Becoming an independent financial advisor and starting your own RIA isn’t all easy. But it can also be one of the best decisions you can make if going independent is the best thing for you and your clients. As someone who did it myself back in 2021 the journey, process, and good & bad of it all are still fresh.
For me, and a lot of other advisors that have gone the IRA route there are benefits like added freedom to run the practice you’ve always dreamed of with the clients you’ve always wanted. You also have more control over realizing a healthier work-life balance – which all of us could use more of these days!
Are there downsides to starting your own RIA? Sure! It can be scary and there’s a lot of uncertainty at first. I miss some of the people I used to work with as well, but at the end of the day doing what was right for me and my clients was too important to ignore any longer and is why I was compelled to start an RIA.
As I mentioned in part 1 of this series, the road I took to becoming fully independent was a bumpy ride. I’d like to share more of my experience with you in this blog post to hopefully make your journey a little easier.
Continuing on from the last post here are some additional steps you can learn from on how to start your RIA.
Step 6: RIA registration, ongoing compliance, and custodian
Man, when I went out on my own, this part of becoming an RIA was a black hole. There are so many options to choose from.
Fortunately, though, I came to find that RIA registration has basically become commoditized. It has become a pretty straightforward process, and a number of firms are helping advisors through the entire process. I interviewed a couple of different firms after doing a lot of online research and ended up picking the firm that not only knew what they were doing. You are going to have a million and one questions when going through the RIA formation & registration process so it’s important to have the right partner.
Choosing an RIA registration firm
After interviewing several firms specializing in RIA registration for Financial Advisors I narrowed my final options down to two firms that specialize in registering RIAs that you can investigate are:
- FINComplaince – who I used for RIA registration and who I still currently use for ongoing compliance, etc.
- Foreside
Go with the firm that makes you feel like you’re a human, rather than just a number. And choose one that can handle the entire RIA registration process for you.
The right firm will be able to draft all the various forms and documents you’ll need to register as an RIA, saving you time and money in the long run. They will also help you register with the Securities and Exchange Commission (SEC) or the State depending on what registration you’re going for.
Some points on the RIA registration process
Here are a few things I learned along the way that you may not know yet:
- It can take anywhere between 60 and 90 days for your RIA registration to be approved after submitting everything; state registrations tend to take longer.
- It can cost between $3,500 and $5,000 (or more, possibly) to have the firm do everything for you.
- There are additional fees to consider as well, such as notice filing in each state. I recently spent over $800 just to register in three states.
You will most likely become your Chief Compliance Officer
I decided to be my own compliance officer (CCO). It sounds worse than it is in reality and with the right ongoing partner is pretty straight forward actually. It costs me a little over $300 a month for me to get all the compliance support that I need. It’s not as much work, and it’s not as expensive as you may think it is to handle your own compliance.
The firm you work with will most likely have compliance templates that you can use. They’ll also help ensure your ducks are in a row as your own CCO.
Don’t hesitate to invest in your compliance program and support. It is only a matter of time before you are audited by either the State or SEC so better to have everything in order. Not only is it a basic requirement to have the right compliance protocols in place but you owe it to yourself and the clients you serve.
Custodian selection
You can use multiple custodians if you’d like. I currently use Altruist for all of my clients but just in case also got set up on the Morningstar platform in case I needed something that Altruist couldn’t do which I have yet to find by the way!
I love the Altruist technology platform for a variety of reasons including a great user experience for my and my clients AND that the Altruist team is made up of amazing people who go out of their way to help you.
When choosing a custodian, be sure to check out their tech platform and find out more about their service and client onboarding.
You’ll also want to find out what it would cost – for both you and your clients – to use the custodian.
Not all custodians are created equal so make sure you do your due diligence here as it will a long-term relationship with whatever custodian partner you select.
Step 7: Assemble the right (tech) stack
The next step in your journey to independence is choosing the right technology stack for your practice. Now, you don’t have to do this too quickly. Finding quality often takes time, trial, and error.
Weigh up what is a must-have for your firm and what would be a nice-to-have. Don’t get distracted by all the shiny tech options that are out there because – if you’re anything like me – you’ll want it all. Get focused and bring on new tech slowly.
Here are the must-haves that I recommend RIAs have in place in terms of tech:
- A custodian platform for investment management, trading, billing, and statements – I use Altruist for this.
- Financial planning software that can determine cash flow and so on – I use Asset Map for this.
- A customer relationship management system (CRM) – I use Redtail for this.
- Fact-finding software – I use PreciseFP for this.
- Electronic file storage – I use Rubex (eFileCabinet) for this.
- A secure email service – I use GSuite for this.
- A website provider – I now use FMG for this
- Social media platforms.
- Digital monitoring and archiving software – I use Presults for this.
The great thing about being independent is that the tech that you use is completely up to you. You can choose which tech vendors serve you best, given the type of practice you want to run.
My best advice would be to choose platforms that can speak to one another, also known as integration. This is value for money.
Once you have the foundational tech in place you can then look to bring on additional nice-to-have tech like Riskalyze, etc.
Step 8: Have a realistic timeline
Once you’ve decided to leave your current firm and go at it alone, you might be all fired up and ready to go. The best approach to starting an RIA is to be prepared for all of this to take time.
My advice? Give yourself at least six months to get this right, if not longer.
However, if you do want things to move along at a decent pace, the best thing you can do – and the best investment you’ll make – is to pay for help. Please don’t try and do it all alone; this is the quickest way for the risk (discussed in part one of this series) to become a reality.
Each of these steps takes time. Finding the right vendors, having conversations with clients, onboarding tech – the list goes on. These aspects all happen over an extended timeline.
Remember you’re handling all of these aspects of registering as an RIA while still practicing for your current firm. That’s a lot to manage! Don’t try doing it all at once.
Step 9: Submit your resignation
This was bittersweet for me. I’d worked for my previous company for almost 16 years, but it was time to go. The most important part of your resignation is to be respectful. Leave on good terms with your head held high.
Express your gratitude to your employer and your colleagues for the value they brought to you and your career.
Remember that the work doesn’t stop when you submit your resignation letter. That’s when it starts.
Also, keep in mind that no matter how respectful & professional you are in submitting your resignation some people and firms will retaliate and go after your clients. It’s sad to say but it happens all too often. One bit of advice here, don’t say anything to your current firm until the day you submit your resignation.
I realize we are all human and have meaningful relationships with people we’ve worked with for years but given the downsides and risks of leaving your firm and going indy you have to make sure you are protecting yourself.
Wrapping up on your journey towards independence
My journey toward starting an RIA wasn’t an easy one. I made mistakes, and I spent money where I really should not have. I hope that by sharing these steps with you, your journey toward independence is a little smoother.
My suggestion is that you browse through my blog, as I’ve shared quite a bit of content lately that relates to various aspects of running your own firm.
If you want to learn more about Conneqtor, a financial advisor course, and how it helps you take your practice into the 21st century, visit my website. You can also watch the webinar I did earlier this year with Redtail, where I discuss the steps in this blog post in more detail.
Sending plenty of positive vibes your way,
Derek Notman
