Preparing to make the leap, especially interested in RIA

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Nov 14, 2010 11:38 pm

I have been perusing the forums for a while as I am considering setting myself up as an RIA.  I am currently a mutual fund accountant/analyst, but have been looking to get into asset management for some time now.  I turned down a position with Jones as I am more interested in the RIA model - specifically, charge by the hour for recommendations, portfolio analysis, etc. and charging a fee for managing the assets.  My question is thus:  What is the timeline to set up such a business (that is, how much should I have saved before taking the plunge)?   Also, for those that have started out on their own, without a book of business or big name, what kind of response have you received while prospecting?  I am on the CFA track now, and am considering obtaining some professional designation within the financial planning industry, but I was curious how people respond to a (relatively) young advisor.  Thanks in advance for any help.

Nov 15, 2010 11:22 am

It will take you generally 3-6 weeks (depending on state) to get your RIA approved.  You can get everything else done in the interim (LLC, bank accts, etc.).  Then you will need to start an affiliation with a custodian.  All-in, it might be about 6 weeks.

As far as getting business, starting from scratch is a tough row to hoe.  I think you will need to start out as a "financial planner", charging people fees for advice.  Most people won't hand over their assets to a newbie WITHOUT affiliation with a major name (i.e. wirehouse, Jones, etc.).  Doing some planning and advising for people will get your foot in the door for the assets. 

Nov 16, 2010 9:29 am

RIA is for people that already have books of business... I'm not sure why you would put yourself through 2-3 year of no real income.  Your expenses will be high, your stress levels even higher, and your client list short.  Build a book at a bank, wirehouse, or work for a veteran at a local RIA.

I hate to be a downer, but you will save money and headaches this way.

Nov 17, 2010 2:23 pm

Thanks for the comments. I have considered going into a bank first, then starting on my own. Reading through some of the other posts it seems there could be employment contracts that might make things difficult. Would the financial planning income be enough to get by until AUM grows? It seems the going rate is 100-200/hr, which appears sufficient to live on as long as I maintain a steady stream of business.

Nov 17, 2010 2:47 pm

Unless you have some connections, where you are going to wind up with deposits day one, I'd say you are likely to make darn near little or nothing for several years. So, if you've got a few hundred thou laying around, you can live on, well, sure, start with nothing and just open up the doors...

Nov 26, 2010 5:36 pm

I am in a similar situation as I need to find a business model that will work. I am also thinking of other methods. What are the difficulties you guys find operationally. Not raising capital but as far as operations and research is concerned. If you start off on your own, a lot of time is consumed in prospecting and client facing. Doing the paperwork and research will be difficult?