Understanding Your Options Part 1 – Roll-Up RIAs
We have discussed the advantages of joining an Independent RIA 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?
In a series of posts, we will examine several typical RIA service models that prospective advisors can consider when deciding to join an existing RIA – and we’ll compare each to the DWA Independent Advisor platform. We will examine one model type per post to keep things simple.
Part 1 – Roll-Up RIAs
Part 2 – Employer RIAs
Part 3 – RIAs owned by firms with affiliated “independent” broker-dealers
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’.
Roll-up RIAs are structured in essence, as a vehicle to ‘pool’ the assets of many advisors in order to create and grow a single larger entity. These firms are often referred to as “advisor owned” companies, and position advisors as shareholders of the parent company.
The roll-up RIA business model transitions advisors into their operation by buying a portion or all of advisor’s existing RIA or practice, and then executing what is typically a long term contract to grow business. The advisor’s payout is generally 30%-40% with various incentives.
In this arrangement, advisors maintain their individual client relationships. Advisors no longer have complete direct ownership, and in some cases, any ownership. The roll-up typically offers a definitive and proprietary strategy for managing advisor’s clients’ money, and generally requires the advisor to adopt the “firm way” of doing business.
Advisors operate exclusively under the brand of the roll-up RIA and the services and tools provided to the advisor are generally proprietary. Advisors often operate from the firm’s office space and have access to support staff, who are employees of the roll-up firm.
The roll-up may or may not be affiliated with a broker-dealer for commission business. If an advisor is interested in providing commission-based products, additional research is required to ensure the desired b/d service is available.
Exit strategy is usually limited to the future sale of roll-up entity after the firm aggregates many advisor businesses and assets.
Roll-up RIAs generally seek advisors with $100mm or more of AUM, although less than that is becoming more common.
Now, let’s see how the typical roll-up model compares to DWA’s Independent Advisor model.
Both service models can offer advisors the tools and resources they desire for their business; the DWA platform however, offers unmatched flexibility because we never limit advisors to a narrow set of services and products, and there are no proprietary products. DWA understands that one size rarely fits all. This is precisely why we developed our open architecture service model for advisors, which offers a broad selection of investment management choices, custodians, options for additional service providers, and integrated technology solutions. Advisors, and their clients, deserve nothing less.
The roll-up model offers advisors partial ownership in the parent company, but it also strips advisors of ownership of their individual client relationships, accounts and revenue streams. DWA’s Independent Advisor model allows advisors to preserve ownership of their individual clients and accounts, and their practice. With DWA’s service platform, you maintain your valuable relationships and assets, and we provide you with support solutions to help manage your practice and grow your business. You also enjoy the systems and processes that enable advisors to experience significance efficiency. You may choose where you work, see clients and how much or little you spend on your practice. Ultimately, the total DWA platform translates to helping you realize a much greater value for your practice, should you decide to sell all or part of your business.
DWA’s independent advisor model is proving to be the platform of choice for advisors who are seeking to operate and develop a client-centered, independent practice.