Despite having prior experience in Asset Management and current experience as an analyst with a boutique IB, I'm finding it hard to get back into asset management or into equity research. Would I be crazy to become an RIA and start my own firm?
My biggest worry is that I would probably start with less than $5MM AUM, so I would have to supplement my income with another stream - which I am positive the IB would let me continue to do some work. I am not worried, however, about performance, so I do think after I "prove myself," that I would be able to bring in additional AUM. I've always done well for myself in investing and have typically beat the market (not bragging, just making a case for becoming an RIA), and the stock I used in my sample research piece for job apps is up approximately 15% since I wrote the research piece 2 months ago. Anyone have thoughts or prior experience they could share?
If you're "not worried about performance" you probably shouldn't be an RIA.
$5M AUM probably isn't going to pay the bills -- and the outflows in the AM space to ETFs / Robo advisors should be of some concern to you. If you want to charge based on AUM, you better be able to offer good risk-adjusted returns and have some expertise in other areas to offer clients as a value-add. The space is competitive and people aren't willing to fork over cash unless they get something for their money.
Even if your returns are actually adequate, the fees you'd generate on $5M isn't great. I wouldn't consider doing this unless you were leaving an established firm with your own book of business
If you have saved some money from your banking days, you'd probably be better buy into a small private wealth management shop.
Edit: TLDR: "yes."
Thanks for the response. Yeah, so what I meant by "not worried about performance" is that I do pretty well in investing, so I am confident in my ability to perform (recessions aside). I know the $5mm would definitely not pay the bills, but if I can charge 1% on AUM and hold a side job as a part-time investment banker (I get a referral fee on clients retained from the pitchbooks I create in addition to normal income), I think that should hold me over until more capital comes in. If I perform after one or two years, I would imagine that the track record should be useful in bumping that AUM up significantly (i.e., "Hey, we beat the market these two years, come in and talk with us.").
I don't need to be making $100,000 a year to be content either, considering I would view the research and discussing investments with investors more of a hobby than a job (it could be the case that it's more stress than I anticipate as well). Also doesn't hurt that I am in the Midwest, so I don't need that much for living expenses either.
surprised nobody has answered yet
yes
Lol, love the sternness.
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