Why Starting an RIA should not be a One-size-fits-all Decision (Part 1)

As compliance consultants, we’ve worked with a number of start-up RIA’s over the years and can say it is not a one-size-fits-all business venture.

There are a number of considerations investment advisors should address as part of the planning process which save time, conflicts, and expense later on.

SEC RIA Admissions

SEC RIA Admissions 2013-2015

An important step in starting a new RIA is to make a solid analysis of goals. When considering goals a thorough research of the business model, tax planning, custodian relationships, state rules, and more will impact the cost to establish the RIA and decisions down the line. For many investment advisors wanting to start their own RIA the effort involved in dissecting various aspects of formation is beyond their expertise.

To balance out the complexity in setting up a new firm, some RIA principals will start with a simple low cost template based solution and assume they will modify it later once they build up capacity. From what we’ve seen, this can create a number of even more complex problems that are not easy to upgrade or change once the firm is already doing business. As an experienced consultant to new RIA firms starting out, we caution against making decisions without fully understanding their impact.  

Factors driving RIA Startups

One important aspect of establishing a new RIA firm is complexity of the business model, both now and in the future. There are a number of products and client preferences to work with. Over years demographics change and consumer preferences evolve. For instance, if the plan is to serve younger generations, a Fintech strategy will need to be adopted as part of the business model. However, Fintech firms are in an evolving state where compliance regulation and product offering are constantly being developed. For a new RIA, researching a well thought out Fintech solution now can make the difference later when some Fintech providers will likely fail, or get tangled up in regulatory actions, bad press, or worse.

 As another example, many firms want to start with a niche they’re comfortable serving. Matching the value proposition to long term goals is helpful. If a firm is adopting a competitive price strategy, they may decide to partner with a third party money manager rather than hire analysts. This decision is followed with the question of available resources through the partner, technology concerns, and restrictive agreements. There’s many other market segmenting factors as well that have restrictive consequences which are not easily changed.

The best consulting advice helps a newly forming firm winnow down the possibilities with stakeholders while discussing pros and cons of various options. Starting from a foundation that considers future strategy, a new firm can apply resources toward meeting goals now and later.

RND Resources Inc assists new RIA firms with SEC application

RND Resources Inc assists new RIA firms every step of the way

Investment advisors and breaqkaway brokers that take the plunge should do everything possible to ensure that their new business is set up to maximize resources. “We’ve worked with a lot of RIA structures after they were set up and it’s clear that many don’t consider advanced planning strategies”. Some mistakes are costly to fix in terms of adopting changes to procedures and policies, negative exams, and staff training.  Reaching out to an experienced consultant allows new business stakeholders make important decisions with confidence.

Visit our Resource Guides for tools to help set up a new RIA


For more information about setting up a new investment advisory firm or for a confidential consultation about breakaway broker strategy, reach out to our business development team. Call us at (818) 657-0288 or send a message using the form below.

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