Business Structures for Financial Advisors: Finding the Right Fit

Sean Kernan, Managing Partner • Sep 12, 2023
Significant market events like the Schwab/TD Ameritrade merger have catalyzed an overall reassessment within the financial advisory community. Mergers of this scale inevitably generate shifts in talent and prompt advisors to reconsider their affiliations. As a multi-custodian firm, we advocate for leveraging these transitions to enhance your business model. This is especially pertinent given the heightened competition among custodians, where personalized service, competitive fee structures, and economies of scale are becoming increasingly vital.

Many advisors experience greater satisfaction from client interaction and business growth rather than the administrative rigors of running a regulated entity like an RIA. The trend of 'tucking in'—affiliating with larger RIAs to leverage their infrastructure—continues to gain traction as it allows advisors to focus on their core competencies.

Succession planning and liquidity considerations are also increasingly influencing advisors' choices of business models as advisors seek affiliations that could potentially meet those needs. Our succession planning consultants can address these needs, offering an investment pathway into our collective success, while also fostering discussions around business life cycles.

Determining Your Ideal Business Structure
For advisors contemplating independence, there are essentially three pathways: establishing your own Registered Investment Advisor (RIA), aligning with an existing RIA, or joining the corporate RIA of an Independent Broker-Dealer (IBD). Each has distinct advantages and challenges.

Aligning with the Corporate RIA of an IBD
This model offers a transitional route to independence, allowing you to own your business while capitalizing on the resources of an IBD. Regulatory compliance is linear, as you become an Investment Advisor Representative of the IBD. However, this affiliation does constrain you to the IBD’s approved custodian, product offerings, and technological platforms.

Starting an RIA
For advisors seeking the zenith of independence, establishing your own RIA grants full control over key decisions, from custodian selection to technological adoption. However, this also entails the intricate task of developing and overseeing compliance protocols, operational processes, and cybersecurity measures—an endeavor requiring meticulous planning and resource allocation.

Affiliating with an Established RIA
The 'tuck-in' model permits you to function as an Independent Advisor Representative under an established RIA, thus eliminating the direct responsibilities and costs associated with managing a regulated entity. These affiliations often offer hybrid options, broadening your client service capabilities and even providing structured succession and liquidity solutions.
ARC offers complete independence to advisors with the ability to choose how they affiliate with us. Advisors have the option of joining one of our existing DBAs or creating their own, with or without the help of our in-house marketing team who can assist with logo and website design. 

Conclusion: Your Path to Independence
The journey towards independence warrants rigorous due diligence. Engage with multiple industry stakeholders, consult third-party recruiters, and scrutinize the consistency of information you gather. Advisors should see firms not just as vendors but as educators and strategic partners. Advisor Resource Council stands as a supportive pillar in this landscape, offering customized transition pathways for advisors seeking autonomy.
By thoroughly considering your structural options—be it aligning with an IBD's corporate RIA, initiating your own RIA, or affiliating with an established entity—you empower yourself to align your business with your long-term objectives and professional ethos. As you move forward, keep these critical factors in view, and remember that the journey to independence is not a solo endeavor but a collective experience guided by your choices and supported by your partners.

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