How important is physical office space to growing your business locally?
A: There’s no right or wrong answer here. If you feel focused and comfortable in an office, rent some space, and leverage in-person meetings as much as possible. If you enjoy the freedom of virtual working and servicing a larger clientele from all over the world, office space is not required. At the end of the day, it’s making the decision that’s right for your business and clients.
How did you choose your pricing model and how has it evolved?
A: The short answer is trial and error.
If you’re operating on a fee only model, put value into your pricing structure. This may look like offering a package that is priced high enough that people who truly value what you will provide to them are willing to pay; a second tier that is less engagement from you but still providing education and insight; and then a free option that is nurturing prospects and offering resources and content until they’re ready to move into another level.
And always be testing your pricing. Find out what works best for your market and clientele.
How important is it to have experience with a wirehouse or brokerage before launching an independent RIA?
A: Technically speaking, you can pass your Series 65 exam and start your own RIA. But, from my experience, I gained so much knowledge about running a business, seeing how pricing works, and understanding the ins and outs of planning that I was able to take that knowledge with me when I designed my own firm. That step in my career journey helped bring me to where I am today, so for me, it was a crucial piece of my business.
Once you established your solo business, how did you approach your existing book of business?
A: It’s not easy, but having an open and honest conversation directly is perhaps the best way to ask your clients if they’re comfortable transitioning with you. Explain your reasonings of starting your own firm and your vision of how you hope to serve clients. Of course, it can be a tough ask — but the worst outcome is they’ll say no. It’s best to have a positive mindset that your firm will be successful and create relationships with the right type of clients.
What was your biggest hesitation or challenges faced when starting your own RIA?
A: It can be easy to overlook that when you go out on your own, you’re starting a business. That means paying all the bills that come with running a business - salaries, taxes, resources, tools, technology, and the list goes on. For me, there was a learning curve for all the elements that I’m financially responsible for when I started my own business.
How did you determine your initial costs on a monthly basis when you decided to start your own RIA?
A: When you think about costs, you have to think about technology and systems you need to have in place in order to run your business — and then layer on the nice to have items.
A good exercise is to list out the items you absolutely need, your non-negotiables, to run your business and tally that up on a monthly basis. For example, communication tools, compliance support, financial planning software tax software, and CRM are necessary for me. Now on top of this overhead, it would be nice to have some additional marketing support, like running a paid ads campaign or possibly hiring a marketing manager. With this number, factor in your fee schedule and how many clients you need to serve in order to support your monthly costs.
Understanding your total costs and what you can afford is going to look different for everyone, but it’s an exercise in budgeting that must be done.
If you’re interested in learning more about starting your own RIA, check out the additional resources we have for advisors that are considering launching their business.
As always, please let us know if you have any questions. And be sure to catch up on more articles in this series: