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RIAs are the fastest-growing category in U.S. wealth management since 2016. In 2022, Cerulli estimated 2,100+ advisors joined the RIA channel, bringing roughly $290 billion in client assets.* What’s driving this growth?

RIA 101: Understanding the RIA Model

This way to ria

With LPL Financial, there’s more than one way to RIA. Whether you’re looking to start an RIA, join an existing RIA, or explore new custodian options, we can help bring your perfect fit into focus. Through our consultative fit process, we’ll work with you to determine which path best suits your innovative spirit—so you gain more control to customize your business and deepen your client relationships. As a leading custodian and top RIA in the country, LPL empowers you to go RIA, your way.

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Why Registered Investment Advisor (RIA)?

In response to investors’ increasing demand for comprehensive financial guidance, many financial advisors are exploring opportunities to elevate and differentiate their service offerings. The prospect of gaining more control, potential economic advantages, and business development opportunities are all motivating advisors to consider the RIA model. Perhaps most compelling is having the freedom to realize their business vision to foster stronger relationships with clients.

As an advisor, one of the most effective ways to build trust with your clients is by demonstrating your commitment to providing independent advice. RIAs are held to strict fiduciary standards by the SEC and are expected to always act in clients’ best interests. As an RIA, you can access in-depth research, non-proprietary products, and investment strategies to create personalized solutions that address your clients’ needs.

Deeper client relationships

Delivering a personalized experience that combines the efficiency of digital integrations with a human touch can be a powerful differentiator. Running an RIA enables you to customize your tech stack, automate processes, and choose how to connect with clients and provide them with their financial picture. Bottom line—you choose the solutions you want without paying for features you don’t need.

Freedom of choice

Starting an RIA isn’t just creating a business—it’s creating a legacy for your loved ones. RIAs typically have strong earning potential because you control your fees and expenses, and choose the products and services you offer. As your clients’ portfolios grow, so does your firm. RIAs also have a greater chance of maximizing business value when you’re ready to sell. Privately owned books can be sold in the open market and are often more attractive to buyers. By increasing your sales potential, you increase the likelihood of receiving a competitive sales price. And you can save more earnings by structuring it as a capital gain instead of ordinary income, which can be a significant cost differential.

Ability to leave a legacy

The RIA model offers tremendous opportunity, but it also carries specific regulatory and compliance responsibilities. Some candid self-reflection can help you answer if an RIA is right for you: What do you hope to achieve by going RIA? What does your dream firm look like? What are your top priorities? Consider these questions and download the following RIA Your Way whitepaper to help decide what best reflects your leadership style, personality, and goals.

Is RIA right for you?

Ideal fit: You want maximum flexibility, control, and authority for your business.

Starting an RIA

• Control every aspect of your business, from your tech stack to marketing • Receive maximum payout • Control all expenses • Build business value

Top benefits:

• What do you want to insource versus outsource? • Are you prepared to manage your firm’s compliance responsibilities?

Key considerations:

Ideal fit: You’re comfortable being a business owner but want to utilize a larger firm’s back-office and compliance support.

Joining an RIA

• Plug into existing infrastructure • Outsource risk and compliance • Access an established community • Leverage economies of scale • Access potential growth resources • Gain experience navigating the RIA world

Top benefits:

• What business functions do you want to manage? • Do you want to keep/create your own brand? • Do you want to join a large, national RIA or affiliate with a smaller, local firm?

Key considerations:

Ideal fit: You want to offer your clients brokerage products and advisory services.

Hybrid RIA

• Receive brokerage compensation through a broker-dealer and up to maximum advisory revenue through the RIA • Leverage turnkey infrastructure of the broker-dealer or use third-party vendors to build a customized technology platform • Can pursue this model whether you start or join an RIA

Top benefits:

• Are you comfortable operating within a dual compliance structure regulated by FINRA and the SEC? • Do you want separate strategic partners or a single wealth management firm that can streamline your brokerage and advisory business?

Key considerations:

Ideal fit: You want to focus exclusively on advisory business.

Advisory-Only RIA

• Receive maximum payout • Operate within a single compliance structure regulated by the SEC • Can pursue this model whether you start or join an RIA

Top benefits:

• What do you want to do with your current brokerage business? • Do you want to sell your brokerage business to an outside firm, or to a wealth management firm that can manage it as the rep of record? The latter allows you to maintain the client relationship and access the data.

Key considerations:

If you’re ready to begin the process of starting your own RIA, or exploring whether starting or joining an RIA firm could be right for you, LPL is here to help bring your perfect fit into focus. Contact our Business Development team to learn more.

LPL Financial is here to help

*Cerulli Associates, U.S. Broker-Dealer Marketplace Report, 2022

The views and opinions expressed by LPL Financial Advisor(s) may not be representative of the views of other Financial Advisors and are not indicative of future performance or success. Neither LPL Financial nor the LPL Financial Advisor can be held responsible for any direct or incidental loss incurred by applying any of the information offered. For financial professional use only. Tracking #1-05373092

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Originally published on LPL.com on June 15, 2023. Read original article here.

This way to RIA

Originally published on LPL.com on June 15, 2023. Read original article here.