RND Resources specializes in assisting startup RIA firms complete the process of submitting an application to the SEC or state registry. Over the years we have seen a number of complications due to lack of understanding of the RIA formaiton process and poor planning. RIA formation is not a one-size-fits-all business venture. There are a number of considerations investment advisors should address as part of the planning process to save time, conflicts, and expense later on.
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| SEC RIA registrations 2014 (588), 2015 (449) |
Start with a Plan
An important step in starting a
new RIA is to make a solid analysis of goals. When considering goals a thorough
research of the business model, tax planning, custodian relationships, state
rules, and more will impact the cost to establish the RIA and decisions down
the line. For many investment advisors wanting to start their own RIA the
effort involved in dissecting various aspects of formation is beyond their expertise.
Start at the beginning
To balance out the complexity
in setting up a new firm, some RIA principals will start with a simple low cost
template based solution and assume they will modify it later once they build up
capacity. From what we’ve seen, this can create a number of even more complex
problems that are not easy to upgrade or change once the firm is already doing
business. As an experienced consultant to new RIA firms starting out, we
caution against making decisions without fully understanding their impact.
Strategy: Business Model, Product Model, Fee Model
One important aspect of
establishing a new RIA firm is complexity of the business model, both now and
in the future. There are a number of products and client preferences to work
with. Over years demographics change and consumer preferences evolve. For
instance, if the plan is to serve younger generations, a Fintech strategy will
need to be adopted as part of the business model. However, Fintech firms are in
an evolving state where compliance regulation and product offering are
constantly being developed. For a new RIA, researching a well thought out Fintech
solution now can make the difference later when some Fintech providers will
likely fail, or get tangled up in regulatory actions, bad press, or worse.
As another example, many firms want to start
with a niche they’re comfortable serving. Matching the value proposition to
long term goals is helpful. If a firm is adopting a competitive price strategy,
they may decide to partner with a third party money manager rather than hire
analysts. This decision is followed with the question of available resources
through the partner, technology concerns, and restrictive agreements. There’s
many other market segmenting factors as well that have restrictive consequences
which are not easily changed.
The best consulting advice helps a newly forming firm winnow down the possibilities with stakeholders while discussing pros and cons of various options. Starting from a foundation that considers future strategy, a new firm can apply resources toward meeting goals now and later.
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| RND Resources Inc assists new RIA firms with start up and formation strategy |
Make decisions with confidence
Investment advisors that take
the plunge should do everything possible to ensure that their new business is
set up to maximize resources. “We’ve worked with a lot of RIA structures after
they were set up and it’s clear that many don’t consider advanced planning
strategies”. Some mistakes are costly to fix in terms of adopting changes to
procedures and policies, negative exams, and staff training. Reaching out to an experienced consultant
allows new business stakeholders make important decisions with confidence.
For more information check out our Resource Guides
RND Resources Inc | Compliance * Consulting * Audit * Startup & Formation
Broker-Dealers, RIAs, Private Equity, Family Offices
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