Insight into RIA

futurectdoc:

It's not really AM, you're a stockbroker. No offense, but no one will trust someone without a solid track record and youth will work against you.

I'm talking about being in an Analyst role within an RIA, not as an advisor or broker. Sorry for the confusion.

Chicago12345:

Some RIAs will create and market their own managed account strategies. If you start in a junior equity analyst role at a firm like this, you may be able to make the jump to an AM down the road.

Thanks for your response. I think this specific role consists of a mix of investment analysis/manger due diligence, portfolio structuring, client relationship management and in depth financial planning. So, probably a mix of technical/client relations rather than a pure equity analysis position.

kingtut:

My first job out of undergrad was with an investment consulting firm that also owned an RIA practice. My job revolved our trading, asset allocation, and security selection. RIAs are worlds away from the stock brokerage world....there is no comparison. RIAs are registered with the SEC and state while traditional brokerages are governed by FINRA. Generically, RIAs are simply private wealth management firms that have no bank affiliations.

Generally speaking, a lot of RIAs are formed by successful advisors from the wirehouse banks, ML/MSSB/UBS, who privatize their books of business by establishing an RIA. Instead of giving up half of their profits to the banks, advisors establish an RIA and bring clients over where they have control of every dollar coming through the door. There are obvious pros and cons to each, but generally the advisor will make much more money as an RIA than staying with their bank. This assumes that they are able to transfer a substantial portion of their client list to the RIA. I actually know a guy who sold his RIA to a bank, waited for the non-compete to expire, and then re-formed his RIA years later. He made quite a bit of money and only lost a few clients. The downside to forming your own RIA is that you have no back office support. No compliance, legal, marketing, trading, etc... It can be a huge pain in the ass to set all of this up or attempt to outsource it to bundled providers.

Many of the larger AUM advisors at wirehouse banks, $1B+, will have a fairly sizable support staff helping them as a team. Generally, when the advisor goes the RIA route they will take their entire team with them and give each member an equity stake in the RIA. Because there is theoretically more money to go around to each team member the advisor can reward loyalty with ownership stakes. The biggest plus to RIAs is that they are self controlled and don't have to deal with the minute compliance issues that the wirehouse advisors face on a day to day basis.

Pay structure has dramatically changed in the PWM industry over the last 10 years. The old brokerage model of getting paid when you generate a purchase or sale is quickly going away. Virtually everyone is going to a fee based model whereby your clients are charged a declining fee schedule on their assets. I don't remember our fee schedule exactly, but I think it was 1% of $0.99M, 0.85% $1M-$5M, 0.6% $5M-$10M, 0.5% $10+M. More money equals higher economies of scale for you and your client. Our wealthiest clients were generally the easiest to work with.

Our firm ran two other businesses outside of the RIA. We had an M&A consulting practice and also an investment consulting practice. I worked in all three businesses as a generalist analyst. I worked there for a few years before moving to a F50 CF role and then to a $1T asset manager in a research role. My path is fairly unique within finance and I will say that without the M&A consulting experience it would have been difficult to land the position at the F50 with only RIA experience.

Working for an RIA definitely has the potential to pigenhole you if you get into an advisor role and want to change industry. If you want to stay in PWM and you are a good networker it shouldn't have an impact on landing roles at larger AM shops. Larger RIAs tend to implement their own strategies so it's possible to land a research role at an RIA or move into one after a while in industry.

Do some research outside of this forum as there is a ton of misinformation from people who don't know shit about anything.

I forgot to mention that I helped convert our firm from FINRA registration to an RIA for the same reasons I mentioned above.

Thanks a lot for the write up. SB or 2 for you. Your path seems really interesting and definitely unique, I'll take a look around some other places and see what other information I can come up with. Like I said, my only fear is becoming trapped in an advisor type role, but this particular position is more of a "general" analyst type role where you're encompassed in just about every aspect of the business (planning, restructuring, allocating, servicing, etc.) so I think it will be a great learning experience at this point in my career. Thanks again for the insight.