Im 22 and want to become an RIA now

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Feb 15, 2011 6:09 pm

Im 22 in my last year of college, i have worked at various call center collection/sales jobs where all i did was cold calling so i dont think ill have a problem with the 500 day war

Now

what are the bare minimum requirements to start my RIA practice besides my Series 66

Is it realistic at my age (22) to start in a small rented space making 250-300 cold calls to small business owners 5 times a week 8 hours a day for the next 2 years of my life and build a substansial book?

I know i am young but looking at it from an econmical perspective starting as a RIA now i would make alot more money versus working for a wire house until im 30 then starting a RIA

any thoughts? questions? advice?

Feb 15, 2011 6:56 pm

Find some successful indy rep, and give him your pitch. He teaches you the ropes, you bring the youth and energy to market/call, get people in to see both of you. You listen and learn for several years.

Going at it on your own... you're way too young and would greatly benefit from mentoring. And that's coming from me, started when I was 24. I worked at wires, banks, now Indy.

If you take my advice, it is quite important to have a contract/agreement about who does what, and for how long. You can't expect too much, but you have to make sure there is a carrot at the end for yourself. But, if you're like most young folks, you run the risk of being unrealistic with time frame. You are probably thinking 2-3 yrs, and I'd tell you to have about a 5-7 yr time horizon for being solo/able on your own.

My experience includes a Jr. Partner, like yourself, that started with me 9 yrs ago at 23. He's now 40% owner of our firm, I always promoted and gave him raises, so he'd stick around. He'd tell you straight up that it was a good deal for both parties, and we mutually benefit from each other since day one. But, in a case like that, both parties must be honest, team oriented, and not out for themselves/greedy. When he started, I told him I expected 2 yrs of working for me, then he could go solo, with my support. He's never left...

Feb 15, 2011 8:23 pm

And ... this is precisely why RIAs need to be as stringently regulated as brokers. Uniform regulation.

I don't think a b/d would sponsor you to be off by yourself learning this biz.

Feb 16, 2011 7:39 am

[quote=Times7]

And ... this is precisely why RIAs need to be as stringently regulated as brokers. Uniform regulation.

I don't think a b/d would sponsor you to be off by yourself learning this biz.

[/quote]

Unifrom regulation doesn't save us from bad ethics.  RIAs need more flexible regulation because of the variance of business models.

Feb 16, 2011 10:12 am

Official.

You need the 65.  Or combined 7 and 66.  Some states have capital requirements.  Sometimes there are requirements if you will custody assets (don't recommend this - the state regulators will live in your office). 

Also, BFP makes some good points.  But don't let anyone decide for you.  You could be wildly successful starting on your own from scratch.  It's no different than any other business.  Just infinitely harder.

You also need to figure out how you wil structure your business.

Will you sell newsletters in addition to services?

Will you be doing planning?  If so, what kind of planning?

Will you be doing strictly investment management?

Or will you be doing all of these things?

Feb 16, 2011 11:36 am

I thank you all for your responses,

lovindaindy


I would be primarily focused on retirement planning and investment management

Because of my age i plan on targeting recent college graduates that have just started their career to build my book vs targeting elderly people with money seeing as though they probably wouldnt feel comfortable with a 22 year old handling their investment decisions.

To my understanding i dont need a sponsor for the 65 correct?

Feb 16, 2011 12:42 pm

Official. How big a war chest of money do you have to back up this idea? Trust me, it takes money. 

So, how much money do you have to back this up, and how much do you THINK you'll need?  

Feb 16, 2011 12:46 pm

Why can he not work a drone job somewhere and prospect/network in the evenings and weekends? It will be slow but if his expenses are manageable he should be able to move full time in a couple 3-5 years.

Feb 16, 2011 12:55 pm

Just FYI, recent college grads don't have any money.  And they won't for about 25 years.  The reason we all look for the 55+ crowd is that's where the money is.  I have maybe ten clients who are under 50 who have more than $100K.  They're a pretty rare breed.  And I don't think I have any under 30. 

If you're going to let your age be a barrier to success, then you might want to rethink your career path for about 10 years.  The only way a 22 year old survives this business is that he works harder than everyone else and doesn't let his youth and inexperience become an issue in prospecting. 

Take BFP's advice and look for a mentor to work with for a few years.  Even plumbers and carpenters have to work in an apprentice program for years before they can do it on their own.  This business is incredibly complex.  Trying to learn it on your own, with zero training and without a mentor, is in my opinion a recipe for disaster.  Don't let your youthful exuberance keep you from having the best chance of success in this business. 

Feb 16, 2011 2:11 pm

[quote=lovindaindy]

[quote=Times7]

And ... this is precisely why RIAs need to be as stringently regulated as brokers. Uniform regulation.

I don't think a b/d would sponsor you to be off by yourself learning this biz.

[/quote]

Unifrom regulation doesn't save us from bad ethics.  RIAs need more flexible regulation because of the variance of business models.

[/quote]

I doubt it. Playing more to BFP's comment about mentoring, I just thought it was funny, " I'm 22 and I want to become an RIA now." I'm 65 and I want 22 year old women to think I'm hot.

It goes without saying the guy is ethical, but is he qualified to go out and represent himself as an investment advisor? As the CFP puts it, you need ethics, knowledge and experience.

A gal inherits a few million and decides to go into the investment management business for herself and her friends.  She reads a few books, registers with the state, and off she goes managing other people's money.

It's just funny to me, but them some people self medicate or try to do their own roof repairs.

If this guy wants to work with  twenty somethings, he might consider starting with an insurance company if he wants to eat and learn.  The world would be a better place.

Feb 16, 2011 2:38 pm

[quote=Times7]<p>[quote=lovindaindy]</p><p>[quote=Times7]</p><p>And ... this is precisely why RIAs need to be as stringently regulated as brokers. Uniform regulation. </p><p>I don't think a b/d would sponsor you to be off by yourself learning this biz. </p><p>[/quote]</p><p>Unifrom regulation doesn't save us from bad ethics.&nbsp; RIAs need more flexible regulation because of the variance of business models.</p><p>[/quote]</p><p>I doubt it. Playing more to BFP's comment about mentoring, I just thought it was funny, " I'm 22 and I want to become an RIA now." I'm 65 and I want 22 year old women to think I'm hot. </p><p>It goes without saying the guy is ethical, but is he qualified to go out and represent himself as an investment advisor? As the CFP puts it, you need ethics, knowledge and experience. </p><p>A gal inherits a few million and decides to go into the investment management business for herself and her friends. &nbsp;She reads a few books, registers with the state, and off she goes managing other people's money.</p><p>It's just funny to me, but them some&nbsp;people&nbsp;self medicate or try to do their own roof repairs.</p><p>If this guy wants to work with&nbsp; twenty somethings, he might consider starting with an insurance company if he wants to&nbsp;eat and learn.&nbsp; The world would be a better place.</p>[/quote]

I understand your concern but isnt the goal of being an FA to make the best financial/investment decisions for your clients? I dont see how my age could limit my ability to succesfully manage money. Im sure there are people in their 60's that suck at it.

As far as Recent College grads not having money this is true but i am thinkin 5-10 years down the road. If i have been giving them sound financial advice when they first starterd their career dont you think id have a pretty loyal client base. In other words, i might not be opening up huge accounts right away but it will pay off down the road. Especially since the target would be recent med school/law school grads and young small business owners. My generation will birth more entrepunuers than any before us so i think there is a great market for young people starting careers/businesses that need their money managed.


[quote=N.D.]

Why can he not work a drone job somewhere and prospect/network in the evenings and weekends? It will be slow but if his expenses are manageable he should be able to move full time in a couple 3-5 years.

[/quote]

My thoughts exactly, i dont see why i couldnt do this, maybe i was a little misleading in my title saying that i want to be an RIA right now but like with anything i will see much more money and success starting out young rather than starting 15 years from now, and hey if i fail ill still have time to find a new path.

To the person who said i should never let my age limit my potential sucess in this business i agree, you are 100% right, it is more the perception of young FA's that i am worried about. You see a handsome young guy in his early 20's trying to pitch a fund and you instantly think "this guys full of shit" ... or am i wrong??


[quote=BigFirepower]

Official. How big a war chest of money do you have to back up this idea? Trust me, it takes money.


So, how much money do you have to back this up, and how much do you THINK you'll need? 

[/quote]

This is the hard part.. to be compeltely honest currently i have little to no money, but starting part time prospecting on the evengins and weekends like B.D. said im thinkin ill need maybe 10k .. i could be wayyyyyyyyyyyyy off

But that is why i am here

To learn from you all!

Please keep the feedback coming!!

thanks in advance

Feb 16, 2011 2:53 pm

I don't know about your qualifications and experience.

It's better to be young. In that sense, we are still a young profession and defining who we are and how we work.

I totally encourage you, I just fear that you are already looking at shortcuts and bad habits. And look at all the free advice and encouragement you have here to start out on your own.

My point relates to recent comments about the regulatory environment and coming changes. A broker dealer or even an insurance agency would train you in the basics. Your desire to start out on your own as an RIA just points out the need for uniform training and regulation.

The prospect of you going out on your own as an RIA and cold calling people and prospecting and representing yourself as an FA (without proper education, experience and of course ethics) just makes me feel cheapened as a professional. There is plenty of business, I don't think you should be allowed to experiment on the general public. If you were affiliated with a broker dealer, there would be more training and oversight - or you could be mentored by an RIA, but make sure you don't join up with some small hack job that is ignorant about the role of insurance in financial planning.

If you can get away with it, great, but watch out because a lot of small RIAs are likely going to be more heavily regulated in the near future, thankfully.

Feb 16, 2011 3:41 pm

You are going to have to explain how more regulation makes it better.

To be a broker, you still don't even have to havea  college education.  In fact, the training your receive is "sales training" and people will tell you this is a "sales" job.  It doesn't take much to do this job.  If you don't think this kid has a right to be out there earning business and learning the ropes through trial and error, I think that you are selling him short without knowing anything about him.

I also think just because someone has a CFP, doesn't mean they have any sort of competence when it comes to this profession.  In fact, it can be a detriment.  This could be some whiz kid who knows more about retirement planning than all of us combined (that is doubtful, I'm sure, but still).

CPAs give bad tax advice, screw up audits all of the time.

If you want to regulate RIAs, fine.  But make sure it is specific to what each RIA does.  Some are simply financial planners, and really who cares what they do.

Some are investment managers. 

Some are portfolio managers. 

Some are analysts. 

Some are hedge funds.

Realistically, I think have an SRO lends itself to corruption, on both sides.  Getting rid of the SRO and allowing a government entity to regulate the B/D side makes the most sense.  With all of the complaints lodged against B/D's, it's a wonder SRO's even exist.

Feb 16, 2011 3:44 pm

Best of luck to you man, but if you choose to go the route you're talking about of targeting recent college grads vs people who have actual money to invest, you will most definitely starve your first 20 years in the bus.  Getting $50/ month from some sap making $40k pays you about a buck.  If you feel like you can get 5000 people to sign up for that than go for it (and good luck offering good service to 5000 clients).  Otherwise I suggest focusing on targeting anybody 35+. 

I started when I was 23 and as long as you have confidence in yourself you'd be surprised how many people would actually prefer to do business with you vs a 65 year old.  If anybody questions working with you because of your age, tell them, "the benefit to working with me is I will be able to be see you through your entire retirement vs. having to find someone new at a critical stage of your retirement because your FA retired."

Feb 16, 2011 3:51 pm

 I think we agree about the regulation part.

As for things like requiring a CFP, college education, continuing education, training, oversight - one can only hope.

I don't have a big axe to grind here. I'm independent, established and old.

More cred will help the next generation.

If you want to regulate RIAs, fine.  But make sure it is specific to what each RIA does.  Some are simply financial planners, and really who cares what they do.

Some are investment managers. 

Some are portfolio managers. 

Some are analysts. 

Some are hedge funds.

I think this pretty much makes my point, thank you.

Feb 16, 2011 3:55 pm

 anybody questions working with you because of your age, tell them, "the benefit to working with me is I will be able to be see you through your entire retirement vs. having to find someone new at a critical stage of your retirement because your FA retired."

In this case, still BS, though, without some kind of mentoring. The reason you go to a doctor is for their knowledge, experience and ethics. Not that some starving kid who has little experience would be unethical or unrealistic in taking business or making recommendations, because, after all, she's RIA.

Feb 16, 2011 5:18 pm

[quote=Who do you know]

Best of luck to you man, but if you choose to go the route you're talking about of targeting recent college grads vs people who have actual money to invest, you will most definitely starve your first 20 years in the bus.  Getting $50/ month from some sap making $40k pays you about a buck.  If you feel like you can get 5000 people to sign up for that than go for it (and good luck offering good service to 5000 clients).  Otherwise I suggest focusing on targeting anybody 35+. 

I started when I was 23 and as long as you have confidence in yourself you'd be surprised how many people would actually prefer to do business with you vs a 65 year old.  If anybody questions working with you because of your age, tell them, "the benefit to working with me is I will be able to be see you through your entire retirement vs. having to find someone new at a critical stage of your retirement because your FA retired."

[/quote]

Well noted, thanks a lot!

Did you start an indy at 23? or start in the business at 23?

Feb 16, 2011 5:29 pm

Official - I think you're missing the bigger picture with the target audience you want to pursue.  What do recent college grads, new doctors, new business owners, and new FA's all have in common?  They're all broke.  New docs don't make $200K a year.  Most of them are looking at being 30-35 before they start making more than $70-75K per year.  And once they do start making serious money, they have a mountain of student loan bills to pay off.  I'm thinking 15 years after they finish residency they might have some money to play with.  That's if they don't blow it on big houses and Bimmers instead. 

New business owners don't have any money either.  Start-up costs, business loans, meager cash flows, insurance, legal costs, etc all add up pretty quickly for those folks.  Like the docs, give them 15 years and they might have enough cash to make them good clients. 

Take our advice on this one - it's OK to look for those people and hope you can build your practice around them 20 years down the road, but you'll starve between now and then.  You want their parent's accounts.  That is if the parents didn't spend it all on college educations.  You can't build an immediately sustainable practice on 20 somethings. 

My advice would be to absolutely not do this part time.  If you're going to do it, do it right.  You can't do your clients justice if you're spending 40-50 hours a week at your regular job and then getting around to managing their money in the evenings.  If you're dead set on being in this profession for the rest of your career, don't waste 40-50 hours a week working for a paycheck when you could be spending 40-50  hours a week building your business.  Give it 100% of your attention while you have the ability.  Before long you'll find your time being split between your business, your spouse, your kids, your hobbies, and your responsibilities at home.  It would be great to be able to say by the time you're 30 that you can put that list of things in the priority you choose. 

Feb 16, 2011 6:11 pm

Do it part time.  I know a guy who started his while he was in the Air Force, and then when he got out, already had $10 million in RIA assets.  Enough to supplement his retirement pay for sure.  $10 mil at 1% pays a lot of bills.

Feb 17, 2011 9:31 am

Official, when I started my indy practice, I estimated that my partner and I would need about 250-300k. That was based upon former colleagues and some research, and a dose of common sense. I'm sorry, but you simply do not have the capital to do what you are looking for. Your education background is in Human Resources too, you basically are a do it yourselfer hobbyist right now....

I hate to tell you this, but between you and a snowball in hell, the odds favor the snowball in a big way.

If you are smart, you'd take my original advice. But, free advice, and all that...