The landscape for a financial advisor or team that is contemplating independence is abundant with opportunity.
The newest development to take shape in this niche is the size of the teams moving to the registered investment advisor arena.
Historically, a typical start-up RIA managed about $70 million to $100 million in assets. More recently though, there are significantly larger advisor teams, some with billions of assets under management, exploring and going independent.
We refer to them as mega teams. Irrespective of size, the allure of joining the RIA ranks still tend to center around control, philosophy and economics.
Over the past six months, however, we have observed three emerging themes that are increasingly attractive to these larger advisors:
Choice. Platforms, roll-ups, custodians, regional RIAs, national RIAs and a maturing ecosystem. There are seemingly innumerable configurations as to how new mega-teams can have their vision and independent businesses supported. It used to be a linear path to forming an RIA, but many would-be breakaways are finding creative, credible and compelling solutions that uniquely fit their needs and expectations.
Capital. In years past, the inability to access financing and pay off a remaining balance on an advisor's forgivable note were often barriers to entry. Today, mega teams have broad access to capital for a number of reasons, such as monetizing some or all of their business, funding an internal transfer or buyout, investing in business-related enhancements, and yes, even paying off a note as they move to independence. As the industry has evolved, funding partners are more comfortable lending on cash flow versus hard assets, and more entities view a high-performing RIA as a strong investment opportunity. This combination of factors adds to the appeal of mega teams going independent.
Legitimacy. Across the country there are existing RIA firms displaying noteworthy success. Whether defined by asset growth, revenue growth or profitability, select RIAs have been able to institutionalize their businesses and build true enterprise value. The elite of this group are even beginning to develop national brand recognition among consumers. Cerulli Associates predicts that independent RIAs will eclipse the assets managed by traditional brokerage firms as 2020 draws near. Once deemed too risky for their thriving businesses, mega teams are reconsidering and acknowledging that the RIA opportunity is too big to ignore.
The decision to explore independence entails time, patience and organization. It also requires vision, knowledge and discipline.
Seek experienced professionals to help facilitate some or all of the process. Attorneys, accountants and financial services and/or business consultants can be valuable third-party resources.
Regardless of the approach, seek out the most efficient, insightful and well-advised experience. Whether a mega team or a single advisor, the outcome of this process has the potential to be the most significant professional milestone, so treat it with the care that it deserves.
Kathleen Asack is principal at AmplifyRIA in Walpole, Mass., and Mary Ann Buchanan is chief executive and co-founder of RIA Match Concierge Consulting in Vienna, Va.
This story is part of a 30-day series on going independent.