Before Moving From a Broker-Dealer to an RIA Model: Know Thyself


If you want to grow an increasingly successful advisory business, don’t assume moving from a broker-dealer model to an RIA model is a forgone conclusion. Before making any major move:

  • Know yourself – that means recognizing both your strengths and your weaknesses.
  • Know what you want. There’s nothing wrong with being content where you are if that is what suits you best.
  • Run your numbers. Be specific and realistic. While RIA structures may mean bigger payouts than the B-D model, they typically come with more complexity and expenses.

Related: Go Ahead and Love on Your Small Clients


One size doesn’t fit all, so don’t force yourself into shoes that just don’t fit.

Last week’s post about contentment and building the business you want to build generated some interesting feedback, and if you didn’t see that, I’ve included the link in the notes. . .

I want to go a bit deeper into that topic this week.

Whether you’re running your advisory business within an independent or a wire-house model, or whether you’re part of a regional firm or a national broker-dealer, the bottom line is you need to be content with what you’re building and where you want to get to. Don’t be tempted to listen to industry chatter about the grass being definitively greener over the other side of the fence, especially if you’re content with your current business structure.

When I was swimming in the mid-80s, four of us from New Zealand received swimming scholarships to come up here to the US. We accepted the offers and were very successful in both swimming and our schoolwork. However, what other swimmers and coaches back in New Zealand didn’t realize was that for the four of us, moving into the US collegiate system was a parallel step that was a good match for our backgrounds and temperaments. We had all been at the top in our strokes in New Zealand. Then we made it top in Australia, and moving over to US college swimming was a parallel step for us in our competitive swimming careers. Many people back home saw our moves to the US as the next steps up for us: they saw it as going from top in New Zealand, up to top in Australia, and then another vertical step to go to the US. They felt if they wanted to progress in their swimming careers, they had to also move to the US, when, in fact, it wasn’t necessarily a great environment for them.

Sure enough, a number of younger New Zealand swimmers came across after us, and before long many of them were homesick, were making failing grades, were not swimming well, and they ended up dropping out of college. What they didn’t realize or take into account was that before I started college in 1986, I had traveled away from home to the US for three months in 1984 and for another four months in 1985. I was prepared to take that step across in 1986 because I knew what to expect and wasn’t just doing it because it seemed like it was what I was “supposed” to do if I wanted to keep advancing in my athletic career. Some of those swimmers who came after our group that went overseas, came from small towns and a small home environment suited them perfectly. They made the mistake of looking at us, thinking that was where they should get to, and lost sight of the fact that they were already where they needed to be.

It can be the same for us as advisors, the same situation within our industry: we can so quickly be tempted to look at the RIA model if we’re part of a broker-dealer and think that’s the way we should be going to progress our business careers. And so I want to encourage you if you are thinking along these lines,

  1. Know yourself. It’s really important you know where your strengths are. It’s also just as important to know where your weaknesses are.

  2. Know what you want. Just because we see the RIA model being touted as potentially more profitable, that doesn’t necessarily mean that it’s the best model for you. It may not even be what you want. There’s nothing wrong with being content where you are, and maybe that means being content within the B-D model.

  3. Run your numbers. Research your numbers if you’re going to make that jump. You’ve got to be very realistic about what it’s going to cost to take on more overhead. You’ve got to be realistic about what’s going to be involved with compliance oversight if the broker-dealer you’re currently with is not going to be providing that service to you any longer. Going RIA may mean a higher payout, but on the other hand, when you’re with a B-D, that’s all taken care of. If you go RIA, it becomes an extra responsibility you have to be concerned about.

There’s something to be said for peace of mind and contentment. You can try those new shoes at that shoe store and walk out, and a couple of hours later—maybe even a day or so later—if it’s not a good fit, you can bring them right back. Once you’ve repapered all your clients and made that big move leaving a B-D to shift to an RIA setup, it is certainly not that convenient coming back. Know what you love most about where you are, consider what it would take to make that major change, and don’t hesitate to take pride in being content if you are already where suits you the best.

And one more thing: if you are considering making a transition, Brad Wales and Aaron Hattenbach have written two super-helpful articles, and I’ve included links to those in the notes.

I look forward to bringing you another Distraction-Proof Advisor Idea next week.