Five Business Models to Know if You’re Considering Becoming an RIA

It’s a Great Time for Independence as an Advisor

In recent years, many financial advisors have shifted the way they do business, hoping to find greater opportunity to grow their businesses and to help their clients thrive. The Registered Investment Advisor (RIA) model is a valuable choice, providing advisors with independence and flexibility over how they serve their clients and build their careers. As an RIA, advisors are finding a new type of infrastructure that empowers them to select the right products for their clients, customize the best technology solutions, and uniquely design policies and procedures that better serve their clients’ needs.

If you’re worried about stepping out on your own, you needn’t be. Read on to learn more about your options.

Why Are So Many Financial Advisors Choosing to Go Independent?


In a recent study released by Schwab Advisor Services, more than 90% of advisors who went independent said they had no regrets and would do it again if they had the chance. The same study also reported that these advisors are happier, as they’ve not only benefited from the freedom of independence but also from a revenue perspective.

Advisors are choosing to go independent for a number of reasons. Some are interested in designing a firm from the ground up, others simply want to be able to channel all of their time and attention into their clients, while others are looking to build equity in their businesses. If you think independence may be right for you, keep these questions in the front of your mind:

  • What kind of client experience are you interested in creating?
  • How much support will you need to go independent?
  • What do you want your professional life as an RIA to look and feel like?

Below I’ll discuss five core models of modern independence.

1.    Build Your Own RIA Firm

If you’re an advisor with an entrepreneurial spirit and you’re looking to grow, creating your own RIA firm may be the option for you. RIAs who want the control to build something that fits their vision may find that starting their own firm meets that motivation. If you’re looking to find your own way in the RIA industry, you’re not alone. Assets in the RIA channel have achieved a compound annual growth rate of 11.7% over the last five years, according to Cerulli.

Ultimately, it comes down to what’s motivating your transition to independence. Are you looking to satisfy that entrepreneurial urge or are you hoping to deliver a better client experience? If given the freedom and opportunity, do you believe that you have the vision required to create a firm that will better serve your clients?

PRO: Full Independence

Ownership means that every detail on every level of the business will be up to you. From the technology you use to the marketing strategy you employ, and from the office culture to the aesthetic you design, all of it is yours to shape. You can make your brand something that’s unique to you and your client service vision.

CON: Full Responsibility

Choosing to create your own firm may mean full independence, but that means you also have full responsibility. You reap all the rewards that come with owning a business, but you take on all the risk, too. As the owner, you’ll oversee all business operations, meaning you’ll have to evaluate and manage all service solutions your firm uses, all back-office technology, and compliance management matters. You’ll also be responsible for working with providers and vendors to customize the right selection of services and solutions for your clients. Additionally, while you’ll be able to keep 100% of what you earn, you’ll also have to take on 100% of the expenses while controlling how revenue is reinvested back into the company. The failure or success of your firm will lie solely on your shoulders, which can be a lot of pressure to grapple with.

2.    Go Hybrid by Outsourcing Some Firm Operations

If you feel overwhelmed by the number of choices and oversight that goes into creating an independent RIA firm, but you are still committed to that level of independence, then outsourcing some operations may be the right move for you. There’s an entire industry of world-class service providers who are ready to help RIAs get their firms up and running smoothly. They’re able to provide firms of all kinds with the business management help you may need as you choose which technology will work best for your firm, aid in ongoing compliance changes and issues, as well as help guide you as you determine what business strategies will bring your firm the greatest growth.

When you think back on what is driving you to go independent as an RIA, you must ask yourself – are you more excited by the idea of serving your clients or designing a better client experience?

PRO: You’ll have to make fewer management decisions

Working with platform providers takes some of the responsibility and decision-making out of your hands, leaving you with more time to focus on your clients. Having that support means that you’ll have a team of people who can simplify business operations for you while also helping you implement the day-to-day operations of running your firm. You’ll still be the one holding the reins of your company, but you’ll likely have extra time to focus on your top priorities, whether that’s getting more face time with your clients, recruiting advisors, or growing your firm.

CON: Outsourcing costs money – and you’ll have less control over the design of your business

While outsourcing for business operations can free up your time, it also requires you to loosen some of that control you have over your company to allow other professionals to steer your firm. Additionally, hiring platform providers will cost money, so you must be comfortable with that investment.

3.    Find an Equity Partner to Share Ownership

Because assets in the RIA channel are showing such promising increases, many investors – and RIA aggregators – are finding themselves interested in obtaining a partial stake in RIA firms. As an advisor, this means that you have the opportunity to find funding for your firm if you need it. Some investors may be more hands-on in wanting to provide not just financial support but operational support, as well. Others may be happy sitting back and collecting on their investments. Not only can investors help with the start-up of your business, but they can also help you grow inorganically or provide aid if you need to find other advisors to join your firm.

PRO: Equity partners can provide more than capital

Depending on who you choose to invest in your firm, you may be able to find an investor who can help with more than just investing capital into your business. Many equity partnerships can take on a consultative approach by providing firm-management support that creates value for you and your clients. Additionally, bringing in an equity partner means that any risks involved with the business belong to both parties, lessening the burden that full ownership carries.

CON: You’ll be trading ownership for capital

Though equity partners come with plenty of benefits, it ultimately means that you’ll be losing some of your ownership stake in your business. That doesn’t necessarily mean that you have to give up the majority stake in your firm, but you won’t be able to walk away with 100% ownership once you sign on with an equity partner. If this is something that is important to you, then you may want to think about pursuing a loan rather than giving up partial equity.

4.    Find Employment at an Established RIA Firm

If you’re looking for independence without any of the responsibility that comes from ownership, then you may want to think about joining an established firm as an employee. More and more, RIA firms are looking to achieve growth by absorbing advisors – and the book of business they bring with them – into their overall infrastructure.

PRO: Low risk, lots of rewards

If you join an established RIA firm, you’ll be able to benefit from a ready-made platform and pre-established brand, so your transition will be less risky and smoother for your clients. You’ll also have guidance from the firm management team. Being able to leverage an existing infrastructure means that you’ll be gaining access to the firm’s existing technology solutions, compliance management, administrative processes, and staff, as well as niceties like office equipment or a coffee bar. All of this translates to you being able to spend more time with your clients.

CON: Little say in company design or operations

By joining as a team member in a firm, you’re handing over all control of designing a firm that fits your vision. You’ll essentially be agreeing to reflect and champion the company’s values instead of your own, so it’s important that you do your due diligence to determine whether the firm’s culture and investment philosophy are a good match with yours.

5.    Affiliate Yourself with an Established RIA Firm (Tuck-In Model)

You may think that joining an established RIA firm means that you become their employee, but that’s not necessarily the case. There are many firms out there that will allow you to keep your clients and maintain your autonomy. And the numbers show that firms are seeking to broaden their service potential more and more. According to that previously mentioned report from Cerulli, 73% of RIA firms are planning to bring on more advisors within the next year. The report also showed that the number of advisors per RIA firm has grown by 2.2% at a four-year CAGR for the independent RIA model, and even higher at 5.5% for the hybrid model.

PRO: You can leverage the benefits of a pre-established business.

Affiliating with an existing firm can provide you with flexibility while also allowing you the potential for growth. You can tap into their existing marketing campaigns, events, and product offerings, in addition to the firm’s technology, compliance management, and other business operations. You’ll still have your clients and full control of your schedule, so you’ll be able to maintain the work-life balance that works for you while reaping the benefits of the firm’s brand recognition and expertise. Though you’ll operate independently, you won’t necessarily be considered self-employed. So, any insurance and liability coverage will be the responsibility of the firm. This model allows advisors to focus solely on their core business and clients while relying on experts to help with the day-to-day business operations and risk management.

CON: You run the risk of affiliating with the wrong firm

It’s critical that you join a firm that is a good cultural fit and matches your investment philosophy. As you look at your options, make sure you clearly understand whether they share the same mindsets, values, and goals that you and your clients have.

At TriCapital, we offer a tuck-in opportunity that allows you to maintain your independence while gaining the process, platform, marketing, and support of our firm. By joining our team, you would be able to focus on your client’s needs and grow your book of business while leaving all of the practice management to us.

If you think that affiliating yourself with an RIA firm may be the right option for you, please contact us today to begin a conversation about becoming a TriCapital Advisor.

Join the TriCapital Team

More Articles