Starting an RIA

or Register to post new content in the forum

19 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.
Nov 10, 2005 11:16 am

I have worked on the buyside as an analyst for many years and have a couple contacts that want to seed me with about 10 mln to manage accounts for them.


   I am thinking about starting up a registered investment advisor.   Am I crazy to try and set this up by myself?   Anyone have any advice on a custodian to use, specifically Ameritrade?  Anything I should watch out for?  Has anyone used any of these consultants that offer to do all of the compliance work for a set fee?



Any advise would be appreciated



Nov 10, 2005 6:36 pm

What area do you follow?

Nov 10, 2005 7:13 pm

Different states have different requirements for RIA's. In Georgia, the Secretary of State website lists the regulations and requirements to be licensed as an RIA. The same may also apply in your state. Also, check with www.sec.gov for a list of federal regulations for RIA's.


However, the easiest route to take would be to consult a securities attorney to make sure you've crossed all your t's and dotted all the right i's. Sure, it will cost a few bucks, but at least you'll know you're getting off on the right foot.

Nov 11, 2005 12:39 pm

Nice seed money.  Why go thru the hassle and COST.  Just join RJ.  You can start as a traditional employee, get paid to study and get your license, build you book, then go indy and still be at RJ.


10m. is not enough to live off.  Try 100m

Nov 11, 2005 1:56 pm

$10M is fine if it is 100% fee-based and you are earning 100% on that biz.

Nov 11, 2005 2:07 pm
BrokerRecruit:

$10M is fine if it is 100% fee-based and you are earning 100% on that biz.


100% is NOT possible, what about overhead? 

Nov 14, 2005 9:18 am

Fee based is about 1 to 1 1/2 percent on the Assets under Management.  So let's use 1.25% to be safe.  Multiplied by $10M is $125,000 per year.  Noone gets 100% payout.  If you got 55% payout it would be $68,750.  And 55% payout is high.  $10m is the starting point for Financial Advisors who finish their second year at RayJay.


You need much more than $10m, but like I said, it is a good place to start.

Nov 14, 2005 9:55 am

Actually, through RJ's RIA platform, all fee-based biz is not run through the grid and no haircuts are taken, thus, it is a true 100% payout.  Transactional biz is run through a grid and subject to haircuts.


And, yes, ex EJIR, of course there is the overhead, I was simply referring to the payout. 

Nov 14, 2005 11:15 am

Minus the overhead, it is definitely a 100% payout.

Nov 14, 2005 12:40 pm

Well, I learned something.  When I decide to go indy, I will have a party.

Nov 19, 2005 1:30 am

What are the overhead costs generally for an RIA?



If he already has 10 mln in assets managed, and charges 1 percent, how much of the $100,000 will he keep?



Acrob, do you plan on leasing an office or do it from home?

Nov 21, 2005 10:09 am

Does RJ  RIA allow you to cusodian assets at another firm like E-trade, or TD Water house?


Nov 21, 2005 11:15 am

Yep.

Nov 21, 2005 12:06 pm

RJ's RIA platform (called the Investment Advisor Division) I believe requires a minimum of about $30mm of assets to affiliate with them.  So, a start-up RIA like acrob is talking about probably wouldn't work there.  But, it may be worth a call.

Nov 21, 2005 9:27 pm
BrokerRecruit:

Actually, through RJ's RIA platform, all fee-based biz is not run through the grid and no haircuts are taken, thus, it is a true 100% payout. Transactional biz is run through a grid and subject to haircuts.



And, yes, ex EJIR, of course there is the overhead, I was simply referring to the payout.





BrokerReject,



You mean there can be overhead before the overhead? What's the typical net net at RJ? I've heard for a $700k gross producer about 60%, how accurate is this?



BPD

Nov 22, 2005 10:34 am

You mean there can be overhead before the overhead?


I don't know why this is so difficult to understand.  Yes there is overhead.  Rent, utilities, advertising, furniture, paper, pencils and so on.  The independent firms charge ticket costs (which I include in overhead on my balance sheet because not all trades have ticket costs) and take a "haircut" on the commissions earned.  The hair cut can be from 10% to 20%.  I am currently at the 85% payout grid, and at 90 to 100% on life and fixed annuity products depending on who I purchase through.


1. Everyone's overhead costs will vary greatly so you can't come up with a common net net payout.


2. Overhead is something that we can control, unlike the Reps at Jones. So the net net will vary.


IT VARIES. 

Nov 25, 2005 6:48 pm

BL,



I was just kidding with "You mean there can be overhead before the overhead?" It was said tongue in cheek.



Yes, I understand you are controling your overhead by not having an assistant, at least according to one of your previous posts. Have you hired anyone yet?



What is your net net?



BPD

Nov 28, 2005 10:28 am

BPD,


It will depend on the product mix and which platform.  If they are in the IMD side (RIA) vs. the IAD (independent contractor), they will have expenses that the indy won't incur.  However, they will be paid out at 100% on fee-based biz., vs. 75-90% on the indy side. 


I wouldn't say there is a clear-cut net-net that I speak to.  I try to stay away from those general stats and make them specific to each producer since there is no generic business model that everyone will use.  If I had to state an average net-net of those I've place thus far, I'd have to say around 70%.  These aren't the biggest producers in the world, but their business model is perfect for the specific platform they've gone into to increase their net income a pretty significant amount.

Nov 28, 2005 3:12 pm

I just finally made the decision to go completely indy.  My total cost were less then $ 2500.00.  I also affiliated with and indy broker that will handle any needed trades on smaller accounts at a 75 % payout with a $49.00 per month tech fee.


Office expenses (all overhead) will run about $ 1,000.00 per month.


I don't think that is too bad for what I will gain by being on my own and keeping the total fees.