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

Should I start my own RIA or join an RIA firm?

Greater flexibility, potential economic advantages, and business development opportunities have drawn many successful financial advisors to the RIA model. In fact, according to Cerulli, RIAs continue to grow assets under management (AUM) and advisor headcount at the fastest rates across the industry. ¹ Could it be your next step?

Many factors will play into your decision-making process, but perhaps the best place to begin is determining whether you want to start your own RIA or join an RIA firm. If you see yourself as a business owner and are comfortable making the majority of the decisions, starting an RIA could be the right fit for you. Joining an RIA could be appealing if you’d prefer to plug into time-saving business, compliance, and back office support.

If you’re leaning toward joining an RIA, the following criteria can guide your due diligence process and help you make an informed decision.

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

Compliance is one of the main reasons financial advisors seek to join an RIA. 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. With a strategic partner to help you keep up with regulations, you’ll have the confidence knowing that your practice is compliant.

Questions to ask

1. 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. Firms should provide a transparent, easy-to-understand breakdown of their payouts and fees. In addition to compensation, some RIAs provide up-front payments and have retirement succession plans. Make sure you know what each firm on your list offers. And don’t discount the intrinsic value of leveraging a larger firm’s scale to save valuable time and reduce your costs and risk.

Questions to ask

1. 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.

Disclosures

¹ 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.

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