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Chicken and Egg: How to Grow Your RIA Practice From Scratch

It takes money to make money. If you’re small, you have to get big before you can access the scalable back-office services you need to get big. You need to have scale in your business before you can afford to hire the employees who will give you the scale you need to ramp up.

Yes, running a planning practice takes you into a lot of chicken-and-egg situations, where it seems like you have to have something already before you can get access to it. But, according to Financial Planning columnist Bob Veres, the good news is there are solutions for many of these blind alleys in your business growth.
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1. Peter Mangan, President and CEO of Shareholders Service Group

Custodial Platform, No Minimum AUM

When you decide to drop your licenses and become a full-time independent RIA or leave an established firm to go out on your own, you have to be able to put the new client assets you attract into the hands of a custodian. But if your AUM is under $10 million when you knock on the doors of the established back-office providers, they either turn you away or charge high rates for services that their other advisory affiliates are getting for free.


The solution: Shareholders Service Group in San Diego (shareholdersgroup.com), a firm that runs a custodial platform like larger competitors Schwab and TD Ameritrade, custodying assets for 900 RIA firms around the country. Some are large firms, with more than $1 billion under management, but SSG has maintained a policy, since inception, of opening its doors to new advisors even if their AUM happens to be $0 million.


“We know that advisors don’t go through the hassles of setting up an operation and registering if they’re not serious about being in the business,” says SSG CEO Peter Mangan. “So we don’t think there is a lot of risk in taking advisors who are just starting out. In our experience, they tend to grow.”
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2. Caleb Brown, Founding Member of Virtual Solutions For Advisors

Virtual Office Staff


Hiring a virtual assistant is a fraction of the cost of hiring a full-time employee, and there are no emotions, sick leave or vacation time to deal with, either. Virtual Solutions for Advisors’ web site (virtualsolutionsforadvisors.com) has a Virtual Staff tab you can click on. You can find a virtual receptionist or someone to do your bookkeeping, for example.
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3. Cindi R. Hill, CFP, Founder of Hill Compliance Advisors

Compliance


You’ll need to find someone to handle your compliance for you. Outsourcing works here, too.

The web site of Hill Compliance Advisors (www.hilladvisors.com) notes that its founder, Cindi R. Hill, is a former RIA herself in addition to being a virtual compliance consultant for RIAs.

Hill “personally performs your compliance tasks, allowing you to run your business and spend quality time with clients,” according to the firm. “Compliance may seem to be an enormous burden; however, with a little help, it doesn’t have to be.”
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4. Melanie Jocson, president and CEO, Virtual Partners Group

Paperwork and Back Office Operations


Virtual Partners Group will handle office paperwork, including opening accounts, processing ACATs forms, wire and check requests.


The firm states on its web site (virtualpartnersgroup.com) that it is “vested in making certain that your business can continue to grow. To help you accomplish this we take care of the day-to-day details … so you can develop the big financial picture.”
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5. Jennifer Goldman, Founder, My Virtual COO

Virtual Chief Operating Officer

Another common chicken-and-egg situation comes later on, when your staff has grown, and suddenly the comfortable intimacy of working closely with a small number of people turns into the chaos of trying to manage a full-blown organizational chart.


The solution: a virtual chief operating officer. One firm that does this is Jennifer Goldman’s My Virtual COO (myvirtualcoo.com).


Goldman has, in the past, run her own advisory firm, worked as the COO for two firms and helped set up operations and procedures while on staff at another, larger RIA.

She will provide, remotely, the hands-on management of your office transition, getting procedures established, installing new computer systems and training staff.

“The one thing I hear over and over is that people just don’t have the time,” she says. “Advisors always run out of time when they need it the most.”




Also see:

href="http://www.financial-planning.com/fp_issues/2012_2/paradoxes-starting-ria-business-2677044-1.html">Chicken and Egg



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