Your Complete Breakaway Checklist

A GUIDE TO STARTING YOUR OWN RIA

Launching a new RIA can feel intimidating, but with the right partners supporting you, it can be the best decision you’ve ever made. Follow our two-phased breakaway checklist to make your transition as smooth and headache-free as possible.

Your Transition to Independence

According to a recent industry study, 100% of advisors who made the decision to go independent would do it again. So if you’re considering transitioning from your broker-dealer or wirehouse to start your own RIA, chances are you’ll be glad you did.

While independence comes with a host of benefits – increased net worth, stronger client relationships, more freedom and flexibility – getting off the ground is a lot of work, with plenty of boxes to check before you’re ready to open your doors.

Follow our breakaway checklist, split into Phase One and Phase Two, for the essential steps to launching your new firm.

PHASE ONE:

Compliance & Legal

Good compliance and legal counsel is necessary for getting your new RIA established correctly from a regulatory standpoint.

Insurance

Get the insurance coverage you need to protect yourself, your new firm and your clients.

Custodian

Fees, transition support and the size and structure of your practice will contribute to your custodial decision.

PHASE TWO:

Business Structure

While your previous firm took care of tasks like billing, trading and reporting, you’ll have to decide whether to handle those tasks with in-house staff, or outsource to a third-party.

Tech Stack

Depending on the business structure you choose, you’ll need to evaluate the right tech solutions from a number of available options.

Investment Management

Many advisors leave their BDs or wirehouses in search of more flexibility when it comes to the models they’re able to offer their clients.

PHASE ONE

Compliance & Legal

Pre-registration, your compliance consultant should create and submit all necessary documentation for the following:

Register with the SEC (if assets under management are $100M or greater).

Register at the state level in your primary state (if assets under management are less than $100M).

Notice file with any other states in which you have more than five clients. Be sure to look into the specifics for each state, there are exceptions to the notice filing requirements.

Create new ADV forms for your firm (Part 2A), yourself and any other advisors (Part 2B), Form CRS (Part 3) and Investment Management Agreements.

Post-registration, your compliance consultant can work with you to secure the legal representation necessary to form the Limited Liability Corporation (LLC) or other business entity that will own the RIA.

Insurance

This next checklist area is an important one for managing liability. Your previous firm likely had insurance coverage for you, but you’ll need to obtain at least the basics for your new RIA:

Errors and Omissions

Directors and Officers

Cybersecurity

NOTE: While Independent Broker-Dealer (IBD) departures are not always contentious, advisors leaving traditional wirehouses will need legal representation to manage the process. Lawyers specializing in Broker Protocol can help advisors understand:

  • Resignation process and timing.
  • The client information they can take with them, and when they can contact clients.
  • New RIA registration timing, such law firms will also handle the registration itself.

Custodian

Your custodial partner will play a big role in your new firm, and based on the size and structure of your practice, some custodians will be a better fit than others. Follow this process to get setup:

Determine the level of transition support you will need and if you can absorb or pass on custodial fees to your clients. Not that some custodians apply custodial fees, while many do not.

Once your choice is made, sign the custodial contract.

If you are moving to a new custodian, you will need to complete account repapering, including new account applications and Automated Customer Account Transfer Services.

If you are staying with your existing custodian, you will need to sign Limited Power of Attorney (LPOA) to move client accounts to your new firm.

Find out whether soft dollar credits are available from your new custodian. These can be applied to your new firm’s technology fees.

PHASE TWO

Business Structure

The first steps in determining the appropriate business structure for your new RIA is to evaluate whether you will be hiring all staff in-house or if you will be outsourcing any processes to a third-party, such as a TAMP.

There are several trade-offs to consider when determining whether to hire a team in house or outsource operational tasks to a Turnkey Asset Management Platform (TAMP):

  • Do you want to manage a team of people as well as your book of business?
  • How quickly do you want to get up and running? Outsourcing accelerates the operational transition with a team of experts already in place to work with you.
  • What’s your budget? You’ll want to evaluate either outsourcing to a TAMP or hiring in house.

If you decide to hire internal operations staff:

Determine whether your employees will be W2 or 1099.

Evaluate and purchase health insurance and benefits packages.

Purchase necessary employee hardware, such as laptops, monitors, etc.

Draw up legal employment contracts.

Recruit, vet, onboard and train employees.

If you decide to outsource operations to a TAMP:

Evaluate TAMP providers. There are many resources available for supporting your due diligence process.

Once your choice is made, sign your TAMP contract.

Work with your onboarding team to get up and running with your TAMP.

Tech Stack

Your business structure decision – in-house vs. outsourced – will determine the technology stack you need for your firm. If you’re handling operations internally, vet and implement the following:

Portfolio accounting system

Rebalancer

Customer Relationship Management (CRM) system

Client portal and mobile app

Financial planning software

Risk profiling software

Some tech providers offer most or all of these functions in one, cutting down on evaluation and implementation time, but those tend to be costly, with one or two standout features rounded out by several middle-of-the-road solutions. 

If you decide to engage a TAMP for a holistic tech stack, instead of purchasing tools individually:

If you choose to work with a TAMP, the right partner will package all necessary technology into their service offering. Avoid TAMP solutions that require you to sign a licensing contract with another tech provider.

Investment Management

After making decisions about business structure and tech stack, you will also need to determine how to handle investment management at your new firm. Start by asking yourself these questions:

Do you plan to utilize third-party model portfolios from trusted asset managers?

Do you want to build and manage your own model portfolios?

Will you want to leverage some combination of the two?

If you’re looking for guidance on what’s right for your firm, read our whitepaper presenting the 3 questions for investment advisory firms evaluating outsourced investment management.

NOTE: If you plan to work with a TAMP, keep in mind that not every provider is built to handle an advisor-managed investment approach. Look for extensive experience and flexibility supporting both advisor-managed models and a combination of advisor-managed and third-party models.

ADDITIONAL

Other Small Business Needs

In addition to all of the above checklist items, it’s important to keep in mind that your RIA firm is also a small business, meaning you’ll need to consider things like:

Choosing an office space or serving clients remotely

Buying office equipment

Setting up a business email address and a website

Designing a logo

Developing marketing and promotional materials

NOTE: Most investment professionals do not have deep knowledge or experience in marketing, and that’s okay! There are plenty of great branding and marketing firms that specialize in supporting investment advisory and financial planning firms. If you’d like to get a sense for what a sophisticated marketing setup may entail for your firm, head over to our Marketing Crash Course

Disclaimer: The information provided in this article does not, and is not intended to, constitute legal or investment advice. All information, content, and materials provided are for general informational purposes only.

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Choosing the right support system is critical to your success as a breakaway advisor. GeoWealth uses proprietary technology to power our TAMP, keeping costs low for advisors just starting out.

What’s more, the team at GeoWealth has years of experience helping advisors build their own businesses, from our close partnerships with custodians, compliance consultants, lawyers and other tech providers to ongoing support from the very beginning of your transition.

Let us help you navigate your journey to independence.

TAKE A DEEPER DIVE

10 Steps to Starting an RIA Firm

If you found this checklist helpful but want more, here is our deepest and most detailed look into exactly what it takes to start an RIA. Whether you’re breaking away from a bigger firm or just starting out on your own as an independent advisor, the journey to launching a new RIA can feel daunting. But with the right resources, a broad support network, and a rigorous framework, it could be the best decision of your career.

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