How Much Does It Cost To Start An RIA?

I'm Brad Wales with Transition To RIA (TransitionToRIA.com). This is episode #84 of my question and answer series where I answer RIA related questions I get from advisors just like you.

How much does it cost to start a Registered Investment Advisor ("RIA") practice?

As often occurs with the advice that financial advisors give their own clients, the answer is "it depends."

For new advisors first entering the industry who plan to run a virtual practice, the cost might be as little as a few thousand dollars. For a large team catering to HNW clients, who plan to transition their practice from an existing broker/dealer firm, the cost could potentially be $100,000+.

There are several variables that go into the total cost equation. Some of the variables have static prices, while others provide a wide range of options for advisors to choose from.

In this episode I explain what the main cost variables are and how you can start to pencil your own start-up estimate.

What I do: At Transition To RIA I help financial advisors understand everything there is to know about WHY and HOW to transition their practice to the Registered Investment Advisor (RIA) model.

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🔹 Website: https://TransitionToRIA.com/
🔹 Show notes: https://TransitionToRIA.com/how-much-...
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🔹 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 much does it cost to start an RIA? That is today's question on the Transition To RIA question and answer series. It is episode #84.

Hi, I'm Brad Wales with Transition To RIA where I help you understand everything there is to know about why and how to transition to the RIA model.

If you go to TransitionToRIA.com, you can find all the resources I make available. This entire series is in video format, podcast format, I have articles, I have whitepapers. All kinds of resources to help you understand the RIA model and what it might mean for your practice.

Again, TransitionToRIA.com.

On today's episode, we're going to talk about a question I get asked often, “How much is it going to cost me to start an RIA and transition my practice into it?”

It’s an important question to ask, and it's certainly part of the conversation I typically have with advisors that are exploring the model. But it's not an easy question to answer. I certainly can't come on an episode like this and just say, "It is exactly $11,200," or whatever the case may be, because there's so many different variables involved in starting an RIA.

What drives the answer is the advisor's current practice profile, and what they hope to do with it going forward. There are significant differences from someone that's literally not an advisor now that wants to become an advisor via the RIA model, versus a $700 million team that is desiring a large office space. That's going to have an entirely different cost structure.

There's not just one simple, "Here's the number, as long as you can plan for that, then you're good to go." There are a lot of variables involved.
What I want to do on this episode is talk about what many of those variables are, so you can start to pencil some of these factors in. This is what I help advisors with. But we're going to go over a number of those variables, so you can start to do that exercise yourself as well if you'd like.

This is not going to be an exhaustive list of every possible expense that could be involved in starting an RIA, but it is going to touch on some of the main key pieces.

How I often try to frame this answer is that there are two main expense buckets. The first bucket is what I refer to as “day one” expenses.

Basically, what costs are there to get you to “day one” of the RIA? And then there are the “day two and beyond” expenses.

We’ll start with the day one expenses.

The first expense that typically comes to mind is the registration of the RIA itself. I've done several episodes on this process. How long it takes, the rough cost of it, how you hire a compliance consulting firm to help with it, etc.

Now, you're not technically required to hire anyone for help with the registration. In theory, you could attempt to do it yourself, but that would not be a good idea. You're almost assuredly going to do it incorrectly because it's a detailed process. If you're not willing to spend money to get help with setting up the RIA from a registration standpoint, you probably shouldn't be going down the RIA path, to begin with. Con't....

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