Should you form your own independent RIA as a financial advisor? For solo advisors and advisory teams who are tired of living under corporate restrictions, independence offers the appeal of more control, higher take-home revenue, and running their business their way. However, unlike larger teams with half a billion or more in revenue and built-in infrastructure, many advisors are not prepared for what’s ahead. When you leave a firm or a broker-dealer, you may feel like you are on an island.
Should you form your own independent RIA as a financial advisor? For solo advisors and advisory teams who are tired of living under corporate restrictions, independence offers the appeal of more control, higher take-home revenue, and running their business their way. However, unlike larger teams with half a billion or more in revenue and built-in infrastructure, many advisors are not prepared for what’s ahead. When you leave a firm or a broker-dealer, you may feel like you are on an island.
Here are 10 things every advisor should consider before starting an independent RIA and making the leap.
1. Know the Start-Up and Ongoing Expenses Going In
Legal, compliance, marketing, and technology fees for an independent RIA could start at $7,500 to $10,000 or more, and ongoing expenses could be 40% of your revenue. You will also need to consider if you will be buying someone else’s practice? You need to factor in T&E, conferences, a CRM, email marketing, prospecting, billing technology, planning and portfolio management software, website hosting, health insurance, E&O, and possibly staff. If you can hold off on a brick-and mortar office location, do so until you have your feet under you.
2. Advisory Fee Structure and Minimums
Before leaving, conduct a comprehensive analysis of your current business. Know your actual hours spent for an average A, B, and C client household per year and are you charging enough to cover your time and skills, while baking in enough profit margin? How many hours do you spend on a financial plan (basic and complex)?
Will you be fee-only or fee-based? Will your model be AUM, financial planning, hourly fee, retainer fee, or a combination? Will you incorporate commission products to solve specific client needs? Your inclination may be to lower fees to win clients; however, your time and efficiency may quickly suffer. Know what your competitors are charging so you don’t underestimate or over-price. If you do more tax planning than others, charge for that value.
3. You’re Building a Business, Not Just Changing Platforms
Starting an RIA is not simply a change in platform or payout, it’s launching a business. You need a business plan and workflows. Think about scalability and what builds equity value. You are building something that can grow, evolve, and one day be sold. Advisors who treat independence as a business, not just an escape from a grid, are the ones who thrive. You will need to choose a business legal structure, EIN number for tax purposes, and business banking accounts. If your brand or logo is your last name, it may cause problems down the road if you bring in equity partners later.
4. Compliance is on You
Once independent, the compliance burden shifts on you. You’ll need to register with the SEC or your state regulator, create and file your Form ADV, establish policies and procedures, adopt a compliance calendar, and archive social media and client interactions. Mistakes are costly and reputationally damaging. You’ll want to engage a good RIA attorney to give you guidance on writing your ADV, client planning agreements, and disclosures
5. Custodian Fit Matters
When starting an independent RIA, choosing a custodian is not just about managing assets and client billing. It’s about culture, support, and the experience your clients will have. For solo advisors, look for custodians that support smaller firms, offer accessible service teams, and provide transition assistance. Don’t underestimate the operational lift of account openings and ACAT transfers. A custodian should be a partner, not just a back-office warehouse.
What services will they give you and are the thresholds reasonable to qualify for business subsidies?
6. Technology Is Your Infrastructure
Tech is the backbone of an RIA. Depending on your needs, a comprehensive suite can run $25,000 to $50,000 annually, even for small RIAs. That being said, don’t get caught up in the “shiny new object” syndrome. Focus on what you truly need to run your client experience. You may not need all the bells and whistles. If it takes too long to learn it, you may not need it.
7. Have Your Niche Activated Beforehand
If you don’t have a reliable marketing strategy or niche market for client acquisition, figure this out before you walk. Without a continual flow of new clients you may be in desperation mode trying a random mish mosh of lead generation tactics. Purchased leads can be expensive, unreliable in quality, and you are in competition with other advisors for the same lead. Be intentional about who you want to work with. It’s better to have a niche activated vs. stops, starts, and failures with inconsistent prospecting. “Hoping” that clients and centers of influence will refer you is not a plan.
8. Get Your Designations Beforehand
If you can get your CFP® designation or other designations before breaking away, you can focus solely on client acquisition and managing your practice in your early years. You don’t want to be distracted.
9. Leave the Right Way – Legally
Make sure you have good legal advice and leave your firm following all compliance protocols. Some firms will tear down your good name on the way out to conserve assets; you should take the high road and let your solid client relationships facilitate a good outcome.
10. Don’t be Impulsive. Do Your Homework!
Starting your own independent RIA is both liberating and challenging. On one hand, it can offer unmatched control, flexibility, and long-term equity. But it also comes with new responsibilities, financial pressures, and the reality that you are not just an advisor anymore, you are a business owner.