RIA, operate under BD or setup own?

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Mar 30, 2007 5:36 pm

Anyone out there that can give me a quick list of pros/cons of operating under your BD's RIA vs setting up your own. 

Mar 30, 2007 6:17 pm
gad12:

Anyone out there that can give me a quick list of pros/cons of operating under your BD's RIA vs setting up your own. 



If you have to ask, you're not ready to set up your own.

Mar 30, 2007 7:42 pm

Thanks that helps a lot.

Mar 30, 2007 11:03 pm

A few things -



A BD RIA generally doesn't permit the aggregate management of

discretionary investment portfolios. The loss of the 10 to 25% in revenue

back to the BD is significant, over time, and it's not worth it for larger

groups. The fact that you are tied to a single investment platform is a

drawback, since you do not have the ability to manage assets regardless

of the platform. Your own RIA will permit you to manage funds at

Schwab, Merrill, Fidelity, or anywhere where the client wants.



You own it - you create the platform, you control the look, feel, and the

branding of your own RIA. Being dually registered on a BD platform also

requires you to fulfil the requirements of BOTH NASD and SEC

compliance. This can be a bit daunting, since you are trying to run a fee-

only practice through a BD. Also, your BD may impose restrictions on the

type of advice you provide, the types of fees you can charge, and the

types of platforms you must use for servicing your clients. There are

some BD's that will also require first rights of refusal in the event of sale,

and they may restrict who buys your practice to other individuals within

your system.



On managed account business, they take a major portion of your

revenues... I couldn't make it work for me.



I think the two largest reasons why I wouldn't use a BD RIA affiliation is 1.)

the mass management of discretionary portfolios, and 2.) the

compensation differential.



Just my opinion - I've always felt that the pure RIA format is the best

option for those looking for the ultimate in terms of flexibility. It's not

for everyone, but I'm very happy with my decision to do the RIA. We

looked at many BD/RIA combinations, and settled to do it all through the

RIA which we created, and own.



Good luck to you.



C