Independent RIA vs affiliation

by **blueseater** » Thu Mar 01, 2007 3:10 pm

Hello,
I'd love some feedback on the pros and cons as you see them, of being an independent RIA vs affiliating w/a firm.
I have a proposal from a company I am thinking of working with-they propose keeping 40% of my AUM fees and 25% of my planning fees-to handle all of the back office regulatory, compliance, record-keeping et al. They seem to be overdoing the "fear of audit" card a bit as their big selling point.
I am a start-up, planning on no more than 100-125 clients, projecting that over a 4-5 yr period. AUM goal is $20-25 million. In other words, I'd be giving this firm a significant chunk of my earnings.
I've talked with several independent RIAs who have told me that the compliance requirements, especially for a small firm, are not that odious, and can be handled by a service or even a software packet. How accurate is this? I'm having a hard time justifying the percentage that the firm wants to keep, yet I don't want to be in regulatory hell. Thanks

by **broberts** » Thu Mar 01, 2007 3:39 pm

In no way is there proposal good. A B/D keeping 40% is not competitive. Feel free to email me direct and I'll give you a suggestion.

Bruce

by **Fee-Only Guy** » Fri Mar 02, 2007 12:26 am

If you are going to be state registered, you shouldn't worry about being auditted. Even at SEC registration, which the minimum I hear might go to $50m AUM, the audits are few and far between. You should be able to do all of you compliance. Warren Mackenson has an inexpensive compliance manual template that you could use to start out.

Jeremy

by **blueseater** » Fri Mar 02, 2007 8:31 am

Much thanks Jeremy

by **Fee-Only Guy** » Sat Mar 03, 2007 11:02 am

www.protracker.com

There is a compliance manual template and Business continuity plan template as well. I have not used them but they are well known throughout NAPFA as being a great tool. Also His Protracker software is a CRM but apparetly also helps to track compliance issues.

In addition you should look into an e-mail archiving solution. I use www.disecurityco.com.

I think as a state registered advisor, as long as you have a good ADV, contracts, compliance manual, and e-mail archiving, you are pretty much doing everything. Certainly there are other things depending upon your business, but those are some biggies. If you have any specific questions, you can contact me directly at jeremy@portnofffinancial.com.

Jeremy

by **blueseater** » Sun Mar 04, 2007 9:47 am

Thanks again Jeremy, I will be in touch if I think of anything specific.

by **amarkell** » Sun Mar 04, 2007 6:49 pm

Jeremy wrote:

> If you are going to be state registered, you shouldn't worry
> about being auditted. Even at SEC registration, which the
> minimum I hear might go to $50m AUM, the audits are few and far
> between. You should be able to do all of you compliance. Warren
> Mackenson has an inexpensive compliance manual template that
> you could use to start out.
>
> Jeremy

I became registered 6.5 months ago an I had my initial Alabama Securities Commission audit a couple of days ago. I think they perform an initial audit around 6 months after registration all the time.

by **amarkell** » Sun Mar 04, 2007 7:10 pm

Jeremy wrote:

> If you are going to be state registered, you shouldn't worry
> about being auditted. Even at SEC registration, which the
> minimum I hear might go to $50m AUM, the audits are few and far
> between. You should be able to do all of you compliance. Warren
> Mackenson has an inexpensive compliance manual template that
> you could use to start out.
>
> Jeremy

I became registered 6.5 months ago and I had my initial Alabama Securities Commission audit a couple of days ago. I think they perform an initial audit around 6 months after registration all the time.

by **al_Gebhart** » Mon Mar 05, 2007 6:50 pm

I would suggest that you contact a few other places. They company you looking at is not worth it. If you call me 800-428-1292, I can give you a better source. There are several firms to help with the compliance issue and the back office support. Good luck and keep looking.

by **BillInOrlando, CFP(R)** » Mon Mar 05, 2007 7:29 pm

BRUCE........THEY'RE going to email THEIR info. to you over THERE. Spend a few minutes to learn the difference and make this site professional.

by **trinitywealth** » Tue Mar 06, 2007 3:33 pm

Rocket or Bill Let me know how to go about going it alone, what are the steps, costs involved, assuming you are qualified with no problems on U-4......

by **dp2822** » Thu Mar 15, 2007 8:35 pm

Yes, I'd be curious, too. This B/D stuff is getting old...fast. If you don't want to continue doing the commission business...and put up with all the B/D crap, going totally independent sounds like the way to go and toss the licenses. At least it appears to be more ethical! Any comments?

by **blueseater** » Sun Mar 18, 2007 8:56 am

To start with, I've chosen to work with NCS to handle my registration and compliance needs-I want as little to do with that as possible. Expect approx $2500 to get that set-up, and depending on the level of ongoing service you want, anywhere from $1200 to $5000 annually. I'm setup as an LLC, state of MA requires $500 filing fee, and I retained attorney-another $1000. Looking at SSG for platform, and reviewing software. I'm expecting another $2000 annually or so. Puts a dent in the old 401k, eh?

by **grimess** » Sun Mar 18, 2007 5:06 pm

Just out of curiosity, why an LLC?

by **blueseater** » Wed Mar 21, 2007 1:26 pm

I chose an LLC to allow me to handle liability issues, and for a more simoplified tax approach