10 Steps to Reaching Advisor Freedom

How to Start an Independent RIA Without Breaking the Bank

November 17, 2022 |

shoestringria stacked color

Going independent has its advantages.

As an independent RIA, the advisor calls the shots. They can use any technology, offer whatever products they wish, and make more money per client because they are not beholden to a corporate RIA. Independent advisors primarily work from home, a potential solution for advisors who don’t want to return to office work.

But this freedom does come with a cost. Advisor-entrepreneurs had to figure out how to succeed in this industry on their own. Until recently, there was very little guidance on how to succeed as a startup RIA.

Seeing the need for clear guidance, the BillFinTM team at Redi2 Technologies created a roadmap for startup independent RIAs to help them avoid common pitfalls while navigating financial regulations. This educational series, originally called The Shoestring RIA, is called RIA Resources since our focus was high quality advice at a reasonable cost.

Why Going Independent is Worth It

Starting up an RIA involves significant sweat equity and patience, but it’s well worth it for the freedom alone for motivated advisors.  Your bosses decide what you’re selling, and to whom when you work for somebody else. Running your own RIA allows you to offer what you want for your clients.

Perhaps your current firm is stuck in the past, eschewing AdvisorTech in favor of inefficient paper-intensive processes which can harm the customer experience. Schwab found that three-quarters of independent RIAs cited developing stronger long-term relationships as a driving force in their decision to go independent.

Others may feel trapped in their current firms with little say in what products they offer to their clients. With an independent RIA, you’re free to choose the products and services you offer and the companies you work with.

While there’s a lot of work, motivated and experienced individuals can spin up their businesses in as little as 90 days. However, we don’t believe business experience should hold motivated advisors back, so we created this ten-step process to guide you and get your RIA up and running quickly.

We’ve summarized our recommendations below, but you can read our full guide on our website here.

Step 1 – Do Your Homework

Before spinning up your independent RIA, take some time and think about your goals. Do you want to be a lifestyle practice where you handle most of the business yourself or a larger firm with hundreds of clients?

The easier option is a lifestyle practice, as you don’t have as much overhead and can run everything from home. You can set your hours, choose who you want to work with, and have complete control over the direction of your business.

While this might sound enticing, lifestyle practices have their disadvantages. There’s a limit to the amount of work you can effectively take on, and you’re solely responsible for seeking new clients.

Firms scale their businesses by building repeatable processes, hiring staff and buying software that can automate a lot of the work. Growth does not come cheap, but RIAs that made the investments now have billions of dollars in AUM  were small startups just a decade ago. But these firms also require a much larger time commitment from the owners, and decision-making is more distributed.

Once you decide which route to choose, it’s time to write a brief business plan, decide on your business structure, what you’ll charge, and what areas you’ll focus on. You should also start researching how to separate from your current employer, which may not be easy.

Training agreements, confidentiality restrictions, promissory notes, forgivable loans, non-solicitation, and non-compete agreements may affect the process to varying degrees. Determine whether the Broker Protocol applies to you, which can further restrict what you can do after leaving a firm.

Step 2 – Develop a Budget

Developing a budget will help to control your overhead costs. While everyone’s budget looks different,

  • Insurance: Every RIA is required to carry errors and omissions insurance, and if you have employees, carrying workman’s compensation and offering health insurance is necessary.
  • Office Rental: While many new RIAs will likely be able to do without an office, those focusing on growth practices must consider office space and its associated costs.
  • Office Equipment: Whether you work from home or in an office, you’ll need equipment. Think computers, printers, desks, chairs, and so on.
  • Software: Depending on your comfort zone, you can choose an all-in-one solution (Morningstar Office, Envestnet |Tamarac, CircleBlack, etc.), or choose platforms on an a la cart basis (BillFin, Blueleaf) – but make sure the options you select integrate well with one another.
  • Marketing: This includes anything that gets the word out, including website hosting and design, business cards, promotional literature, etc.
  • Professional Organizations: When you’re just starting, professional organizations can be a great resource to keep abreast of the latest developments in the industry. They’re also fantastic for their networking opportunities.
  • Compliance: Regulatory mistakes are costly, so outsourcing compliance is a helpful tip. We will dive into this further in step 6.

Research from the XY Planning Network found that the average start-up RIA requires about $12,000 to $50,000 in first-year funding. Costs vary based on the type of firm you’re starting, the location, and the services you provide. Don’t forget your living expenses. Make sure you have enough to live on – you likely won’t be profitable for a year or more. During this period, you’ll need to have enough to pay yourself.

To break down your budgetary needs even further, we’ve provided breakout estimates for the most significant startup costs below.


Budget Item Funding Required
Filing and Registration Fees $400
Business Liability Insurance $400
Professional Liability (E&O) Insurance $2,000
Marketing $1,000 to $3,000
Website Design and Hosting $2,000 to $5,000
Office Equipment $2,000 to $5,000
Organization Fees $1,300 to $2,300
Compliance Outsourcing $3000 to $5000
Software Varies*
Living Expenses Enough for 12-24 months


* Software costs vary based on the technology you select. A few basic programs will cost about $1,500, but most moderately upgraded setups cost $5,000 or more.

Step 3 – Choose a Name, Structure, and Make it Official

With a business plan and budget, you now have what’s necessary to begin the actual work of starting your RIA. It’s time to choose a name if you haven’t already. You can name your practice anything you want, but it’s a good idea to check that the matching .com is available.

Next, you’ll need to decide on a business structure. While you can organize your RIA in any way you see fit, you might consider setting the business up as a Limited Liability Company (LLC). This separates your business from your finances and is very easy to set up.

Of course, consulting your attorney and accountant for advice on the best strategy for your specific goals is highly recommended. We also recommend hiring a compliance lawyer to ensure your filings are in good order with the state and SEC, policies and compliance manuals are in place, and client agreements are set.

Once you receive the paperwork from the state, you’ll want to visit the IRS website to obtain an Employer Identification Number (EIN). These two documents allow you to apply for bank accounts and credit cards.

While all this is underway (which may take several weeks), make sure to study for and take the FINRA Series 65 exam, and any other relevant exams, if you have not done so already. The exam currently costs $187 and is available online, and consists of 130 scored questions. You must answer 94 questions correctly and have three hours to complete the test.

Step 4 – Market Your Services

You can’t just start an RIA and expect people to find you on their own. A sound marketing strategy is essential to your startup’s survival and doesn’t need to break your budget. We recommend that, at a minimum, you spend time ensuring your website is search engine optimized.

SEO, as it’s more commonly known, involves tweaks to your website’s design and text to make it easier for search engines to crawl. We recommend targeting local keywords (ex. “RIAs in (my town)” vs. generic RIAs near me, etc.), as they will be cheaper and easier to rank for.

Other worthwhile marketing avenues to consider include:

  • Social Media: Easy to set up but don’t create an account everywhere. Pick two you know you can keep updated regularly and have the best chance of reaching your target audience.
  • Blogging: While fairly easy to set up thanks to tools like WordPress, blogging does require an additional time commitment. Simply writing a blog post isn’t enough. You’ll need to research topics to write about and whether or not people are searching for what you’re talking about. Longer form content (1000+ words) is also necessary to rank on Google these days.
  • Podcasting: If you’re not camera or microphone shy and have an opinion to share, starting a video or audio podcast is a great way to get the word out. We don’t recommend this early on as it will take you away from other important tasks and can be labor-intensive.

Step 5 – Getting Your Books in Order

With the basics of your new business in order and business bank and credit cards opened, the next step is to ensure you have a way to manage your finances. The easiest and most broadly supported platform is QuickBooks, and we recommend opting for the online version since it allows you to access your books from anywhere.

Also, sign up for a bill-paying and invoicing service. We recommend Bill.com (which has a QuickBooks plugin) and BillFin, which makes calculating your client invoices and payment processes automatic.

How should you set up your QuickBooks Chart of Accounts for an independent RIA? A basic chart of account looks like this:


Balance Sheet Categories Income Statement Categories
Assets Income
Liabilities Expenses
Assets = Liabilities + Equity Profit/Loss = Income – Expenses


Balance sheet categories are things you either possess or owe, while income statement categories are how you determine whether a business’s activities are profitable. However, these categories are far too generic for an RIA. You will need more specific subcategories to understand your business’ finances.

Here’s what we suggest you use as a start for your Chart of Accounts:

  • Asset Subcategories: Cash, accounts receivable, office equipment, business bank account, real estate
  • Liability Subcategories: Accounts payable, unearned income, wages payable, payroll taxes payable, credit cards
  • Equity subcategories: Owner’s contributions, owner’s withdrawals, retained earnings.
  • Income Subcategories: Planning service fees, product sales, speaking fees, asset management fees
  • Expense Subcategories: Supplies, insurance, marketing, payroll, license and registration fees, conferences, travel, membership dues, meals and entertainment, office rent/lease, software vendors, depreciation, utilities

This is a lot to take on and keep track of. We recommend hiring an accountant or bookkeeper to help you set up your books properly and keep them current. Make sure they have experience with RIAs. They can tell you which categories are relevant and may have recommendations for additional subcategories to track. While consultations are typically free, expect to pay a few hundred dollars for a QuickBooks certified accountant to set up your books.

Step 6 – Ensuring Compliance

The financial industry is tightly regulated, and mistakes are costly. Even if you’ve done all the work yourself so far, you’re just asking for trouble if you attempt to handle compliance paperwork yourself. We recommend outsourcing this work to an experienced compliance professional, as a single mistake can tie up your launch for weeks (if not months).

These firms learn your business model, confirm that your documents are all in good order, including your Form ADV 1, compliance manuals, brochures, and marketing materials, and that your books comply with state and federal record-keeping requirements. After this initial work, the CCO will continue to advise on compliance matters. For this service, you’ll spend about $3,000-$5,000 a year.

Step 7 – Choosing a Custodian (If You Need One)

If you plan to operate as a fee-only financial planning firm, choosing a custodian may not be necessary if you’re not directly managing client assets. But most RIAs manage their client’s portfolios, so we assume you will need one.

For new RIAs on a budget, we recommend you choose a custodian with the following qualities:

  • Support for small firms: Many of the largest custodians have minimum AUMs, so be sure to ask when seeking out custodian services. Second-tier custodians (who get their name from their size, not the quality of service) are more likely to serve startup RIAs like yours unless you’re bringing a substantial amount of business.
  • Their technology: Smaller custodians must innovate to stand out. Some custodian firms may have technologies or features that might work well with how you plan to work or the services you plan to provide.
  • Their services: What level of service does the custodian provide? We recommend focusing your research on their trading support, compliance offerings, and technology expertise.

Step 8 – Choosing Insurance

With your custodian selected, everything should be in place to operate your RIA efficiently and legally. The last step is protecting the investment you’ve made with insurance.

Your state may or may not require errors and omissions (E&O) insurance, but we strongly recommend you carry sufficient coverage. Some custodial firms like Schwab require at least $1 million in E&O, so if you prefer to work with the bigger names, it’s the price you’ll need to pay.

The good news is that it isn’t expensive, and most firms will pay less than $1,800 annually. But the protection it provides you against mistakes definitely makes it well worth its cost.

If you plan to hire employees, you must carry a workman’s comp policy (unless you live in Texas). You might be able to obtain a policy from the same company you got your E&O policy from, so it’s worth it to ask. Health insurance is also important since you’re likely no longer on your old firm’s policy and for your employees, who will expect a competitive benefits package.

Step 9 – Go to an RIA Conference

At this point, your RIA should be up and running and serving its clients. While free time will be at a premium early on, you’ll be able to step away within a few months. We recommend using some time to attend one or multiple RIA conferences.

These events offer advisors the opportunity to network, learn new skills, and stay on top of industry trends. They’re often in places that are great travel destinations, so with a little planning you can use the time around the conference for some much needed R&R.

Some favorite conferences include FPA NorCal, the brand new Future Proof Festival, and AICPA & CIMA ENGAGE. We recommend that you attend your custodian’s conference if they hold one.

Step 10 – Join a Professional Organization

RIA conferences are valuable to firms in their formative stages. They provide an easy way for advisor-entrepreneurs to network, talk, and discover everything they need in a central spot. We recommend going further and joining some of these same professional organizations holding these conferences.

The organizations known to have the most value for advisors include:

The largest organizations all have regional chapters or groups, which enable networking locally – an important part of being a successful independent RIA.

Following all ten of these steps won’t guarantee that your firm will generate enough revenue to support your lifestyle or grow enough to make you wealthy, but in our experience, they are the best way to start.  There are many resources readily available online to assist and guide advisors looking to strike out on their own.  This advice, coupled with outside professional guidance, will have you well on your way to independence.

The Shoestring RIA is a series of articles written and published by the BillFinTM team at Redi2 Technologies designed to help RIAs as they start out on their own. We recognize just how challenging it is to venture out and build a successful business. Our articles will be focused on helping these new businesses with a wide range of topics.



The information, analysis, and opinions expressed herein are for informational purposes only and represent the views of the authors, not necessarily the views of Envestnet.  Nothing contained herein is intended to constitute legal, regulatory, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type.  The views expressed herein reflect the judgement of the authors as of the date of writing and are subject to change at any time without notice.  Information obtained from third party sources is believed to be reliable but is not guaranteed. Envestnet is not a law firm and as such, does not provide legal or regulatory advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel as applicable.