Independent broker dealer vs ria


Below are the different independent financial advisor models available to breakaway brokers or other transitioning advisors ranging from full to partial independence:. This compares to 1, new RIA firms formed in which implies a Many in the industry assume that firms need a significant amount of assets under management AUM in order to prosper. However, the industry stats paint a much different picture. This is largely due to the rapid evolution of the ecosystem supporting independent RIA firms.

From the registration process and onward, firms like ours along with a number of custodians, technology vendors, and others allow even the smallest of investment advisory firms to operate with incredible efficiency at an affordable cost.

Compliance is a serious consideration for any new RIA firm, but again, firms like ours have experience helping thousands of fellow investment advisers implement comprehensive, yet efficient compliance programs with the benefits of the latest technology. Creating his or her own investment advisory firm is not for everyone, but we do encourage every breakaway broker to give it serious consideration before considering other "quasi independent" options given the potential emotional and financial benefits of full independence.

Under the RIA model, investment advisers are only allowed to charge fees and may not receive any commissions. Some financial advisors transitioning from larger institutions may still have a significant percentage of their practice operating under a brokerage model.

Thus, there are a number of IBD firms which will allow an advisor to operate his or her own RIA firm while simultaneously operating as a registered representative of the IBD firm generally as an independent contractor.

While a hybrid setup may allow an advisor to offer both brokerage and advisory services, it should be noted that this arrangement is generally under greater regulatory scrutiny given the potential conflicts of interest and there will be some financial trade-offs to the advisor. As such, we generally recommend that advisors only consider this option if they have a significant brokerage business.

However, there may be times when it makes to sense to explore a hybrid setup. As part of the RIA registration consultation process, we are happy to make introductions to IBD firms that may be a good fit for your practice. It's also important to note that when registered to an IBD firm, an advisor is still generally responsible for securing office space, hiring and compensating staff, and other general overhead expenses.

If an advisor is reluctant to operate his or her own RIA firm, most IBD firms will also allow a financial a advisor to be registered to the IBD firm as both an investment adviser and registered representative.

This scenario is at times referred to as joining a corporate RIA. In this case, the corporate advisory firm is generally owned and operated by the IBD firm. In other similar scenarios, the financial advisor will join a super office of supervisory jurisdiction Super OSJ that may be affiliated with a particular IBD. And much like the hybrid setup, the financial advisor will still be considered an independent contractor and will be responsible for paying for all general overhead expenses.

Thus, there are a number of IBD firms which will allow an advisor to operate his or her own RIA firm while simultaneously operating as a registered representative of the IBD firm generally as an independent contractor. While a hybrid setup may allow an advisor to offer both brokerage and advisory services, it should be noted that this arrangement is generally under greater regulatory scrutiny given the potential conflicts of interest and there will be some financial trade-offs to the advisor.

As such, we generally recommend that advisors only consider this option if they have a significant brokerage business. However, there may be times when it makes to sense to explore a hybrid setup. As part of the RIA registration consultation process, we are happy to make introductions to IBD firms that may be a good fit for your practice.

It's also important to note that when registered to an IBD firm, an advisor is still generally responsible for securing office space, hiring and compensating staff, and other general overhead expenses. If an advisor is reluctant to operate his or her own RIA firm, most IBD firms will also allow a financial a advisor to be registered to the IBD firm as both an investment adviser and registered representative.

This scenario is at times referred to as joining a corporate RIA. In this case, the corporate advisory firm is generally owned and operated by the IBD firm. In other similar scenarios, the financial advisor will join a super office of supervisory jurisdiction Super OSJ that may be affiliated with a particular IBD.

And much like the hybrid setup, the financial advisor will still be considered an independent contractor and will be responsible for paying for all general overhead expenses. Often, under this arrangement, an advisor will operate under a "doing business as" DBA name but all investment business is still conducted directly through the corporate RIA and IBD firm.

This scenario does usually offer more independence than being affiliated with a traditional wire house. However in our experience, we often see advisors shortly transition to starting their own RIA firm given the financial trade-offs of this model along with the realization that operating their own firm is not as daunting as it may have first seemed and offers more flexibility in regards to investment, custodian, technology , and other vendor decisions.

Financial advisors can also join an RIA firm already in existence and operating exclusively as a fiduciary with no brokerage business. This scenario can range from partnering with another local advisor already in business or by joining a larger, national investment advisory firm or corporate RIA.

Each individual arrangement can vary dramatically as far as the autonomy, economic rewards, and overall independence offered. It's important for a financial advisor to remember that in this case he or she will be partnered with or be working for another individual or group of individuals. Thus, it's essential that it is the right cultural fit. You should always consult your relevant regulatory authorities or legal counsel if applicable.

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