Starting an RIA

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Jan 26, 2006 10:39 pm

I am interested in starting a Registered Investment Advisor.   By way of my background, I have an MBA in Finance from an Ivy League business school, series 65 license, and 10 years experience in financial services (although 0 in actually managing OPM).  I have had considerable success managing my own money, but no audited track record or performance figures to speak of.


I have two questions for the panel.  1) Which brokerage/custodian platform would be best to use.  Fidelity, Schwab, Raymond James?, Ameritrade?  The latter is most open to startup RIA's. 


Secondly, I want to leverage existing financial advisors/brokers/planners to sell my fund for me.  To do this, I am willing to give away almost all of my fees  (I am assuming this would be around 1.5% of AUM)  in the initial stages while I still building up my asset base.  I am in a personal situation where I can afford to do this (live without a paycheck) for a while. 


How should I approach brokers, financial advisors, financial planners with this idea.  Is this a viable approach?  How interested would people like yourself be, assuming I can build a solid performance track record. 



Jan 27, 2006 12:20 am

You cannot get in to Fidelity or Schwab without significant assets....say around 25 mil from what I understand.  This is for RIA's managing separate accounts for investors.  It may be different if you are going to manage some sort of pooled product akin to a mutual fund.


It will be a challenge to get brokers/planners to sell your product wiht no track record.


I wish you luck!

Jan 27, 2006 10:04 am

As Joe said diplomatically ("it will be a challenge..."), I'd say more strongly -- it will be next to impossible to get advisors to bring you money when you have no experience running OPM.  You will need to build your own asset base first & establish a track record of several years' performance.  There's a huge universe of established money management firms in existence for planners to pick from; I can't evision why any would have an interest in someone with no experience.


An alternative may be to see if you can get hired by a money management firm (probably only as a junior analyst or a junior to a portfolio manager).  You may end up loving working in that environment as you gain experience and earn your right to move up to a porfolio manager position.  And, if you wish at a later time to break out on your own you'll then have the experience and track record to do so.


While your MBA in Finance is potentially a great foundation, you should think about working towards getting your CFA if you want to be a money manager.


BTW, Raymond James' Investment Advisor Division (for independent RIAs like Schwab Institutional) also has a $25 to $30mm minimum asset requirement.

Jan 29, 2006 8:07 pm

First off, I appreciate the honest advise. 


Regarding building a track record, I am planning on taking my own funds, putting it in a separate account, and implenting the strategies that I plan on implementing in my RIA.  After a year or so, I will have my returns verified by an independent CPA firm.  Would that be adequate to establishing a track record?  How many years of performance constitutes a track record?


I spoke to Ameritrade and they are very open to startup RIA's.  Fidelity seemed less interested, and I will be calling Schwab and RJ to see if they are open to startup RIA's or you absolutely need to bringing 25 million from day one. 


I have worked in Asset Management, and have passed Level I of the CFA(for what that's worth).  I have specific strategies that I believe in and have done well in my personal portfolio.  I am not interesting in working for somebody else for another 20 years, hoping that someone will tap me on the shoulder and make me a PM.  I would rather go balls to the wall, and go out and do this myself. 


Jan 30, 2006 1:33 am

You do realize that starting an RIA and starting your own fund are two separate things, don't you?


Do you have any idea how much money you are going to need in your own fund for it to be worthwhile?   You won't be able to give away your fees because your expenses will be higher than your fees.   My guess is that you would need more than $100 million to have a chance of making money. 


Managing your own money, no matter how successfully or for how long, does not make a track record that others will follow.


If you can be very successful in the investing of your own money, you don't need to start a fund.  Just keep borrowing and investing and you'll become a billionaire!

Jan 30, 2006 4:38 pm

If you go to Raymond James, where I am, you can start off as a traditional employee.  Get a salary and benefits for two years.  Then, either stay that way or go INDY with RJ.  You never have to leave the company.  and it is a great company.


but, you have to have your 7 and your 66.  Or for you just add the 63 and your 7.


go to the website.  good luck.