DIY Versus Joining an Existing RIA

Let’s say that you have crossed the Rubicon and have decided to go the Registered Investment Advisory (RIA) route with your franchise. The first major question every advisor will have to answer is whether to create your own RIA or to join an existing one. There are pros and cons to each option, with neither being the right or wrong choice. It simply comes down to who you are and what you want.

The process of creating a new RIA can be an exhilarating and rewarding one, but it is also an onerous one. It allows the enterprising advisor to seize maximum control of their destiny, customizing their franchise through the advisor’s own vision. But with that said, creating your own RIA can also be time consuming and expensive, and it requires the evaluation of a few different topics by the advisor.

The first topic is structural. You almost certainly will need to hire a legal advisor. The legal process starts with registration with the SEC, and those filings are cumbersome and detailed. As part of this process, a new RIA will have to draw up an ADV, formulate a Business Continuity Plan, institute a Privacy Policy, and build a Compliance Manual and other similar type documents. Once the legal process is complete, the new advisory then has to engage with a number of service providers for things like portfolio management, contact management, data storage, financial planning tools and many other products.

As you can see, there is much to do in building an RIA from scratch, and as such, it is fair to say that larger asset-based advisors and/or multi-advisor practices are more inclined to pursue this route.

The alternative to all this, then, is to join an existing RIA. Choosing this option versus the “do-it-yourself” version comes down to whether you’re inclined to do all of the activities outlined above. Joining an existing RIA that already has the framework for technology, trading, and compliance will allow you to avoid the burden – but for a fee or a toll for services.

The selection of your RIA partner is the first step, and it’s a crucial one. It should be defined by looking at the structure and operations of candidate RIAs and finding the proper fit. One of the deciding factors is how much control the advisor wishes to have over their business going forward. Some RIAs are more controlling than others, and as a result, this option is often better suited for smaller advisors or groups. For advisors that wish to exercise maximum control and flexibility over the way in which they do business, choosing an RIA that is broker-driven without bureaucracy is imperative.

When deciding between a DIY versus existing RIA, there really is no single answer. The option you choose will depend on who you are and what you want from your career. All I can say is that whatever route you choose: Go for it!

Key Client Fiduciary Advisors, LLC ((“KCFA”) is an SEC-registered investment adviser located in Fairfield, New Jersey.  This blog post is limited to the dissemination of general information pertaining to KCFA’s investment advisory services.  The information in this blog post should not be construed as personalized individual advice.  A copy of our KCFA’s written disclosure statement as set forth on Form ADV, discussing KCFA’s business operations, services and fees is available upon written request.