RIA firm marketing for financial advisors who want to kick their broker dealer out the window!

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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, RIA firm marketing tips,, and how to break away from your broker dealer and start an RIA firm that kicks butt!

You’ll learn:

  • 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!

Sara Grillo, CFA is a highly fun and slightly crazy marketing consultant based in NYC.
I am an irreverent and fun marketing consultant for financial advisors.

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.

  1. economics
  2. 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.

So far we’ve talked quite a bit about a variety of topics related to RIA firm marketing. But if we haven’t answered your questions by now, check out the podcast where we continue our discussion of how to grow an RIA firm, how to transition out of the broker dealer model and into the RIA world, and more!

Podcast transcript – Transitioning into an RIA firm with Brad Wales

0:00:00.0 SARA GRILLO: Is it easier from a marketing standpoint to be an RIA firm? Let’s talk about RIA firm marketing… Today we have Brad Wales here. Brad is the founder of Transition to Ria. Before that, he was with Raymond James for 16 years. Hello, Brad.

0:00:55.2 BRAD WALES: Hello, Sarah, thank you for having me on!

0:00:58.8 SARA GRILLO: Why are advisors increasingly transitioning to the RIA a model, in your view…

0:01:06.8 BRAD WALES: Yeah, two primary reasons. Every situation’s unique, every situation is different, but the into main themes you hear at a macro level of both because of the more peel and economics of the A model, and that’s everything from bottom line income in the given year to your ability to grow your assets faster to that final eventual exit strategy, so it’s at a very high level, but those are the main economic drivers, and then the big one that’s equally addresses mostly the pain points that are out there is just the flexibility of the RIA model, and so you and I have talked before, a lot of what you help advisors with from a market perspective, those strategies just either are not even possible for them to do in their current affiliation model or just prohibitive, and certainly that’s difficult when you’re up competing against advisors that don’t have any of those handcuffs. So economics and flexibility, the two main drivers.

0:02:09.1 SARA GRILLO: I love this. So let’s kinda dig in a little bit deeper here, so the economics, this is not something that I discuss a lot on my podcast, so it would be really great if you could give me more specifics about how the economics tend to vary between… When people are at a broker dealer and at an RIA independently.

0:02:32.1 BRAD WALES: The best way I try to frame it, and I talk to advisors in all different affiliation, models and channel, so one answer doesn’t give it justice, but if you look at… You’re kinda captive W2 advisor will say in a wire house firm, what I always challenge them to do is to think of their payout, and oftentimes, it’s an exercise I walk through to whatever I say, Oh, what’s your payout? And they kinda mentally think of what the grid rate is, and they come up with some number, and the reality is, it’s not only that number, then there’s a bunch of things that deduct from it, but however you come up with that number, let’s say you’ve concluded just easy numbers here that you are not an 40% of your gross pay out… Well, the flip side to look at that is that also means that you are paid in 60% of your gross to the firm you’re at for all the services they provide you, and so I challenge advisors a quantify that inverse, that 60% or whatever it might be, come up with a dollar amount of what that actually equals of your gross, and then imagine if instead of that just coming magically out of, you know, your fees that come in and then you only receive net imagine if you got 100% of your fees and at the end of the year, you had to write a check or whatever, that’s 60% dollar, not, which for many advisors is a very large number, and then just ask yourself, are you getting enough value in return from your firm to justify that size check and if you are, Hey, maybe from an economic standpoint, you’re in a good place, if you think you can build out that same suite of value and services for less money, and knowing the difference of that goes into your pocket, that’s where a conversation and looking at how [broker dealer] payouts differ.

0:04:19.3 BRAD WALES: Is really important in the RIA Model.

0:04:20.6 SARA GRILLO: . This is great insight. I think all of us kind of have this idea in our minds when we are giving somebody a cut of something that is this really worth it? But then I have just seen so many advisors that will say that it will complain until the end, but then they would never be able to actually do the things that their firm does for them if they were on their own. It’s like every month I do e-commerce stuff, I sell books and I have this membership sold through on my website, and so I have a payment processor and they take a cut of my payments. And so every single month I’m looking at my statement and I’m like, Oh, they’re telling me all these fee if these fans are coming, but every time someone buys a book, when I’m like in the middle of putting my kids to bed, like, Do I really wanna be shelling out the whole… You know what I’m saying? I can’t… So the question though is, are you the type of advisor that can really do this, that can have this flexibility and how to be a blessing?

0:05:23.7 SARA GRILLO: So what would you say about that?

0:05:26.9 BRAD WALES: Yeah, it’s not just, do I want to do it? So I’ll give you an example, and I’ve had plenty of these conversations and sort of preface it, I’m not suggested in the RIA models for everyone, it is not… And so I’ll give you a typical example. And I personally believe as an example, that the employee channel out there in the industry will always exist, because I think there’s a subset of advisors that no matter what the economics are, no matter what the flexibility is, they like the structure of the employee… Can I’ll give you an example of that? That I’ve had plenty of conversations over the years, and I could be talking to an advisor that at the end of the day, they’re W2 Advisor, one of these large firms, and at the end of the day, after it goes through the pain… Yeah, that’s not fun. But at the end of the day, they are met in 500000 in their pocket, and they say random 50,000 a year, I come in at 9 AM, I leave at 4 PM, I don’t work on Fridays, and I never missed any of my kids sporting the events and that’s a happy life, and I’m content with that, and so even if you can show me how to make 700,000 a year, whatever extra effort is worth it for that…

0:06:40.5 BRAD WALES: Just not for me, and I totally respect that. They wanna be an advisor. They don’t wanna be a business owner. Absolutely respect that. And you do see that, so by no means suggestions for everyone, but for those that are willing to take on that additional responsibility, the rewards that come with it far outweigh the extra responsibility again that goes with it, so…

0:07:04.7 SARA GRILLO: What are those responsibilities, Brad?

0:07:08.6 BRAD WALES: Yeah, so everything from… Again, to use that example of that captive advisor that I in, that just comes and goes everything from… Most people think of compliance, of course, you will be responsible for your own compliance, two-edged sword, you have that responsibility, but you also have the flexibility to work with compliance consultants that you hire that work for you, which is a complete 180, usually from… You’re forced to work with the compliance folks at your current firm, and there’s pros and cons to how all that process works, then things just like being responsible for your office and your staff, and guess what? When the copy machine breaks, if you’re that captive advisor at the big firm, it’s not your responsibility to figure out how to fix the copy machine, and so again, everything has a price to it, is it worth or to make… Worth those additional responsibilities to make an extra 50,000 a year, if you already make 500,000, probably not, if you make an extra 200,000, maybe it becomes worth it for you. So that every situation is unique. And like I said, it’s not a free ride, it is absolutely more economics, absolutely more flexibility.

0:08:20.5 BRAD WALES: But more responsibility as well.

0:08:23.4 SARA GRILLO: So what are you seeing from the RIA firm marketing angle (vs broker dealer), because let’s say you set out and on day one, you’re happy as an advisor, you set out, you establish your own RIA firm, you’re happy with the flexibility, you’re happy with the… The model, but you have to grow the firm. What does marketing look like at an independent RIA firm versus being a W-2?

0:08:54.9 BRAD WALES: Well, the beauty of it is the universe is all yours, and so that also is a two-inch short… If you’re in that large firm, they kinda tell you what you can and can’t do, and here’s the resources you do and don’t have available for you when you’re your own RIA, you can work with whoever you want. Obviously, sir, you put out a lot of great financial advisor marketing content, you provide a lower rate value to a lot of advisors on how to go about doing that, and those advisors have that option to say, Hey, this person or this firm resonates with me, I think they can help me grow this firm. And then a lot of the messages and the techniques that I know you put out yourself, whether it’s how to do things with LinkedIn, how to do things with email, all of a sudden it’s a completely different experience from… Oh, Geez, okay, there’s the suggestion that they should do a particular strategy with LinkedIn, if you’re at that captive firm, all your first step is you have to go and check and see, Am I allowed to do that? Can I get that signed off? Oh, it turns out I can do it, but I have to have it go through some system and get flagged or whatnot, or maybe in my RIA environment.

0:10:01.4 BRAD WALES: Yeah, as long as it’s always on passing the regulatory requirements, I can do it however I want, and so yes, you gotta go out there and find those solution providers of how to help you from a marketing perspective, assuming you want assistance. But the beauty is, again, the handcuffs are off at that point of how you go about implementing the advice, the idea of you…

0:10:20.5 SARA GRILLO: And in some cases, the firm actually dictates who you can work with and who you can’t work with, I’ve seen some advisors that are independent and they do really well with marketing, but I’ve also seen some advisors that just don’t market that they have their practice set up and like you said, they don’t have to work on Friday. They could leave it for every day, they’re getting the… Let’s be honest, they’re getting the commission, they’re getting the trailers, they made it, and I’ve just seen a lot of advisors that couldn’t care less about the first thing about marketing their broker dealer practice, and so for them, it’s fine that the newsletter is the same old template and just… It’s the same from one advisor to the next, and it’s got their names left on there and their picture, and that’s it, there’s no personalization like…

0:11:18.1 BRAD WALES: Yeah, you’re correct, and you probably know the stats better than I do, there is a slice of the advisor pie that, to your point, does very little marketing, sometimes that’s the reward they’ve built up over perhaps 20 plus years and building a base of clients who now give them referrals, and that’s what they’re living off of for new business development, but I think you see that same approach is you have those sorts of advisors in that captive environment, you have those sorts of advisors in that RIA environment, so it’s not to say that’s exclusive to one or the other, but for those advisors that do wanna step it up, and I think going forward, it’s an increasingly competitive marketplace out there and do have advisors being more creative and getting their message out there, and certainly this year is a great reminder of that, that… You gotta reinvent how you’re getting your message out there because you can’t do a lot of what you used to be able to do, maybe an in-person, things like that, and so for advisors that do want to implement some of those things again, you just gotta ask yourself, Where is it gonna be easiest to do that because guess what? Again, some of the people I’m competed against do not have handcuffs that maybe I do if I’m in a captive environment.

0:12:37.1 BRAD WALES: Again, pros, cons to everything, maybe those handcuffs are there for you as an advisor, and maybe it’s not that big of a deal, and it’s not a pain point, and again, that’s why some advisors don’t make a move and they arguably shouldn’t make a move, so it’s to each advisor’s own situation.

0:12:54.1 SARA GRILLO: What are the three ways an advisor… transitions into the RIA model.

0:12:59.1 BRAD WALES: Yeah, so if you were look at my website, we’ll probably get into that at the end, I don’t… My website’s not, Hey, start an RIA, It is transitioned into the RIA model, and the reason is because there are multiple paths of how an advisor can do that, and so the first path, which is actually, Hey, go out, start your own RIA and then build out your support and vendors around you, and that’s everything from your custodian to your technology folks, your compliance folks, to your market and folks, and you build out that whole suite of vendors to help you with Dad, so that’s the option one. Option two is the advisors that say, Yeah, I definitely still want my own RIA, but I’d rather outsource most of that, and so as they call them, there’s a middle office or back office providers that you can take a lot of those bulk services and one forms gone out there, I got best in-breed solutions, if integrated everything together, and you say, Hey, I’m not gonna try to re-invent the wheel, I’m gonna work with these folks, and I’d have to pay for that anyway, so I can pay from here in a package, and they help you with that.

0:14:05.6 BRAD WALES: And then the third solution is the advisors that not only like the idea of outsourcing the middle back office, they don’t even want the compliance regulatory responsibility as well, and so there’s RIA platforms out there that you can join, you still hold yourself out as a DBA and your personal brand and however you wanna hold your firm out there, but you’re technically wrapping up under the RIA from a regulatory standpoint, so they handle that compliance part for you, each one of those three options, again, I know I sound repetitive of pros, cons to each… There is no golden goose. The key is for each advisor, understand in those three paths and understand and based on their particular circumstances, which one might be best for them, and then even once you figure that out, of course, then there’s a whole lot of choices amongst them.

0:14:54.9 SARA GRILLO: Can we go over each of those options in a little more depth, Brad? Sure. Okay, so the first option you described, what are the advantages and disadvantages of that option, just summarize what that option is, just once again, and then advantages, some disadvantages, ’cause… Yeah.

0:15:12.8 BRAD WALES: So started your own RIA from a flexibility and economic standpoint, having your own IA and choosing your own vendors in heaven, control over all those vendors is what’s gonna ultimately result in the best Economics for you and the most flexibility. So that’s at a very macro level, that’s the pro, the con is you have to go out and build that ecosystem around you, and arguably that’s not a one-time exercise, you need to stay on top of your vendors as time goes by and make sure that there’s not other better choices that maybe you should be considered, and so yes, you get the upside of it, you’re not paying someone else to do that for you, you have the entire… All the choices out there, you can pick from the downside is you need to manage that, but you get rewarded again, with economics and flexibility if you’re gonna take that on, and that’s part of the value proposition I do, is helping people sort through all that sort of thing.

0:16:14.0 SARA GRILLO: Okay, good. Now, this second option.

0:16:17.9 BRAD WALES: Yeah, so again, those are folks that like on that idea, want to outsource, and so a typical example of the kind of solution that a middle office provider will do is, as they say, a technology stack. So to go out there and think, Okay, who shall I use from my portfolio management, who shall I use financial advisor for my CRM? Who shall use for financial plan and performance report, and again, the world is that your options there? And for folks that don’t wanna look through all of those options perhaps, and not only look through, and I don’t only make selections now, but then have to make sure they all talk to each other and are integrated again, that’s an example what these middle office providers do where they’ve gone out and they’ve said, Hey, we’ve built out a full tech stack, and sometimes it’s, Hey, here’s one text step and here’s another second option, and it’s all integrated, and you just plug in to us and it’s all taken care of. So again, you kinda have the on a spectrum of economics and flexibility, so in that middle path, you will need to pay them, obviously they’re a for-profit companies, so your economics come down a little…

0:17:24.4 BRAD WALES: The flexibility of, no longer do you have 200-plus options, you have this kind of pre-defined text deck, but the benefit is they’ve done all the heavy lifting for you to get that all plugged into place, and they’re the ones that have to monitor it on an ongoing basis as an example, so that’s what technology… But again, they offer a lot of services, but that’s one of the bigger ones, where folks either get intimidated by the process or just quite frankly don’t wanna deal with the process, they’d rather… Rather again, outsource that sort of thing.

0:17:52.2 SARA GRILLO: I cannot even imagine having to worry about, does the billing system go with the portfolio management system and the customer

0:18:05.5 BRAD WALES: Is… Good news is there’s a lot of options. The bad news is there’s a lot of options. So you get a…

0:18:10.4 SARA GRILLO: Okay, can you tell me… Without having a be a recommendation, of course everybody, Brad is not making any… Telling you what to do here, he’s just giving some examples, what are some of the names that typically come to mind when you would talk about outsourcing forms that would do that for somebody?

0:18:31.2 BRAD WALES: Yeah, so a typical example is Dynasty Financial, they’re one of the more well-known that kind of the pioneer in that market too, like I said, that the middle office providers, the term back office providers to kind of term, you see, so that is the marketplace, and I think they’ve deservedly get credit for 10 years or so ago, they kind of invented that where they said, Hey, there is this movement to the RIA model by especially larger, larger advisors and teams, and a lot of those folks wanna go are… But they don’t want a lot of those headaches and tasks and responsibilities to figure out all of those functions and staying on of it, and quite frankly, just being able to build up enough of a robust service, so an example would be dependent on your size. As an RIA stand-alone or a… Maybe you can’t justify having a full-time on staff, chief investment officer or on-staff marketing person or whatnot, but by going to one of these middle office providers, you’re effectively… They bring those full-time people and you’re effectively kinda get in say, 20% of one of those experts because that’s all you really need, and likewise, the dynasties of the world can supply that same expert out to other firms, and that’s how they can justify the cost of having those people full-time, so it’s also a way to access resources that oftentimes you can’t necessarily access directly on your own dependent on your size.

0:20:04.1 BRAD WALES: The flip side is there are minimums to work with firms like these, and so you do generally have to be started in the hundreds of millions of dollars to be able to get with some of these platform

Like I said, it’s usually the [unintelligible] range that you’re looking at. Because, and again, it needs to make economic sense to the provider as well, so…

0:20:28.1 SARA GRILLO: Okay, so dynasty, could you give me a few other names…

0:20:31.9 BRAD WALES: Yeah, so AssetMark is actually coming out with the kind of a similar type model that will work with perhaps advisors that all smaller than on Dynasty side, so I think… I don’t wanna steal their thunder and wait for them to roll that out in a bigger way, but they’re traditionally a tamp, but they’ve seen that same opportunity to hear these folks that just don’t wanna be doing certain back office functions, and I could be looking at some of these options, so of the three paths, I would tell you that the second one is the fewest providers, if you will, the first one, there’s a number of custodians, it’s still relatively called a single-digit number of custodians, that third one with RAs, you can join dozens hundreds, in theory, it could be thousands, but the middle one, it is more of kind of a select kind of marketplace, it’s gotta be a good fit for both sides.

0:21:28.5 SARA GRILLO: Dave DeVoe, I quoted him in one of my last podcast because he said something like the median level of assets under management is 38 million or something like that, with a very large… I think it was two-thirds of RIA firms or less than 100 million. So if you think about that, then we are talking about a much smaller number of RIA firms that would be eligible for a set up like this…

0:21:53.7 BRAD WALES: Yes, and that’s why that third option, which we can dive into, if you’d like, becomes a peal in for a lot of advisors, not just for the responsibility, but literally, they might not have access to some of these options as well, and even on that first option, just to give a perspective on size, there’s some custodians that will work with you essentially as a start-up, there’s some… They’ll work with you a minimum 10, 20, 30 million, and then there are names that you gotta be in the 100 million plus, and it’s not in a leader thing, that’s just how they’ve positioned themselves in the marketplace, so you can functionally start an RIA with relatively minor not in assets. It is what it is though, it limits some of your choices that you have available to you, everyone’s gonna start somewhere though, so…

0:22:39.7 SARA GRILLO: Yeah, let’s talk about the third option.

0:22:43.2 BRAD WALES: Yeah, so this is not… Like I said, I call them a platforms, this is when I talk about joining an existing area, this is not, oh, the RIA down the street that just happens to have an empty desk in the back corner of the office, and they just as well have some advisor come in and use that desk and they can share in the revenue, these are business-to-business or a platforms that have structured this to say, Hey, advisors that don’t like that option one, don’t like the option to or they’re in big enough for option two. You can come join our platform, again, you can hold your own doing business as name out there in the marketplace, but you gotta use all of our resources as a result of it, and likewise, we take a fee for that because obviously they have cost themselves and then they’re out there looking for margin also.

0:23:37.2 SARA GRILLO: And then what are the advantages and disadvantages though of being with that third option?

0:23:43.0 BRAD WALES: So the advantage, again, from a nothing’s plug and play, but you can kinda see on the spectrum that third advantage, they’ve gone out and again, built everything out, they’ve built that text stack, they’ve figured out tamp options to work with, they have marketing people in-house, they have all the different resources you might wanna utilize and either don’t wanna build out on your own or don’t have the resources or the size necessary to build them out on their own, so easy way to get into the model to get access to scale to… I don’t wanna say limit your responsibility, because in life you always have responsibility, but on that spectrum, it is less than if you had your own A… And the trade-off, again, you have to pay these folks for this, now you do have hard cost, so an example I would give and the… I’m just making up numbers here, but if you were to start your own RIA, and let’s say every 20 cents on the dollar, that’s what it was gonna cost you to pay all your various vendors you needed, and you had this other option in a platform that charges 25 cents on the dollar, and you have to mentally not…

0:24:51.7 BRAD WALES: I don’t think of it as, Oh gosh, I gotta pay them 25 cents on the dollar. Now, you would have had to pay them, you would have had to be 20 cents on the dollar regardless. Because there are these hard costs of a CRM and all the different… There’s resources they’re providing, you’re just providing that extra five cents on the dollar for the convenience, if you will, of not having to do all these tasks yourself and having those additional responsibilities. Is that worth it to you? That’s part of the decision every advisor has to make, now.

0:25:23.3 SARA GRILLO: Let’s talk about misconceptions about the RIA model.

0:25:27.7 BRAD WALES: I’d say one of the biggest ones, a lot of people think you have to be 100% fee-based either currently or indoor forever into the future, and that’s just 100% not the case. You absolutely can start your own RIA or use one of these other avenues, they generally all accommodate this strategy, under the RIA itself would only be fee-based accounts, but there’s absolutely solutions that you can work alongside, for instance, there’s broker-dealers that specialize in this and be in, as they say, a third party or a friendly broker dealer, and typically what you see there is perhaps an advisor that has just making up numbers one million in gross production every year and 800,000 as fee-based 200,000 that is commissioned. And most of that is just trails on variable duty positions, there are 529s or things like that, and that 200,000 just too hard to walk away from, there are solutions where you can put that 200,000 is just one example where these specialty broker dealers… And still retain that business, still receive compensation that’ll be it through a payout, but like with everything pros and cons, you now still have your hands in that FINRA to a degree, that broker-dealer still has certain things they require of you, even though they kind of…

0:26:53.3 BRAD WALES: For the most part, our hands off of your RIA, but for that advisor that does have a meaningful enough amount of that business, there is a pathway to still do in fees and commissions.

0:27:05.1 SARA GRILLO: Yeah, I think this is something I was conscious of but never fully grasped that…

0:27:10.5 BRAD WALES: It’s a common disconnection. Yeah.

0:27:12.4 SARA GRILLO: Yeah. Wow, okay, so what are some other ones?

0:27:17.8 BRAD WALES: I’d say another one. Again, that compliance piece that folks say, Oh wow, I’ll have to start paying for compliance now, and the example I give on that is, keep in mind, you’re paying for compliance now, I don’t care what firm you are paying for compliance, you just might not see an itemized bill, that says compliance on it, so if you’re at one of the large captive or 2 firms that’s taken up or taking a pay out, make no mistake, part of that payout is absolutely to fund the compliance and supervision that is then enforced upon you by that firm you don’t… You just don’t see a little line item that says Compliance, whereas in your own RIA, you would just have to mentally accept the fact that, well, I have to write out the check for compliance where before is in… See, No Evil, I didn’t have to do that. But again, where the rubber hits the road is, Okay, are you better off paying for it yourself, choosing the compliance vendor you work with, and quite frankly, only paying for the compliance that you need… A quick example of that, and you see in the news recently, some firms are stepping back from international clients and things like that, I imagine you don’t have any foreign clients, but you’re at a firm that does accommodate them, does allow them…

0:28:42.5 BRAD WALES: Well, that firm has to build out a huge compliance apparatus to mitigate that risk and that liability to the firm, because there are a whole host of different responsibilities they have with foreign clients. Well, if you yourself don’t have any foreign clients, is it perhaps fair that your payouts the same as the advisor that does have a whole lot of foreign clients, and likewise is perhaps getting good benefit from the amount of money they’re putting in the compliance part, and you can make an argument both ways. Maybe you’re doing something more esoteric, but the idea is when you’re on your own, you gotta mentally accept the fact you see it, you’re paying for it, but you’re only paying for as much compliance you actually need and nothing more.

0:29:24.4 SARA GRILLO: Another thing I’m curious about, Brad, is if you could tell me some success stories of advisors that have made this transition that you’ve seen.

0:29:36.0 BRAD WALES: And I’ll give you one that might hit close to home from it, from an RIA firm marketing standpoint, and you see examples like this… And then this comes again back to the flexibility, this advisors ultimately it is what it is, the numbers better, better for him now that he’s gone down the RIA path with his team, but as an example of what prompted his discovery process in the first place, what is one name is one of the large firms out there. And he wanted to make videos for a host of reasons, just I’m a big fan of videos, I know you’re a big fan of videos, whether it’s to demonstrate your expertise for business development reasons for exposure reasons, all the different motivators there, I wanted them on his website they wanna put ’em on YouTube. And he went to his firm and said, I’d like to make videos. And by the way, this advisor is very experienced, very tenured, no worries whatsoever, that this advisor is gonna go and do something stupid and talk about guaranteed things that they shouldn’t be talking, and using the word guaranteed, there’s no words at

0:30:44.9 SARA GRILLO: Performance history, I just…

0:30:47.0 BRAD WALES: No, no worries. There’s no worries for this year or the firm, he goes to the firm and the firm says, We don’t have a problem with you doing this because blah, blah, blah, everything I just said, but here’s the reality, we don’t have… We don’t have a mechanism to get our hands around all the thousands of advisors at the firm doing it, and if we allow you or we let someone else, everyone else is going on to it, we don’t have any way, at least right now to corral that to get our hands that so the answer is no. And that’s a tough thing to stomach, as they say, the least common denominator approach to compliance, and so not that this advisor wasn’t capable of properly responsibly doing this marketing method, but because of admittedly bad apples, that’s not the firm’s fall. It is what it is, you get enough people in a room, there’s bad apples, and so his hands were tied and that wasn’t the sole motivator for him, and that was a significant one, and he didn’t… At making the move to the RIA model and now… Absolutely has the flexibility to do that.

0:31:49.5 BRAD WALES: Don’t have a game one’s permission or doesn’t have to be held to the bad apple standard of compliance. I think that’s a typical example you see on the where someone has some pain points and looking for more flexibility.

0:32:03.3 SARA GRILLO: Okay, Brad, I’m gonna ask you some funny questions, let’s go… Is I actually get a lot of these wanting to transition people, right. And I get… I can always tell when one’s gonna… When someone’s emailing me about the subject, because it’s always from a personal email… Yep, and the person is always kinda acting like they’re in the witness protection program to be like, I was thinking about doing something at some point, and I might need some of your help, but I can’t talk now.

0:32:43.8 BRAD WALES: A… Secret secret. Coded messages. Yeah, yeah, right.

0:32:49.1 SARA GRILLO: I feel like I need the Rosetta Stone or something to decipher these messages from you advisors like Just call… If this is you advisors, don’t go the email, just be like, Hey Sarah, I try your blog on your website, or I read this article, or I saw you on LinkedIn. Can I talk to you?

0:33:09.8 BRAD WALES: Yeah, there’s a lot of folks out there that are absolute tenured, experienced, amazing professionals in this industry that have earned a fantastic reputation, that have earned every client they have through blood, sweat and tears, and decades of work with them, and yet here they are sending folks like you and sending folks like me, the back door secret email because… Oh, I’ll get in trouble if I got from it. I talk to someone like you, and that’s how the industry works, I get it, and we gotta play along, but for advisors, I say, just reflect on that, everything you’ve put in, so should you still be held to that having to sneak around… Obviously, I’m biased and big believe in the rat model.

0:33:56.1 SARA GRILLO: Alright, well, Brad, this has been great, thank you so much. How can people get in touch with you?

0:34:02.4 BRAD WALES: I just head on over to my website. www.transitiontoria.com

0:34:07.5 SARA GRILLO: Alright, well, great, everybody, thank you for listening and please subscribe, rate and review this podcast.

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Khatta, Manish. (2020, Oct 15th). RiaBiz. As the RIA business merges toward big and centralized, small nimble firms still have a lock on doing well and making a great living. Retrieved from https://riabiz.com/a/2020/10/15/as-the-ria-business-merges-toward-big-and-centralized-small-nimble-firms-still-have-a-lock-on-doing-well-and-making-a-great-living

Podcast transcript is edited from original recording.

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