processes, and choose how to connect with clients and provide them access to their financial picture. Bottom line—you choose the solutions you want without paying for features you don’t need.

Ability to leave a legacy

When you start an RIA, you’re not just creating a business, you’re creating a legacy for your loved ones. RIAs typically have strong earning potential because you can control your fees and expenses, and choose the products and services you offer. As your clients’ portfolios grow, so does your firm. 

RIAs also have a greater chance of maximizing the value of your business when you’re ready to sell. Privately owned books can be sold in the open market and are often more attractive to buyers. By increasing your sales potential, you also increase the likelihood of receiving a competitive sales price. And you can save more of what you receive by structuring the deal as a capital gain as opposed to ordinary income, which can be a significant cost differential. 

Is RIA right for you?

It’s clear that the RIA model offers tremendous opportunity, but it also carries specific regulatory and compliance responsibilities. How do you know if it’s the right move for you?

Some candid self-reflection can go a long way toward helping you answer that question. What do you hope to achieve by going RIA? What does your dream firm look like? What are your top priorities?

Give yourself time to thoughtfully think through these questions, and refer to the following high-level overview to help you make the decision that best reflects your leadership style, personality, and goals. For an even deeper dive, download our RIA Your Way: Explore the Evolving RIA Model whitepaper

Starting an RIA

Ideal fit: You want maximum flexibility, control, and authority for your business.

Top benefits:

  • Gain complete control over every aspect of your business, from your tech stack to marketing
  • Receive maximum payout
  • Control all of your expenses
  • Build value in your business

Key considerations:

  • What do you want to insource versus outsource?
  • Are you prepared to manage your firm’s compliance responsibilities?

Joining an RIA

Ideal fit: You’re comfortable being a business owner but want to lean in to a larger firm’s back-office and compliance support.

Top benefits:

  • Plug into existing infrastructure
  • Outsource risk and compliance
  • Access an established community
  • Leverage economies of scale
  • Access potential growth resources
  • Gain built in experience navigating the RIA world

Key considerations: 

  • What business functions do you want to manage?
  • Do you want to keep/create your own brand?
  • Do you want to join a large, national RIA or affiliate with a smaller, local firm?

Hybrid RIA

Ideal fit: You want to offer your clients brokerage products and advisory services.

Top benefits:

  • Receive brokerage compensation through a broker-dealer and up to maximum advisory revenue through the RIA
  • Leverage turnkey infrastructure of the broker-dealer or use third-party vendors to build a customized technology platform
  • Can pursue this model whether you start or join an RIA

Key considerations:

  • Are you comfortable operating within a dual compliance structure regulated by FINRA and the SEC?
  • Do you want separate strategic partners or a single wealth management firm that can streamline your brokerage and advisory business?

Advisory-Only RIA

Ideal fit: You want to focus exclusively on advisory business.

Top benefits:

  • Receive maximum payout
  • Operate within a single compliance structure regulated by the SEC
  • Can pursue this model whether you start or join an RIA

Key considerations:

  • What do you want to do with your current brokerage business?
  • Do you want to sell your brokerage business to an outside firm, or to a wealth management firm that can manage it as the rep of record? The latter allows you to maintain the client relationship and access the data.

LPL Financial is here to help.

If you’re ready for more control, flexibility, and opportunities for growth, consider reaching out to LPL. As a leading custodian, we provide RIAs the support they deserve and the flexibility advisors need to better serve their clients and grow their business exactly how they want—today, tomorrow, and well into the future.

RIA Your Way: Explore the Evolving RIA Model

For an even deeper dive, download our whitepaper to get started.

RIA Custody at LPL

Download our brochure to learn more about LPL’s dedicated support for RIAs.

Connect with LPL Financial

Connect in confidence with one of our experienced consultants to learn how LPL can support your move to independence.

*Cerulli Associates, U.S. Broker-Dealer Marketplace Report, 2022


The views and opinions expressed by LPL Financial Advisor(s) may not be representative of the views of other Financial Advisors and are not indicative of future performance or success. Neither LPL Financial nor the LPL Financial Advisor can be held responsible for any direct or incidental loss incurred by applying any of the information offered.

For financial professional use only.