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New RIA setup with little AUM

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Apr 3, 2009 4:35 am

Great stuff and both the RIA route and Indy look good.  I don’t see too many negatives going Indy especially if you combine both advisory fees and commissions.

  As far as RIA goes do you bill monthly for cash flow?  Do you charge the client ticket charges?   Thanks this thread has been very helpful.
Apr 5, 2009 7:33 am

Ice is quite right.  You can technically do commission business, but you will have to be registered with a B/D to do so.  For instance, if you wanted to do commission business through Brokers Xpress, you could, but that would have to be disclosed on your ADV.

  Also, you would have to disclose any insurance business.  Your insurance business would run separately from your RIA business.  
Apr 5, 2009 6:26 pm

So I could charge commissioins if I was with a registered B/D.  Now could I do commission trades for people that didn’t want to pay advisory fees and have people that wanted to do that have an advisory account?  I would definitley want to do insurance as it is an important piece of the financial puzzle.

  So, could I do commissionable trades, advisory fees for some clients, and insurance on in the same company?   Thank You.
Apr 5, 2009 7:45 pm

[quote=BiLo]So I could charge commissioins if I was with a registered B/D.  Now could I do commission trades for people that didn’t want to pay advisory fees and have people that wanted to do that have an advisory account?  I would definitley want to do insurance as it is an important piece of the financial puzzle.

  So, could I do commissionable trades, advisory fees for some clients, and insurance on in the same company?   Thank You.[/quote]

Here are three real cases that might help this conversation.  In each case the advisor dropped their BD and opened RIA only shop.

1.  Advisor decided to include trading fees as a part of their client fees.  He was a stock picker and was not concerned with the conflict of managing trades.

2.  Advisor decided to include the trading fees as a part of their client fees for his old clients and for his new clients decided to charge the client seperatly for trading.  He did not want to create a pricing issue for his old clients that were moving.

3.  Advisor added trading fees to his advisory fees.  He chaged the normal fees he was charging at the wirehouse and then added trading fees.  He was confident that his clients would not mind paying.  He was correct, 95% of his clinets moved with him. 

I refered all three advisors to the same attorney to write the client services agreeement, so I know there were no legal issues.  In a perfect situation, I would agree that the trading costs should be seperated. 

As far a commision trades... the only way to can charge a comission on a trade is to be affiliated with a BD.  In an RIA you can charge a "consulting fee" or a "flat fee" for your advise on a trade, but it is not a comission.  All of the advisors above have a consulting fee clause in their ADV and Client Agreement.  I should also add that their consulting fee is minimal when compared to their advisory fee.  If there consulting fees became large, I am sure the regulators may have some concern. 

Hope this helps.

ash
www.FAfreedom.com - The Breakaway Experts
609-945-7100 x 101
Apr 7, 2009 5:41 pm

[quote=brandnewadvisor]$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.
[/quote]

Just a question for people that are RIA only; how do you handle the client that really needs some of their income guaranteed (i.e. annuities)?  Let's say someone comes with $1m, and you need to ensure some income, are you just putting all into a fee platform, or are you doing something else?  I don't even kow if you can do annuities in an RIA platform.

Thanks.

Apr 7, 2009 5:48 pm

B24 - no load annuities - no surrender, extremely low expenses, good funds. You can set up your fee in several ways - they can pay you, they can pay you out of another account they have, or if they are taking distributions from the annuity, they can send some of that to you.



Apr 7, 2009 6:38 pm

[quote=B24]

Just a question for people that are RIA only; how do you handle the client that really needs some of their income guaranteed (i.e. annuities)?  Let's say someone comes with $1m, and you need to ensure some income, are you just putting all into a fee platform, or are you doing something else?  I don't even kow if you can do annuities in an RIA platform.

Thanks.

[/quote]

Here is an article that may help you.
http://registeredrep.com/mag/finance_variable_annuity_providers_0501/index.html

ash
www.FAfreedom.com - The Breakaway Experts
609-945-7100 x 101
Apr 7, 2009 6:55 pm
Moraen:

B24 - no load annuities - no surrender, extremely low expenses, good funds. You can set up your fee in several ways - they can pay you, they can pay you out of another account they have, or if they are taking distributions from the annuity, they can send some of that to you.

  Thanks.
Apr 10, 2009 12:17 pm

Good Morning All,

  I saw my name and Trade-PMR mentioned a few times on this forum.  Thank you all very much.  Indeed, we are proud to work with startup RIAs or emerging advisory firms.  Over the years we've seen so many firms get started from ground zero who today are doing quite well and have grown their AUM by leaps and bounds.  It's a story I have so often seen repeated helping Advisors believe in their dreams and help execute their business plans.  I'm always honored for the role I play in this process.
Jul 1, 2009 6:47 pm

Can you still setup retirement plans as an RIA? That is where I will be focusing heavily over the next few years. 

Jul 1, 2009 9:15 pm

I have a feeling I’m going to regret even asking this, but … what exactly do you mean by “setup retirement plans?” And how long have you been doing this?

Jul 1, 2009 9:40 pm

I’m gonna laugh my ass off when FINRA gets their claws into regulating the RIA’s. 

Jul 2, 2009 1:06 am

[quote=Alice Cooper]I’m gonna laugh my ass off when FINRA gets their claws into regulating the RIA’s. 
[/quote]

Why?  SEC is no walk in the park.  Regardless of regulator, the crooks seem to always eventually get caught.

Jul 2, 2009 3:21 pm

[quote=Alice Cooper] I’m gonna laugh my ass off when FINRA gets their claws into regulating the RIA’s.

[/quote]

What exactly is your point with that comment, Alice? That misery loves company? FINRA or some federal group will get their claws into national regulation of the insurance industry first. You should get a good laugh out of that too.



Besides, obviously this kid chico has nothing to do with the RIA world, so he’s probably already a RR regulated by FINRA. I guess not even regulators can regulate away all inexperience or ignorance.

Jul 2, 2009 5:19 pm
Alice Cooper:

I’m gonna laugh my ass off when FINRA gets their claws into regulating the RIA’s. 

  I'm gonna laugh my ass off when FINRA starts regulating EIA's.
Jul 2, 2009 5:40 pm
B24:

[quote=Alice Cooper]I’m gonna laugh my ass off when FINRA gets their claws into regulating the RIA’s. 

  I'm gonna laugh my ass off when FINRA starts regulating EIA's.[/quote]   I hope that neither of these things ever comes to be.
Jul 2, 2009 7:09 pm

hopefully nothing. Remeber a few years back when they went crazy about how research needed to be outsourced. Everyone said it would be the death of internal reseach at the wirehouses. I don’t think anything has changed other than an added disclaimer or two.

Jul 6, 2009 3:38 pm

Matt,

I know that you are looking for a custodian, but when it comes time to check out Performance Reporting Systems, Research and Investment Planning, Client Web portals and Document Vaults, you should check out Morningstar Office.

Our All-in-one solution was made for RIAs who want to consolidate their software and streamline their practices.

Morningstar is planning to hold a free webinar this Thursday.
You should check it out:
https://www118.livemeeting.com/lrs/morningst_ccc/Registration.aspx?pageName=1581nzr17ztwxbhp

If you can’t make the webinar, which will highlight why newer RIAs are choosing Morningstar Office, you can either click here http://global.morningstar.com/office or give us a call at +1 800 886-1749.

Best of Luck!

-Morningstar

Jul 13, 2009 8:39 pm

By setting up a retirement plan, I mean setting up 401(k), SEP, SIMPLE, and other types of plans. I believe I have already figured out the answer to this.

My biggest concern related to how I would be compensated.

I’ve been in this business for about a year now.

Jul 13, 2009 8:58 pm
Morphius:

I have a feeling I’m going to regret even asking this, but … what exactly do you mean by “setup retirement plans?” And how long have you been doing this?



Morph - I think he means "company sponsored retirement plans".

Yes, you can "set them up", but you do not take a commission off of the sale of the plan. You can set yourself up to take a fee like a commission, but it won't be the same.

We focus on more of a consultative role. Charge a fee commensurate with the amount of work you will do. Some plan sponsors like this, others do not.

There is legislation focusing on the flat fee arrangement for RIA's. We'll see if it passes.