Many advisors understand the advantages of joining an independent RIA, as we have touched on in earlier posts. But for some advisors, the decision to do so only creates more questions and can be mired in confusion. What type of RIA service model best fits your needs? This is the second in a series of posts in which we examine several typical RIA service models that prospective advisors can consider when deciding to join an existing RIA – and we are also comparing how each stacks up to the DWA Independent Advisor platform.
Part 1 – Roll-Up RIAs, Part 2 – Employer RIAs, Part 3 – RIAs owned by firms with affiliated “independent” broker-dealers - coming soon!
Each of these service models has its advantages and disadvantages, so carefully determining your needs and preferences, and understanding the characteristics of each model is crucial to finding your ‘right fit’.
Employer RIAs
As their name implies, ‘Employer RIAs’ are structured to allow individual advisors to join the firm as an employee. The primary benefit of this arrangement for the advisor is being able to take advantage of the existing RIA advisory model, without having the responsibilities of starting and running a firm. The benefit to the firm is, very often, acquiring the advisor’s AUM. In this model, the advisor fully transitions to the existing firm’s branding and resources. Advisors are typically required to operate from the firm’s office and support is provided by firm staff. Branding and resources are defined exclusively by the firm, and there is little to no room for deviation from set standards. There are variations between ‘Employer RIA’ platforms. For example, in some models advisors turn over ownership of their clients to the firm; in others, advisors may retain client ownership, but sign over AUM. These firms typically provide money management services which are proprietary and, many times, restrictive. Custodians may or may not be limited. In this model, the firm is generally not a broker-dealer but may offer options for commission business as an option. Upon signing with an ‘Employer RIA’, the advisor generally receives a “payout” ranging from 50% to 70% of fees.
The DWA Independent Advisor model offers many of the attractive benefits of the “Employer RIA” without the drawbacks. In the DWA model, advisors enjoy all the benefits and freedoms of running their own advisory business – but can leave the resource-draining details of operations, compliance and logistics management to the DWA team. Additionally, DWA offers advisors a broad range of services in an open architecture manner, including choice of investment management and custodians. And this flexibility won’t break the bank – advisors are simply charged a service fees based upon AUM. Best of all, DWA makes it possible for advisors to run their own profitable and rewarding business. By providing advisors with dedicated support resources, leading-edge technology, and an engaged community of like-minded advisory business owners, DWA advisors are truly independent, but never alone.
Tags: financial advisors, going independent, RIA Regulations, Series 65 Exam, wirehouse breakaways