Q1 – Why should I consider transitioning to the RIA model?

Also available as podcast (Episode #1)

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Why should I consider transitioning to the RIA model?

The Registered Investment Advisor channel continues to be the fastest growing channel within our industry, and for good reason. It is the only option that provides for maximum independence and flexibility for both you and your clients. You choose how to run your practice, as well as what services and products to offer. The RIA model provides significantly better economics compared with any other affiliation channel. Both now while you’re still practicing, as well as with the valuation of your practice for when you eventually exit the business.

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Want to learn even more by better understanding what a transition to the RIA model might look like for your own practice?  I encourage you to schedule a Discovery call, and I’d be happy to begin that conversation with you.

Full Transcript:

Why should I consider transitioning to the RIA model? This is the Transition To RIA video series. It is question #1.

Hi, I’m Brad Wales with Transition To RIA where I help advisors like you understand everything there is to know about why and how to transition to the RIA model.

This is video #1 of a new video series I’m rolling out to answer questions that I get from advisors just like you. And so the first one I wanted to answer, because it is arguably the most often question I get, the most macro question of all the ones that could be answered is….”Why should I even consider transitioning to the RIA model?” Maybe you’re at a typical wirehouse brokerage firm now or you’re at an independent broker-dealer now and….”Why should I even consider transitioning to the RIA model?”

I would tell you, the generic salesy answer to that is a couple of things, and you’ll see this in advertisements, you’ll see it in different kinds of messaging, and it’s all very broad. You’ll see messages about how in the RIA model you’ll have better economics, you’ll have more freedom and control, you have the ability to build a business, not a practice.

I would tell you, all of those are absolutely correct. If you take the time to learn more about the RIA model, you will see every single one of those is absolutely correct. However, I’m a believer that simply telling you….”you’ll have better economics,” or, “you’ll have more freedom and control,” that’s great and all, but that doesn’t actually teach you anything.

It’s important that you actually understand exactly why those might be the case. As an example….“Why are the economics better or how are the economics better? How does that work both in my current practice, in the current day state? Does it also impact me one day when I want to sell my practice? Why are these economics better and will that relate to me as well?”

“This additional freedom and control, that sounds great, but really, what additional freedom and control will I have versus what I have now?” It’s important you actually learn what each of those steps are and what each of those options are available to you. And then with that, and I’m a big believer, to be fair, a lot of benefits, a lot of pros to transition into the RIA model. To be fair though, there are additional responsibilities as well.

I think it’s only fair – and you don’t see this as often in these advertisements – I think it’s important that you learn what those responsibilities are as well. I would tell you, because of the industry trends you see happening for a number of years now with this tidal wave of advisors moving from that more captive employee environment or broker-dealer environment into the RIA model, that the benefits do far outweigh those additional responsibilities. It’s nonetheless important to be aware of what those responsibilities are.

I would tell you, if all of this, the economics and the freedom and control and the responsibilities, if that was simple to answer, I could answer it all right here in a single video. The reality is, there’s much more to it.

There are a lot of nuances to some of these different factors. So I’m not even going to attempt to answer everything in this one video. That’s why I’ve made this video series to address all kinds of different aspects of the RIA model. Each one of them will be very detailed questions and very detailed answers.

These are questions that I have got from advisors like you that want to learn how this model works. To the degree I don’t answer one of the questions you’d like to know, I’d sure love you to reach out to me and I’ll certainly add it to the list. But know, these are actual questions from your peers that I’ve received over time.

Because we’re going to go into so many different areas of the model, I’ll tell you upfront, some of these questions you’re going to be very interested in and other questions, you might not have an interest at all. You might say….”that’s not something I would do with my future practice.” As an example, one of the questions I’m going to answer is….“can you offer insurance as an RIA?” You might be very interested in learning….“can I do that? How does that work?” Or if you have no interest at all in that, you might not find interest in that particular video.

I want to provide as much information to you as possible so you can really learn about this model and go much farther than these generic headlines of….“it’s better economics or more flexibility.” I think that’s really important.

I’m a believer, the more info you have, the better decisions you can make. I think that’s only being fair. To make any sort of change in your path as an advisor, or your affiliation model, or the firm you’re with, that’s a big decision. You really need to be informed about everything there is to know about it before you can make that decision. That is going to be meaningful to your career. So I want to try to provide you with as much information as possible to make sure you can make that informed decision.

With that, I don’t want this first video to only be high level. I do want to give you some meat on the bone as well in this particular video, before we dive into all these future videos.

A couple examples touching on these themes, these economics, and freedom and control that I want to leave you with to get you thinking and realize why it will be worth your time to go through some of these additional videos, to work with someone like me to learn more about this model.

A couple of ones….number one, I would challenge you to ask yourself, what is your current bottom line, take-home pay under your current affiliation model? I would tell you, there’s a lot of nuances to that beyond simply looking at your grid rate and your production level and you say….”I’m at this production, so I’m at this grid rate.” I would challenge you, it’s probably less than you realize or less than you hope that you’re actually taking home.

So number one is to make sure you’re looking at that correctly, but then number two is….”How would that compare to the sort of take-home compensation I could expect to receive in the RIA model?” I’m going to do videos on all this, but perfect example from this economics theme is comparing….“what do you make now and what could you make under the RIA model?”

Number two, have you ever been told at your current firm, the proverbial, “No” you can’t do something? Whether that was a particular approach you wanted to use to try to attract clients, perhaps it was a particular investment product or service you wanted to implement with your clients. Anything along the spectrum, if you were told….”No, you can’t do that,” I challenge you to learn – which I’m going to help you to understand – “Could I do that under the RIA model? And why am I maybe told no here but I can do it here?”

It’s important to know….”What are my options?” That’s where that flexibility and control comes into place. I think it is meaningful if you – especially those of you that have been in the business for awhile – I’m sure you’ve received a lot of “no’s” over time. Think through when those have come up. I challenge you to learn….“what instead would the answer be in the RIA model?”

The third one, the third tip is what is the current value of your practice? There are a lot of different ways valuations are calculated. It’s got more complicated over the years, but however you want to value your practice, I ask you….”what would your practice be valued under the RIA model?” To the degree you don’t know what the answer is, you’re not able to currently compare….”Am I better off staying on my current path and one day exiting the business on my current path, or might it make it meaningful economic difference if I were to go down this RIA path?”

Until and if you learn what those differences are, you don’t know what you’re essentially leaving on the table or not. A big thing we’re going to talk about is the economics and how your practice is valued and how that’s different from maybe what you have now. (See whitepaper)

The final example – this is not an exhaustive list – is your ability to attract clients. This comes back to the “no” situation of….“how much flexibility do you have to put yourself out there in the community, to get connected with folks in the media and press that could maybe help you get your name out there and how you position yourself? Do you have any handcuffs currently because of your current affiliation model that either outright doesn’t let you do any of these or they make it so restrictive, it’s not worth even attempting to do?”

The question is….”if I want to do those same things in the RIA world, would I be allowed to? How would that work? What would my options be?” That’s the flexibility, the control we talk about. So think those through. What are you not able to do now? What would you like to do? And then to the degree you don’t know the answer to it….“could I do those in the RIA world?” I challenge you to learn what those answers are so you can at least understand the difference between where you are now and what your options are and whether or not you should maybe consider making a change.

The main takeaway is there’s absolutely lots of benefits to transitioning into the RIA model. My goal is to help you understand all of those, but in significant detail as it applies to you specifically. Simply telling you….”You’re going to have better economics or more freedom and control,” – which is absolutely the case – that helps you a little, but that doesn’t nearly help you with what you need to learn, need to understand to be able to really figure out….”Is this something I even want to consider potentially moving into this model?”

That’s what I’m here to help you with. That’s what we’re going to do with this video series.

You owe it to yourself. You’ve worked very hard to get your practice to where it is now. For many of you, you have many years ahead of you still in the profession and then one day there will be that liquidity event. Which is where you reap that final reward for your whole lifetime of work to build up to that and you owe it to yourself to know….”Am I in the best situation now? My affiliation model, the firm I’m at?” Or, “Might this RIA model be better?” There’s a reason thousands of advisors before you have made that change.

Now, ultimately, maybe that change is not for you. Maybe there are particular reasons you prefer what you currently have now versus what the RIA model provides. But I would tell you, you owe it to yourself to at least know what that model looks like. The proverbial, is the grass greener on the other side of the fence? If you don’t take a look, and not just a look, but spend some time to dive into it and understand it, you’re really shortchanging yourself.

Why put so much work as you have, and will for many years to come, into your practice to possibly shortchange yourself of what you could potentially have? I’m not suggesting that the RIA model is for everyone. It’s not. However, for a large majority of advisors, it is worth them digging into, it is appealing. I would challenge you to spend some time to make sure you’re learning about it and can make that informed decision about whether you should or should not consider this sort of option.

With that, like I said, I’m Brad Wales with Transition To RIA where I help advisors like you understand everything there is to know about why and how to transition to the RIA model.

I’ve talked about it here. There are lots of different things that you’ll want to learn more about. I’m going to do a whole series of videos here. I encourage you to take a look at them. I’m going to do economic whitepapers you’ll be able to look for.

If you’re not already there, jump on over to TransitionToRIA.com. That’s where I’ll list all the videos. That’s where I’ll put the whitepapers. At the very top is a contact link, click on that. You can instantly and easily schedule a one-on-one conversation to begin this sort of dialogue. Whether you have a question about a specific part of the RIA model and how might that compare to what you have now or if you simply want to begin that macro conversation of….”Here’s my current affiliation model. Here’s my current firm. Here’s my client base I have now. Here’s what I want to achieve with my practice. What might that look like if I were to make a move to the RIA model?” That’s what I help advisors with all day long. I’m more than happy to help you with that as well.

I hope you found value in today’s video and I hope you find value in all of the videos to come as we begin this new series. I encourage you to take a look at the list. To the degree you don’t see a question answered that you’d like me to answer, please reach out to me. We can discuss it directly or it will give me an idea of a future video I should add to the list as well.

I hope you found value on today’s video, and I’ll see you on the next one.

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