How To Start An RIA

With a new generation of clients seeking specialized services and the rise of flexible business models, there has never been a better time to consider launching your own Registered Investment Advisor (RIA) firm.

While for many, establishing one’s own RIA seems like an insurmountable task, you don’t need to have every detail figured out from day one. Securing the basic aspects of a business plan can build the framework for the business, provide a solid foundation, and supply some integral clarification that will help to determine the direction that the business will take, as well as its next steps. 

Step 1: Define Your Business Strategy

Before you file any paperwork, you need a clear vision. This is the stage where you define your firm’s identity and goals.

• Identify Your Niche: What problems are investors facing that your firm will solve? Clarify what will make your firm stand out from the competition. Determine expected costs of operation, potential revenue, and the amount necessary to make the business a viable operation.
• Identify Your Ideal Client: Your target client demographic will shape every aspect of your business. Consider their needs, what you can do for them, and what they are willing to pay. This will help you select the right services, fee structure, and technology.

RIAs typically use one of three primary fee structures. Choosing the right model is critical to your firm’s profitability and market position.

• Assets Under Management (AUM): The most common model, where the firm charges a percentage based on the client’s assets. This model focuses on investment management, and financial planning services are often included.
• Hourly or Project-Based Fees: The firm charges a client for the amount of time spent on a project or an account. This is ideal for clients who need specific advice but not ongoing investment management.
• Subscription Fees: The firm charges a flat monthly fee for a defined scope of work. This model is often focused on financial planning and can be an excellent option for serving younger clients who are still building wealth.

Once your strategic vision is in place, you can begin to outline the operational components that will bring your firm to life.

• Compliance: This is arguably the most complex and critical aspect of starting an RIA. While you can handle initial tasks like choosing an entity type and securing insurance, compliance requirements quickly become intricate. It is highly recommended to hire an experienced compliance professional to guide you through the process.
• Technology Stack: Identify which software and tools you’ll need to run your back office. This includes hardware (computers, scanners) as well as software for CRM, financial planning, e-signatures, and cloud-based document storage.
• Marketing & Branding: Secure your firm's online presence by choosing a name, a URL, and a web host. Plan your website content, social media strategy, and other marketing materials to attract your target clientele.