New RIA setup with little AUM

or Register to post new content in the forum

40 RepliesJump to last post

 

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Mar 30, 2009 4:23 pm

Getting ready to start an RIA with only six million in assets.  Having a hard time finding a place to custody and build with.  Anyone care to point me in a direction?  Have spoken to National, Fidelity, Schwab - but I'm just a guppy.

Mar 30, 2009 5:39 pm

Try TRADEPM or something like that. They don't have a min... Why are you going RIA if you only have $6MIL?

Mar 30, 2009 5:46 pm

Matt,

Check your inbox. 

Mar 30, 2009 5:53 pm

TradePMR is the name slim is looking for.. good group catering to everyone but helping a lot of smaller RIAs get started..

Mar 30, 2009 7:09 pm

If you are willing to grow, Rydex Financial Services is a good choice.



Mike Patton over at investment advisor dot com has had good luck with Trade PMR
I hear shareholder services is good also
Mar 30, 2009 7:52 pm
matt1957:

Getting ready to start an RIA with only six million in assets.  Having a hard time finding a place to custody and build with.  Anyone care to point me in a direction?  Have spoken to National, Fidelity, Schwab - but I'm just a guppy.



You are correct about Schwab, Fidelity, Schwab.  But try TD or Scott Trade.  TD has a channel that deals with smaller advisors.  Scott Trade is getting into this business and gotten a long way in building all the tools: Trading, performance reports, etc.  

The person to contact at Scott Trade Institutional is Brian Davis.  Sorry do not have his number handy.



Good Luck.

ash
www.FAfreedom.com - The Breakaway Experts
609-945-7100 x 101
Mar 30, 2009 7:57 pm

Have you considered joining an established RIA instead? With your asset level that might be a good avenue to consider. Most of the bigger custodians you mentioned have at least an informal program to try and introduce existing RIAs looking to grow by adding advisors with people like yourself who are interested in the RIA model but might lack the scale to do it economically.

Mar 31, 2009 8:08 am

ice,



I am told by a couple of contacts I have at Fidelity & Schwab that they (and I assume the other smaller custodians as well) have become much more 'selective' in recent months because they have been hit with a large wave of inquiries from prospective 'breakaway brokers' fleeing the wires in particular. It may not be right, but it's not all that surprising, that they respond by at least informally focusing more attention on those prospects that have more AUM and therefore more potential revenue for them. This will probably last as long as the current imbalance in the prospect pipeline remains.



I would encourage those considering a custodian friendly to smaller advisors to also include SSG (Shareholder Service Group) on their due diligence list. Started and run by two of the key guys that used to run what has become TDA today.

Mar 31, 2009 2:56 pm

Out of curiosity why would 6 million AUM be too small.  Isn't  that enough to start with?   I would think in this market in 5 years that would be 12 million plus you got to assume if your showing up and making somewhat of an effort you will have added another 12 million minimum which would give you 24 million in 5 years and if you charging 1% that's $240,000 minus expenses.


I'd take that all day long.
 
 
Mar 31, 2009 3:43 pm
BiLo:

Out of curiosity why would 6 million AUM be too small.  Isn't  that enough to start with?   I would think in this market in 5 years that would be 12 million plus you got to assume if your showing up and making somewhat of an effort you will have added another 12 million minimum which would give you 24 million in 5 years and if you charging 1% that's $240,000 minus expenses.


I'd take that all day long.
 
 
 
I think assuming you can double your current assets in 5 years is a little high what is that a 14.4% return on current assets each year? If you are doing that, then I have $100K that I would like to invest..
 
I don't doubt you can add more assets in the coming years, but as a RIA, you have no second options(not a criticism, since I do fee based).. But how many people are going to want to pay that 1% every year in a bear market losing 15-45%/year.. but aside from that
 
$6mill @ 1%=$60K
$60K-12K(office)=48K
48k-2.4K(phone,internet fax)=45.6K
 
And that is assuming your assets continue to stay positive. Also doesn't consider office supplies, trades, RIA start up fees, etc (Billing system, BPS taken off the top from custodian, any kind of software, etc.. Don't know how this works with a RIA).
 
I have heard $20-30 MIL for a RIA.
 
Try indy build your assets then go..
Mar 31, 2009 9:00 pm

I don't think 14% for 5 years following a 50% down turn is too unrealistic, that's gets us to break even. 

 
I don't know much about the RIA or Indy but why Indy to start up and then go RIA? 
 
Thanks!
Mar 31, 2009 10:43 pm

Going indy you could build more assets and still build a fee business, also it would give you and idea in terms of expense(actual expenses not estimated) and having to deal with everything else(from owning a business aspect).. Also you could fall back on some commissionable products if you don't bring in enough assets(not that you won't).

 
And it terms of fee accounts it will give you a good idea on ticket charges(on an annual basis).
 
I think this rebound will not be the same... I hope it is but I am expecting it to take 8-10 years to get back..
 
Mar 31, 2009 11:24 pm

Squash, I hope you're wrong about this rebound and I'm right.  Too bad we don't have crystal balls.  This market requires brass ones.  Ha-ha.

 
What would you recommend on going Indy with a small AUM and trailing 100k, 2 years into the business?
Mar 31, 2009 11:42 pm

That's what I did.. spent 3 yrs at Jones, xferd $5MIL and built the rest..

Apr 1, 2009 10:40 am

What B/D did you use?

Apr 1, 2009 1:30 pm

If you charge for other services, you can make it with $5mil, while you build your assets.



Apr 1, 2009 2:04 pm
iceco1d:

Squash,


You left EDJ after 3 years, transferred $5MM, and went Indy...did I read that correctly?

 
Yeah I only xfered people who were willing to go feebased.. So right from the start I xfered $5 of the $20...
 
Eventually $6Mil more came... But in my first year I added an additional $5MIL in fee.. That's the key, xfer take who is willing to come, forget the rest(except for the occasional phone call just to see how bad EDJ is treating them) and find new $$
Apr 2, 2009 12:39 am

$5 mil is fine for ria.  I went ria with about $9 mil in 2005.  You'll find getting new clients is way easier with a major custodian (try TD Ameritrade, low min and good reputation) as an ria.  It took me 3 years with a indy b/d to get the $9 mil - then added over $20 mil in the next 2 years.  The real key is not what you have right now, but what you'll do to grow.  ria will give you way more flexability to grow via marketing freedom and more variety of asset managment options.

Also, do yourself a favor and don't charge 1%.  That's for pansies.  Set your fees at 2% with breakpoints so only your biggest clients will get down to 1%.  This way you can come out of the gates with $100k in revenue.

If you know what you're doing there will be no problem with people paying you a % based fee every year - regardless of what the market is doing.  PM me if you need some further direction.

Good luck - don't waste your time in indyville; it will just be a bigger pain in the a$$ when you have to dump them and transfer your book in 1 or 2 years.

Apr 2, 2009 8:02 am

Good advice. I started my RIA with less than 10. Average fee in my area is 2%. I left alot of assets behind that wouldn't pay me as an RIA (b shares, money mkt accounts). But the 100% payout made up for most of the difference.

 
Google a few of your local RIAs. Then go over to the SEC website and look up the firm. Read through their adv II and see what the average fee is for your area.
 
There are lots of ways to control expenses. I used an executive suite to meet clients and worked out of my home office my first two years. I know guys who can afford a nice office space, but like to work from home so they are still using an exec suite.
Apr 2, 2009 3:42 pm

All - appreciate your thoughts and help.  Fred at TradePMR was helpful.  Firm has a new fee based platform that I've been putting people in, and then the mothership gives me grief because I'm not banging out GDC.  1st year in and have 8 mil in assets - 401ks, some fee based, and run of the mill brokerage.

 
Looking at pure RIA in terms of flexibility long term.  I own commercial office space, so rent is free.  Just need to look at the numbers and build a business plan - then decide how and when to pull the trigger.