In this podcast I speak with Brad Wales, the founder of Transition to RIA, about the differences between being an in-house broker-dealer rep and having your own independent RIA firm. At the forefront of this discussion as the question of how to grow an RIA firm, and if RIA firm marketing is easier.
- Why advisors are (increasingly) transitioning to the RIA firm model
- Are broker-dealer reps at a disadvantage to RIA firms when it comes to marketing
- The three ways an advisor/team can transition to RIA
- If it’s easier to market an RIA firm or if broker dealer marketing is easier
- The pitfalls and challenges of growing a small RIA firm
- Common misconceptions about RIA firms
- RIA firm marketing success stories
For those of you who are new to my blog/podcast, my name is Sara. I am a CFA® charterholder and I used to be a financial advisor. I have a weekly newsletter in which I talk about financial advisor lead generation topics which is best described as “fun and irreverent.” So please subscribe!
Let’s get on with the blog!
RIA firm marketing is one reason why financial advisors transition to the RIA model
There are two major reasons why financial advisors at wirehouse firms transition to being an independent RIA firm, according to Brad.
- freedom and flexibility
Let’s say you were netting 40% payout as a captive broker dealer rep. Another way to look at it is that you are paying 60% of your gross payout to the firm for all the services they provide you. Brad challenges people to quantify this as a dollar amount and then imagine if once a year you had to pay this out as a check. Are you getting enough value in return from your firm to justify paying that amount?
The other reason is marketing flexibility. Many broker dealer advisors want to be able to enjoy more freedom in their RIA firm marketing if they were to transition into having their own independent firm.
Is it is easier to grow as an RIA firm than a broker dealer firm?
The advantages to being an RIA firm and having the flexibility that comes with RIA firm marketing are significant. In many cases, broker dealer reps are at a disadvantage to RIA firms because they have fewer options available.
- In some cases, wirehouse firms dictate which marketing firms that broker dealer rep can and can not work with. In other cases, you see restrictions on what the financial advisor can do.
- Many can’t use social media freely or participate in some features of LinkedIn such as LinkedIn messenger, using LinkedIn surveys or polls, and posting videos to LinkedIn.
- Other advisors are not able to personalize their marketing as a broker dealer rep at one of these firms.
- Then there are financial advisors who just do no marketing anyways and just get their new clients from referrals.
In most cases, marketing creativity is highly cut back if you are a captive broker dealer rep. It can be hard to grow if you can’t be creative, because you’ll look like every other financial advisor. You’ll be the same tired old financial advisor brand and it will be hard to attract attention and solidify your value proposition.
How does a broker dealer rep transition to being an RIA firm?
According to Brad, there are three major ways to transition to being an RIA firm.
#1 Start it yourself
Start an RIA firm yourself and build out your own suite of support vendors such as custodian, compliance, technology, etc.
#2 Outsource middle office
There are companies such as Dynasty Financial etc. that will provide you with middle/back office support as a packaged solution.
#3 Join an RIA platform
You go out as your own DBA with your own brand, but are technically wrapped up under a larger RIA firm umbrella.
Each of these options would probably give you more flexibility in your RIA firm marketing than being a captive broker dealer rep. The results are a strong brand concept, more recognition by prospects, less time spent battling with compliance to get the littlest thing approved, and higher potential to reach prospects through social media.
Financial advisor marketing success story
Brad told the story of a financial advisor who was a captive broker dealer rep and the numbers are looking better for him now that he went down the RIA firm path. He wanted to make videos to market his financial advisor firm. He went to his firm and asked. They said they theoretically would have no problem with him doing this, but there were thousands of other advisors and they had no way to monitor all of them.
It was the least common denominator approach to compliance. Not the firm’s fault, but it was hard for him to stomach. He ended up making the move to the RIA model and now has the flexibility to market as he wishes.
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