So You Want to Start an RIA

August 17, 2021 |

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The Shoestring Business Plan

Make no mistake, running your own RIA is a business and should always be treated with the same considerations as any business, such as how to handle products and services, operations, sales, marketing, and finances.

Though some RIAs may join an existing RIA firm to ease their operational burdens, many RIAs wind up starting their own firms or go on to register as both a broker-dealer and independent investment advisor. So, it is crucial to have clarity on the basics of your business. In any case, you won’t necessarily need to produce a lengthy business plan to do this but will need to answer the following questions before a more sophisticated plan can be created.

  • What specific advisory problems are you solving? — Be as specific as possible. Targeting defined problems makes planning their solutions easier. Perhaps as a young advisor starting out, your business goal is to rapidly expand a base of reliable clients. Knowing this you may choose to help schoolteachers in planning for their future and retirement investments, because there are many responsible teachers which makes for a promising market. But don’t stop there, constantly learn more about who you want to serve and how.
  • What products and services will you offer as solutions to these problems? — Go beyond general products and services, be specific in the offerings you give your clients, and think about the advantages and disadvantages of the products given your target clients circumstances. Continuing with the example of serving teachers, products offered to them must be competitive because as a group they are typically solicited too often, and they have retirement options that are unavailable in other professions. Finding the gaps in their investment options could help finding avenues for penetrating the teacher market.
  • How is your firm different from other financial planning firms? — Given the answers to the previous two questions, you may discover a niche you can serve. If your answers are too general, you may be running the risk of disappearing into the noise of every other competitor’s marketing and sales efforts.
  • What are your specific costs for running the business? — In this series, the general costs for anyone transitioning into an RIA will be laid out, however, every advisor will have specific individual costs for running the business. Tally those costs specific to your situation and forecast them over the next six months to a year. A young advisor still living with it’s parents could have a cost advantage over others with greater overhead. Whereas a lifestyle advisor will be keenly sensitive to the overhead they need to pay to maintain their living standard.
  • How will you form your revenue streams? How much will you need to generate to maintain and grow the business? — All entrepreneurs need to know where their revenue streams flow from, short of that, they should be working on finding some. If you don’t have ideas on revenue streams, continue to refine and use your answers from the first two questions to locate where they can come from. This perennial question must always have a firm answer, otherwise, without knowing real sources of revenue the business is in jeopardy of failing.
  • What future challenges can you expect to face? — Forward thinking must become second nature to RIAs since the business world is ever changing. Shifts in industry regulations, or technology advancements can displace your business if you don’t pay attention. Remember the things that have an impact on your operations, and then create contingencies to overcome those challenges if they arise.

Everything you’re going to need!

With a business direction in mind, you can now look at the overall business requirements specific to running an RIA. The choices you’ll make in each of these component categories should be tailored to your needs, but they will need to be addressed in some way in order to legitimize, protect, and grow your business. Each category has been expanded with some of the major tasks.

  • Legal Establishment — Establishing a legal entity; form advisory agreements; register trademarks and copyrights.
  • Regulatory Compliance (SEC) — Register using the ADV form; achieve Series 65 license; develop policies including compliance guide, ethics guide, and standard operating procedures to ensure compliance.
  • Finances — Setup accounting systems; establish bank and credit accounts; determine fee structure.
  • Administration — Partner with a custodian to handle client assets; setup reporting systems; setup portfolio management and financial planning systems; setup client portal.
  • Insurance — Purchase health insurance for employees and self; purchase E&O insurance.
  • Technology — Get business and fintech apps to help run the business: CRM, portals, trading programs, document signing and archiving, billing, risk analysis.
  • Marketing — Create brand logo and design; establish online assets: social media, website, and marketing platform memberships; establish communications channels: email, phone, chatbots, etc.; create marketing strategy.

By this point, much of the mental groundwork has been covered. You should have a clearer idea of what motivates advisors to start their own RIA, and if those match your own desires. Advisors interested in becoming an RIA will have to answer fundamental business questions and will continue to refine their thinking by revisiting them often.

Remember, in later articles, we’re going to break down the costs for major expenses in more detail, explore the registration and legal processes, discuss many of the technology options that make running your own RIA possible and efficient, and address other business issues that are unique to RIAs.


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.