5 Factors to Consider When Joining a Registered Investment Advisor (RIA) Firm

If you’re considering transitioning to an RIA, you’re in good company. From 2014–2024, the overall headcount of independent and hybrid RIA channels soared from 18% to more than 27%, with expectations to surpass the 30% mark by 2029.¹ And when it comes to clients and their assets, both are following the decade-long advisor exodus. In fact, by 2027, independent and hybrid RIAs are expected to control 31% of asset market share, up from 26.7% in 2022.²

When you look at all that RIAs can offer, it’s easy to understand the rationale for the waves of advisors who’ve made the switch – including greater flexibility, autonomy, and ability to meet clients’ needs, the potential for higher payout, and more.

Benefits of Joining an RIA

There are two routes for a financial advisor to choose from in the RIA space, either to start a new RIA or join an existing RIA. Granted, this decision is highly individualistic – based on goals, available resources, risk tolerance, and more. Many advisors, in fact, a significant number, opt to join an established RIA. Here’s why:

1. Saves time and money. You can leverage the firm's established infrastructure, including compliance, technology, and operational support vs. starting from scratch.
2. Lightens administrative load and provides readymade stability. This can be great, especially for advisors early in their careers or looking to transition from a wirehouse or independent practice

Learn more about the RIA model, including the benefits of joining an RIA firm or starting an RIA.

Key Considerations When Joining an RIA

1. Cultural Alignment

It’s important to select a firm that’s aligned with how you want to conduct business and meet your clients’ needs. Being on the same page regarding investment philosophies and platforms, support models, and research capabilities can help facilitate a smooth transition with minimal disruption to your business model, clients, and staff.

Another key factor to clarify early in the process is which business decisions you’ll maintain control over, and which decisions will be made by the RIA. For example, are there particular tools, technology platforms, custodians, or vendors you’ll be expected to adopt? Aligning your interpretations of independence is crucial to closing the gap between your expectations and the day-to-day realities of joining and working with a strategic RIA partner.

Questions to ask

1. What will the service experience be like for me and my staff? Will we be restricted to digital-only service portals, or will we be able to call tenured support teams for assistance?
2. Will I have access to firm leaders for escalated or complex issues?
3. What business decisions will I maintain authority over?

2. Custodian Support

Having a custodian in your corner that is a thought leader, is invested in growth, and makes it easy to do business is pivotal to your success. Combining your business relationships into a comprehensive wealth management experience can save you valuable time and potentially lower your costs. Selecting a custodian that also has an RIA – and if you plan to offer brokerage business, a self-clearing broker-dealer – gives you the best of both worlds: the flexibility you desire, and the convenience of a strategic partner that’s familiar with all aspects of your business.

Questions to ask

1. Do you have asset minimum requirements to custody on your platform?
2. Do you offer a self-clearing brokerage solution for a streamlined experience?
3. Do you have a direct-to-consumer conflict of interest?

3. Compliance Support

The regulatory landscape in the financial industry is complex and constantly evolving, making it a significant challenge for individual advisors to stay compliant on their own, so it probably comes as no surprise that compliance is one of the main reasons financial advisors seeking independence look to join an RIA.

By joining an RIA, advisors gain access to a dedicated compliance team that is solely focused on monitoring and interpreting regulatory changes. This team can provide timely updates and guidance, ensuring that advisors are always in compliance. Moreover, RIAs often offer robust compliance training programs that include regular webinars, workshops, and seminars. These programs help advisors stay informed about new regulations and best practices, reducing the risk of compliance violations.

Look for a highly ethical organization that is well-known for its compliance expertise and has the size and scale to help you stay ahead of ever-changing rules and regulations with customized support, training, oversight, and guidance.

Questions to ask

1. How do you approach risk management and compliance?
2. What is your firm's track record with compliance issues?
3. What support, training, and guidance will you provide to help me maintain a compliant practice?

4. Growth Support

Chances are, you already have ideas and dreams about your firm’s future. Look to join an RIA with the financial strength, stability, knowledge, and capacity to help you pursue them – whether you want to grow your business organically, through mergers and acquisitions, or succession planning.

Selecting a firm that can provide consultative support for sourcing, structuring, and financing deals can significantly streamline a complex process and create efficiencies that save you valuable time. Drawing on the experience and knowledge of a thought leader in this space also builds confidence and credibility with sales partners and can help you experience a higher rate of execution and success.

Questions to ask

1. Do you offer access to capital for acquisitions and growth opportunities?
2. Is merger and acquisition support available?
3. Do you offer support for succession planning?

5. Payouts and Fees

Of course, you’ll want to determine how joining an RIA will impact your compensation and finances. When financial advisors join an RIA, they often benefit from structured payout models, fee transparency, and a range of support services. Here’s a closer look at these aspects:

Payout structures

1. Revenue sharing models
   
   Percentage of revenue generated by the advisor. This can range from 40% to 70% or more, depending on factors like the advisor's experience, size of their book of business, and services they provide.
   
   Tiered structures: Here, the percentage of revenue increases as the advisor's production grows. For example, an advisor might receive 50% of the first $500,000 in revenue, 60% of the next $500,000, and 70% of any revenue above $1 million.
   
   
2. Base salary plus performance-based incentives
3. Profit-sharing and equity

Fee transparency

1. Clear and transparent fee structures. This can include asset management fees, advisory fees, and transaction fees, which helps advisors understand their compensation.
2. Client fee transparency. This can help build trust and ensure that clients understand the value they are receiving for the fees they pay.

In addition to compensation, some RIAs provide upfront payments and have retirement succession plans. Make sure you know what each firm on your list offers.

Questions to ask

1. What will my payout be?
2. What’s included in my cost of services?
3. What are the production thresholds and pricing breakpoints?

LPL Financial is Here to Help

With LPL, you’ll receive top-tier support through the exceptional experiences our service teams deliver, our decades-long history of platform innovation, and the ongoing and significant investments we make in modern capabilities and technologies. Reach out to learn more.