The independent registered investment advisor (RIA) channel has grown over the past 10 years and continues to be a destination of choice for advisors today.

While the RIA model’s advantages are well-known in the advisory space, we know the process of switching to independence does not happen overnight. In fact, it can take on average two years for an advisor to transition to independence.

Here are 10 steps for use as a guide when making the move to the RIA segment:

  1. Plan, plan, plan. Creating a formalized and detailed transition plan is hard work, but it makes a major difference in helping to prepare you for a strategic transition. In crafting a plan, be sure to include your firm’s goals and objectives, business assessment, terms of your transition, communication plan for stakeholders and an execution schedule of the tactics needed to complete the transition.
  2. Seek out qualified legal counsel. Select legal counsel that specializes in this type of transition and contact them early in your process.  This will help you take the right steps so you don’t inadvertently jeopardize your transition. Additionally, experienced legal counsel can provide valuable context on ownership structure as well as compensation and employment contracts for your new business.
  3. Know your goals. Develop a list of goals for your ideal firm and lifestyle. It is important to consider your ideal client profile and how you may want to grow your business. These goals need to answer two important questions:  how will this benefit my clients? And, how will this benefit my career?
  4. Define your ideal client profile. You can’t be everything to everyone. Therefore, it’s best to pinpoint what your client base will look like in order to ensure that you deliver a high-quality service offering, while maximizing your firm’s performance against clients’ needs.  Independence provides you with greater flexibility around specialization, marketing and business development. Knowing how to focus your efforts in these key areas to best meet you ideal client profile is critical.
  5. Understand how your move will impact clients.  When planning your move, it’s important to understand how this will benefit your clients and how you articulate the value to them. Success can often hinge on your ability to highlight the key benefits. A recent survey we conducted with RIAs in the second year of independence noted that 60% of advisors’ clients were immediately on board when the firm made the transition. And, 80% of clients made that move with their advisor when they went independent.2  These numbers are greatly influenced by an advisor’s preparation as well as their ability to articulate value to their clients.
  6. Know your competition. Once you understand your goals, your clients’ goals, and your ideal client profile, then you are ready to see how it fits into your local market. By understanding the competitive landscape, you will be able to better differentiate your firm’s brand and tailor your offerings to bring in new business. Make sure to focus on what makes your firm unique. If you can’t articulate that, then your clients won’t have a compelling reason to do business with you.
  7. Attract and retain talented employees. Your staff is the bread and butter of your business, in terms of business development, client retention and even succession, as you plan your legacy. In order to retain valuable employees and attract the right candidates ensure that your compensation package and work environment are competitive.
  8. Determine which business model works best for you. There are more options to achieving independence now than ever before. These include: starting your own firm; merging or acquiring another; joining a nationally branded firm; joining forces with other like-minded advisors thinking of moving to independence; and  joining an RIA friendly independent broker dealer. Each of these has varying degrees of entrepreneurship and financial rewards. We have developed an RIA Economic Discovery Tool to help advisors evaluate the various models and their rewards.
  9. Contact an expert with knowledge outside of your area of focus. Don’t go at this alone. Consult outside professionals that can guide you through the transition, allowing you to focus on your business. Custodians are uniquely qualified to provide you with context on the industry, guidance around what does and does not make for a successful transition, and the steps to take to ensure your business is ready from day one. They can also connect you with attorneys, CPAs, independent broker dealers, an insurance agent, compliance and regulatory experts, technology consultants and others to help you get started.
  10. 10.   Identify a transition leader. Reduce confusion by identifying a transition project manager who will lead the charge in managing all of the moving parts associated with your firm’s transition. In smaller firms, this may be you. If it is, understand that you need to carve out the time to manage decisions effectively. If not you, then assign someone whose responsibilities will include: developing a schedule that outlines milestones and deliverables; determining how decisions will be made and who will be making them; communicating status updates to stakeholders; and, forming an advisory team (with delineated roles and responsibilities of each member) to help move the process along. Custodians again can play another key role here. As an example, we have a dedicated consulting team that works with advisors to manage this process.

For advisors, going independent can mean the freedom to work with the clients they want, to manage their business the way they want, and the potential to keep more of what they earn. Here is what a few advisors had to say about their move to independence. By following these 10 steps, can help you too get started on your road to independence.

Jonathan S. Beatty is a member of the Charles Schwab Advisor Services management team, leading sales and relationship management. He has worked with fee-based advisors for more than 14 years, providing counsel on strategic business issues and identifying solutions to help them meet their unique business needs.

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