How Does An RIA Compare To An Independent Broker-Dealer?

I often encounter a phenomenon with long-tenured advisors. As they've been born and bred at a broker-dealer, they simply assume they always need a broker-dealer. And these are advisors whose practices have become nearly, if not entirely fee-based. Yet their ingrained DNA tells them a broker-dealer is still required. So when considering transitioning their practice to an independent model, they only consider broker-dealer solutions. That is a classic case of the tail wagging the dog. With a predominantly fee-based practice, they need an RIA, not a broker-dealer. On this episode of the Transition To RIA question & answer series I explain how an RIA compares to an Independent Broker-Dealer, and why if you have a primarily fee-based practice you should not let the tail wag the dog. I'm Brad Wales with Transition To RIA (TransitionToRIA.com). This is episode #144 of my question and answer series where I answer RIA related questions I get from advisors just like you. What I do: At Transition To RIA I help financial advisors and teams between $50M and $1B understand everything there is to know about WHY and HOW to transition their practice to the Registered Investment Advisor (RIA) model. RESOURCES & LINKS ___________________________________________ 🔹 Website: https://TransitionToRIA.com/ 🔹 Show notes: https://TransitionToRIA.com/how-does-... 🔹 Contact me: https://transitiontoria.com/contact/ 🔹 List of all questions I've answered: https://transitiontoria.com/videos/ 🔹 Podcast: https://transitiontoria.com/podcast/ 🔹 Whitepaper ("11 Ways The Economics Of The RIA Model Are Superior To Other Advisor Affiliation Options"): https://transitiontoria.com/whitepapers/ 🔹 Transcription of video: How does an RIA compare to an independent broker-dealer? That is today's question on the Transition To RIA question & answer series. It is episode #144. Hi, I'm Brad Wales with Transition To RIA where we help you understand everything there is to know about why and how to transition your practice to the RIA model. If you're not already there, head to TransitionToRIA.com where you'll find all the resources we provide from this entire series in video format, podcast format. There are articles, there are whitepapers. There’s a Vendor Profile Series. All kinds of things to help you better understand the RIA model. Again, TransitionToRIA.com. On this episode we're going to talk about if you're looking for a change with your practice, whatever kind of model you're in now, whatever kind of firm you're in now, should you be considering the RIA model or should you be considering the independent broker-dealer model? Some of you that are at a wirehouse now and you're considering a more independent path, you might be defaulting to think, if I'm at a wirehouse now, my next progression is an independent broker-dealer. Or perhaps if you're at an independent broker-dealer now and that is no longer a good partner, they’re no longer a good solution for you, you might be thinking…. “I should just be looking at other independent broker-dealers.” Essentially a lateral move. I would challenge you, depending on the circumstances of your practice, that while you might look at those options, you should also be considering the RIA model. And that is for sure if you are predominantly fee-based with your practice. Which mind you, it’s a common misconception, you do not have to be 100% fee-only to go into the RIA model. There are ways to solve for your, often referred to as “legacy” commission assets. I've done episodes on how that works. So just at a high level, you do not have to be 100% fee-only to go into the model. And for those of you that are either perhaps already 100% fee-only, or predominantly fee-only, which I would describe as 70% or more fee-only, I would challenge you, are you only considering perhaps the independent broker-dealer path as your independent route? You should be looking at the RIA model as well. So on today's episode, I want to give you some of the comparisons between an independent broker-dealer and the RIA model. Let’s start with a backstory on the independent broker-dealer model. For those that are not already familiar with it, this is the idea that you are joining a broker-dealer in an “independent” affiliation model, often referred to as a 1099 model, or an independent contractor model. The idea being is that you're going to join that broker-dealer, they're going to give you a relatively high payout. And in return, you are going to manage your so-called local expenses yourself as your own business. You are your own business, you are 1099, you are that independent contractor. They provide you certain services, you in turn essentially run your local arrangement. Con't... View remainder of transcription here: https://TransitionToRIA.com/how-does-... Disclaimer: https://transitiontoria.com/terms/