Tell Me I'm Crazy: I Want to Start My Own Financial Advisory Firm

Currently working in ER/AM and have been developing a redpilled view of finance in general, with the conclusion that starting a financial advisory business for high net worth clients could make some form of sense (bear with me). All criticism is welcome

  1. Regardless of whether you work in IB/PE/AM/HF/ER, you really don't add any meaningful form of value. IB priority above all else is to convince management teams to do a deal for the hell of charging a fee (90% of transactions are dilutive). PE is just a fancy way of transfering money from the LP to the GP where the ultimate product (i.e. returns) are no different than the public markets. AM you're statistically destined to underperform an index as a long-only investor (objectively no value added at all compared to ETF). HF similar scenario - why would you expect the same fundamental investor to add true consistent risk-adjusted alpha at HF platform but not during their time at LO? I get the risk model is different but the median tenure at all the large HFs is 2 years and most PMs drop like flies. Not saying impossible to add value as a fundamental investor, but you really do need to be an anomaly in the game (probably more opportunity in quant than anything else today). And for ER, you're just servicing the chronic underperfomers and fee-charging bankers.

  2. Wealth management, while less complex and requiring a different skillset than buyside, appears to have the potential to offer more value to end clients. Advising people less educated/knowledgable than you and serving as a mentor in many ways seems far more fulfilling/desirable than pretending to offer some sort of superior investment product (and charging a fat fee). Obviously, not everyone needs an advisor (robo often cheaper and more practical), but for those who do, it seems like a worthwhile pursuit.

  3. Working at a bank doing wealth management, while probably more noble/helpful than HF/AM/PE endeavors, still falls victim to the greedy fees via cross-selling unnecessary products such as high margin mutual funds, IPOs, private lending agreements etc. Sure, banks may have larger resources and wallets to flash, but i honesty feel like the 'less is more' doctrine applies to WM. Similar to PE/HF/AM, I can't help but think these large WMs make everything appear more complex than it needs to be. Also, working a W2 job brings bureaucracy and rat race.

  4. Feel like an independent wealth advisory business (with no ties to top LOs, BBs, etc) offers the cleanest, genuine advice. Like just managing ~$100mm and charing 50bps as a standalone advisor seems like all you need. And the big wealth management firms only control ~10% market share of HNW assets, so clearly the market is fragmented (hence more opportunity for the smaller guys who offer differentiated service). Not to mention, the big transfer of wealth occurring with baby boomers surely resonates as a structural tailwind in the space. Lastly, even if you work at a BB doing WM its 'eat what you kill' at the senior level, so why not just 'eat what you kill' in your own firm where you hold all of the upside.

Idk, just a thought. Of course doing your own thing carries a ton of risks in general, but would love to hear any opinions, particularly on the feasibility of running an independent shop, competitive advantage and economics there. Ideally imagining a tier 2/3 city where financial literacy might be lower than NYC/SF


Based on the WSO threads and discussions, your inclination towards starting your own financial advisory firm, despite the risks, aligns with a growing trend among finance professionals who seek more autonomy and direct impact. Here are some insights and considerations based on similar discussions:

  1. Value Addition Debate: Your critique of traditional finance roles like IB, PE, AM, and HF reflects a common sentiment that these roles often don't add meaningful value due to their structural and operational focus. This disillusionment is not uncommon and is a significant motivator for professionals moving towards more client-centric roles like financial advisory.

  2. Wealth Management as a Fulfilling Alternative: Many professionals find wealth management to be more rewarding because it allows them to directly help individuals manage their finances more effectively. This role can be particularly fulfilling if you are passionate about financial education and empowerment.

  3. Challenges in Traditional Wealth Management: The issues you highlighted about working in wealth management at large banks, such as high fees and the push to cross-sell products, are well-documented. These can often lead to conflicts of interest, making the idea of an independent advisory more appealing.

  4. Independent Wealth Advisory Prospects: Starting an independent firm could indeed offer a more straightforward, transparent service to clients, which can be a strong selling point. Managing a smaller pool of assets allows for personalized service, which high net worth individuals often appreciate. The fragmented market and the ongoing generational wealth transfer present strategic opportunities.

  5. Market and Location Strategy: Targeting tier 2/3 cities could be a smart move, as financial literacy levels might be lower compared to places like NYC or SF, and competition might be less intense. This could allow you to carve out a niche market and establish strong local relationships.

  6. Risks and Considerations: While the autonomy of running your own shop is appealing, it comes with significant risks such as income instability, higher initial overheads without institutional support, and the challenge of building a client base from scratch. It’s crucial to have a solid business plan, possibly with mentorship from experienced advisors who have taken a similar path.

In conclusion, while the path to starting an independent financial advisory firm is fraught with challenges, it can also be highly rewarding if executed with careful planning and a clear understanding of the target market’s needs. Networking with professionals who have made similar transitions, and possibly starting small as a side project, could provide practical insights and reduce risks.

Sources: Would you move to a 'tier-2' city?, Advice/Tips on trying to relocate to a Tier 1 city,, How many of you actually plan on going independent?, Why would anyone willingly choose to live in NYC / SF / CHI?

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Welcome to the RIA world - its huge, and you have tons of teams jumping from the large wire houses / banks to set up their own shops. I currently work on a LO strategy for an RIA. Having seen the advice at a place that is regarded as the best private bank in the industry + other firms, I think the independent RIA model is probably the best spot for clients to get truly unbiased + customized services. Everywhere else, the greed / conflicting incentives (not to say independent RIA's have none) can push people into things that aren't 100p right for them. 

There are a handful of firms where the person managing money / the advisor is an experienced public markets investor (knows how to tear apart businesses) and is directly in charge of investing that money; I always thought there were important advantages to this. 1) opportunity to build customized portfolios with individual equities has advantages, esp on tax side. 2) your advisor is someone actually knowledgeable when things happen to markets / large concentrated holdings from previous employment, and not just a salesperson putting you into models. 3) the person guiding you and investing your money/looking for opportunities across everything is receiving feedback from the markets through earnings calls and bottoms up fundamentals, and not just consensus overviews on asset classes by pundits. 

Downside is OBVIOUSLY beating the market is tough, so don't come at me with performance going to be worse than a portfolio of VOO + VTI, especially for someone who already isn't as good as a top LO or L/S person. Yes true most cases, but because you are not constrained to selling a product that fits within a risk or factor or style model for some bigger firm, you have opportunities here.

Here's the thing though; your success is primarily determined by your ability to raise client assets, which is extremely hard. It is very hard to invest at this level and also build a book + manage clients. It is usually broken down between a sales/advisor person and investment person for that reason. Investing/research is always an expense until you have your own clients, so you don't get paid until you have that. 

I was always surprised more ex-HF people didn't end up in this line of work. I know a PM at my old my firm who has $1bn in client assets, and only runs an equity sleeve for the clients and charges 1% flat. She makes 7-8mn/yr every year on that. Not easy to get to $1bn, and this model is a bit more niche obviously. 

Without a network or strong sales and networking skills... well you'll still probably end up running wealth plans all day as you try clawing your way up. 



Ur crazy. But you should 100% try it! Independent advisors who build a decent book live VERY cush lives. Seems low stress (compared to HF/IB/PE) and comp if you do REALLY WELL is comparable to the upper levels.

"The obedient always think of themselves as virtuous rather than cowardly" - Robert A. Wilson | "If you don't have any enemies in life you have never stood up for anything" - Winston Churchill | "It's a testament to the sheer belligerence of the profession that people would rather argue about the 'risk-adjusted returns' of using inferior tooth cleaning methods." - kellycriterion

I looked into this. The main issue is that you need to get a fairly large AUM essentially to make this a better alternative than most of the finance positions discussed on this site because you only get a 1% fee on assets typically (or something equally small). This ends up meaning that your job is essentially to accumulate AUM, not really do much real "finance." If you look at the schedule of a typical RIA, it doesn't leave much time to really be all that thoughtful. Maybe this is cool with you but that's a matter of personal preference. For me, that would be an immediate no go given who I am and what I care about. Most RIAs struggle to get clients and most of the advice I see online for RIAs is almost purely focused on this as a goal. 


It depends - for the most part you are correct. But if you take a look around you will find quite a few firms that are a lot more investing focusing as the value proposition (and the advisor here is much less of a wealth planner / asset allocator / sales person). Neuberger Berman is one of the bigger brand names, and this is essentially what Steve Eisman is doing today, although to be fair, its a bit more unique and the NB teams are essentially working with the traditional LO teams if I am not mistaken. 

Another example for a large firm is First Manhattan. I think Evercore also runs something kind of similar but not too sure. Just sticking with name brands for examples, but you have lots of firms that range from $10bn to maybe $20bn range doing this, and even more in the $1bn-$5bn range. A lot of them can skew more here is the LO product/fund that you get access to but the returns are kind of meh, to other firms with decent performance. I think the better model is doing it in SMA form though.

For a lot of people, they view these firms as the "equity sleeve" for their personal wealth, and then maybe they can bank with JPM or someone else. Or sometimes the firm also has a wealth planning team to cover everything else.  

As you mentioned, building up a book of business is the biggest problem and really tough to get over. How do you both get enough assets to pay yourself, continue to build new assets, but mostly focus on investing day in/day out. I know of quite a few advisors who do just this, but maybe its a legacy model left over from a different generation that won't be inherited or built upon in new ways, idk. Once you scale your book though, you essentially get to grow your income by market rates / whatever your returns are each, and you can get a nice flywheel where its mostly referral and inbound clients vs. spending all of your time networking. 

And then lastly, a lot of wealth gets made when you pick up your book and move and/or you sell your firm. 



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