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Voice of the Advisor
3 Opportunities When Becoming an Independent RIA
Key Takeaways:
- Independent RIAs are the most veteran advisors, and also tend to focus on higher education.
- The RIA’s flexible business model can help them develop specializations that appeal to the evolving investor.
- RIAs believe in the importance of goal-based planning, but may lack a tech stack that supports their unique needs.
There are many advantages to breaking away to become a Registered Investment Advisor (RIA). RIAs have more control and independence – they are not bound by the same production quotas for captive investments that their counterparts in other firm types might have. They can specialize and target particular client types, regardless of their asset levels.
However, RIAs face significant challenges as well. In our 2023 Voice of the Advisor study, we surveyed 650 advisors to better understand RIA behaviors, needs, and preferences compared to their peers across firm types.
Independent RIAs are the most veteran advisors, and also tend to focus on higher education.
As a fiduciary, RIAs have major responsibilities to their clients. To succeed, they must differentiate themselves from the competition while replacing the services and back-office operations that their home office previously provided.
Given these requirements, it is unsurprising that our study found RIAs to be the most veteran advisor group, with an average of 15.42 years in the business. In second place are advisors in Wirehouses, who have an average of 15.17 years in the business. In third are National and Regional Broker/Dealers, who have an average of 14.76 years in the business.
How do veteran advisors perform compared to their less experienced counterparts? Our survey found that experienced advisors can learn from the new advisor’s holistic service, data-driven approach, and openness to AI.
RIAs tend to have more experience than advisors in other firm types.
Advisors who are considering breaking away should know that in our sample, RIAs and Independent Broker/Dealers were most likely to have an MBA.
This is consistent with the understanding that when advisors go independent, they are giving up the corporate brand and must set up their own office, hire staff, develop operational procedures, and handle their own compliance and marketing. Getting an MBA may be key to helping them develop skillsets beyond portfolio management.
Go Deeper
Morningstar’s “Guide to Independent RIA Success” shares challenges, advantages, and solutions that benefit every stage of the Independent RIA journey.
The RIA’s flexible business model can help them develop specializations that appeal to the evolving investor.
Adopting technology solutions that support a broad range of product and service offerings can help RIAs differentiate themselves from their competitors.
Our survey showed that the more products an advisor offered, the more products the client adopted. As investors are exposed to more investing information than ever before, they are responding with anxiety and decision paralysis.
Advisors who proactively offer a broader product palette (and who can answer questions about product types that investors are learning about on their own), can demonstrate expertise and the ability to personalize their recommendations to client interests. While advisors in Wirehouses are currently offering the most products, all firm types are ramping up their product offerings in the next 12 months.
Advisors are also broadening the number of services they offer. In the next 12 months, about 27% of advisors plan to offer another service. Our survey shows that client adoption is there, suggesting that the holistic service that new advisors provide can be a competitive advantage for them.
Advisors of all firm types are increasing the number of products and services they offer.
RIAs may find success in emphasizing certain services or specializations over others. For example, in our survey, Independent Broker/Dealers, RIAs, and Insurance Broker/Dealers were more actively responding to their clients’ tax needs than other firm types. RIAs can take advantage of their flexible business model to tailor their business to the preferences of today’s investors.
Go Deeper
We surveyed 2,000 investors to surface your clients’ behaviors, needs, and preferences. Meet their expectations by understanding their mindset.
RIAs believe in the importance of goal-based financial planning, but may lack a tech stack to support their unique needs.
In our Voice of the Advisor survey we gave advisors a list of factors that investors consider when working with financial professionals and asked them to select which ones they thought investors valued the most. RIAs indicated more than any other firm type that they believe investors value financial advisors who help them reach their financial goals.
RIAs believe that investors value advisors who help them reach financial goals.
However, when we asked advisors across firm types about where they’re spending most of their workweek, RIAs spent less time in goal-based planning than Independent Broker/Dealers, Insurance Broker/Dealers, and Retail Bank Broker/Dealers.
One hypothesis is that since they don’t have the support of the home office, RIAs are spending more of their workweek on back-office tasks such as fee billing and daily account aggregation. A tech stack that supports these operational tasks as well as goal-based proposal generation at scale could free them up for activities that will move the needle. Automating time-consuming activities such as trade execution, rebalancing, and reporting will also free RIAs up for client engagement.
Go Deeper
Watch our on-demand webinar to learn how to leverage goal-planning to surface key trade-offs and jump-start investment plans for all types of client objectives
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