Mav,
I would be looking at starting a solo shop. I would be the sole IAR at my own RIA that I would establish with one of these RIA atty firms, for up to $10k, and from there obviously it's all about getting AUM.
This is what one of my buddies did. He WAS a sole IAR and then got out of that and affiliated himself. MUCH easier.
I think there is a 'personalized', 'customized' trend going on across many industries and I think the investment game has yet to see this, but I think there is a niche for it.
I am NOT seeing this in the advisory business. People who invest with RIA's want two things: safety and someone to talk to when things go bad. Most RIA's are VERY conservative because they don't get paid for performance, they get paid on assets so why take the risk?
I think a lot of people don't realize the kind of risk they truly are in with the stock market.
I disagree here. The whole "risk" thing is way overblown. People should be in a tax deferred index fund and call it a day. I could write a 100 page white paper on why this is absolutely the best strategy for 99% of the public but don't have the time. It's advisors who want to extract fees from clients that scare them on the risk angle. Yeah sure if mom and pop are selling naked puts with leverage then yeah, they are taking a lot of risk. But I think it's immoral to tell everyday run of the mill folks who are simply long an index that they are taking too much risk and you will help them offload that risk for a modest fee. They use to call these people snake oil salesmen for a reason. DON'T be that guy.
I think there is a dearth of talent on the part of advisers not even from just a pure PnL standpoint, but more importantly in this kind of fiduciary role, in awareness of the risks that people have.
Not true anymore. The business is hyper competitive and while the business use to be run by the Jimmy Stewarts of the world, nice guy next door, more often then not, you see advisors with advanced degrees in finance and many of them are actually ex-wall street investment bankers who know "a thing or two" about finance. Please don't play that angle either.
I feel there is an autopilot nature of 'it's the time in the market that counts' and the standard hedge is bonds/bond funds, and don't understand the prospect of 'black swan' where rates skyrocket and most stocks don't like that, and the dollar weakens as higher rates needed to clear borrowing markets.
Dude, you are MASSIVELY overthinking this. Advisors don't put their clients in bonds because there are no kick backs. They do put their clients in annuities which we can discuss later but those are guaranteed fixed returns. Don't play macro fund manager here, your job is to sell, not be George Soros. Different client set.
Again, I understand the difficulty in expressing bearishness in such central bank manipulated markets, but I am at least aware of the dangers and open to how bad things could get.
OK, this is starting to get annoying. Everyone on this website knows this stuff. What did you just read the "The Creature from Jekyll Island"? Yeah so has most of ET. The wheel was discovered a long time ago, don't try to change the tread and say you just discovered it. Most advisors are well aware of the things you are talking about.
I'm not even a big time equity research kind of guy, as I think there are just inherent limits to that in terms of 'edge', but I obviously know the major metrics and specific issues with whatever company it is. I'm more about major positioning, because while there are defensive sectors, largely the SPX going down a ton isn't going to take prisoners, and sectors are all going to go down a lot. Security selection aside from certain defensive names that are lifetime holds, basically, has its limits,I think one could argue.
Again man, you are really over thinking this. Honestly you are trying to be in the wrong business. You have an econ degree right? Just go work for a bank in a private client group. Sally and Bob in springfield don't care your "positioning" theories and quite frankly the won't understand it when you try to explain it to them.
I understand the difficulty in not being at least under say an Edward Jones umbrella to have that brand name. But I would be doing sales there, too, and not getting the discretion I would be looking to have, and I would have to totally take commission which is worse than if I were running my own shop.
I don't think you do understand. LOL. And no, there are no longer commissions at Ed Jones or any shop. It's ALL fees now as in annual fees.
It's a hard process, but I have always had a salesman nature to me, and I talk to people about the market, even people who wouldn't have much a clue about how markets work and have never looked at so much as an SP500 chart, and can relay what is going on in different sectors, and ways to capitalize on things and the danger in just assuming 'I should buy oil because it will inevitably go back up'. The bottom line is I don't doubt my ability to relay to people the kinds of things I'd be looking to implement and what would differentiate me.
Peg and Al are not going to have a clue what you are talking about. Move to NY, go into banking man. You need to be around people that understand the words coming out of your mouth. Again, I know I'm coming across as a dick here but I will give you people to talk to. You just sound like a lost dog right now and really have not done your research and by research I mean talk to people who are actually DOING this right now instead of criticizing what you THINK they are doing.
I did go to one of the top non-Ivys and I live in a big metro area and while I don't have all these connections, I do have good standing in my area generally, and I wouldn't have a hard time explaining what I did previously and how that will benefit me going forward. I think it's even overlooked how little some advisers know about market structure and comprehending just what is going on with days like Aug 24th crash. Including the arbitrage available, although that wouldn't be much relevant with a wealth mgmt job but realizing certain major ETFs are off from their underlying, that is major opportunity anybody who has the ability to capitalize on should. But the main thing there is understanding of liquidity and we're already seeing that in riskier funds.
Man, you would be surprised at the background of the avg advisor today.
This isn't trading. This is an adviser position and my main value add in addition to the usual things one would have to know to pass the exam and get licensed, would be my skill in understanding opportunity in actual asset management and strategies with that, rather than mere SPY/TLT, or what many advisers do now which is outsource portfolio mgmt altogether. And in understanding how dangerous things really are when it seems ok at the present. Right now for instance there is compelling reason, especially if SPX gets below 1700, that we see 800 on SPX before 2500. How many people are really ready for that, and are overlooking what a rally this has been (mostly via the inflationary policies that boosted asset prices)? I get that holding some meaningful allocation to quality stocks at all times is wise, and dividends kept up with defensive companies, but even with tax events on booking profits, selling up here where there is now evidence a major top could be in (not saying sure thing, but for first time in awhile, there is evidence) is wiser than riding it all down only to hope to see these current levels. And if we got here, it would be like Japan and they haven't gotten back to decades ago levels, and it took massive JPY devaluation just to nominally go up to here. I happen to ultimately think stocks WILL be much higher than current levels looking few decades out; it just will not be much 'intrinsic' so much as inflation boosting everything in price. So I think a total cash allocation is riskier than an allocation with equities; I understand that.
Listen to me OK. I'm also an Econ grad. Your knowledge is not special and quite frankly you are pitching this stuff to the wrong crowd. Do you even read this message boad? Take some time off today and read random threads. This whole place thinks the market is going to crash. Your insights are not new.
Pure logistics-wise, I don't understand why the high #s in terms of AUM are needed? I would never be complacent, but running my own shop, and maybe someday hiring a person or two to help, but to start out, just me, getting say $10 million, I would not be afraid to charge a higher than industry avg rate and I see 6 figures in fees at the very least from all that (not saying getting even that level of AUM is easy; that's my main concern/challenge) and I don't think yearly costs are that much in terms of overhead, even if I ultimately hung a shingle or at least leased an office at cheaper place. I think statistically based things like I'm sure a lot of robo advisors do has major flaws, and they just get hidden when things seem to be going well with stocks at such high levels. There is plenty of turbulence from high yield to commodities to sovereign debt and sovereign wealth funds with less from oil now.
Then you are lacking an understanding of basic math.
I'm not looking to go big, big. I see a trend to more local, personalized in so many sectors of the economy, and think there is a place for that in investment. I think a lot of people don't realize that if the market is going back to '08 lows, for example, a buy at SPX 1300 is worse than even now, probably, one could argue, because here at least the chances are still decent that another 30% higher is possible in this whole bull rally, whereas if we were at that level, chances are high that it is going all the way down. That gets subjective, but the bottom line is it's integrating wave theory with how when things get too far from the momentous highs, it cleans everybody out to the lows/overshoots/etc. I think I have a lot of savvy about risks of seemingly awesome strategies like high dividend commodity based companies, and how yield pigs usually get crushed. And if one has conviction, maybe selling puts to slowly enter a position is wiser to get involved.
I'm going to stop responding to this stuff.
As you pointed out, it's less about all this strategy nuance, and more about raising AUM and not being complacent. I feel to an extent reputation builds more AUM, even if I go awhile with only a few 100k even under mgmt. I understand the risks of being a one man shop and how some people would not like that, but I don't think that is a deal breaker altogether.
It's about sales not reputation.
So I'll gladly listen to any rebuttals, but also advice on the kinds of advertising needed to get my name out there.
Money, lots of money. See my comments about overhead.
I should also point out, I'm in a wealthier suburban area of a major metro, skewed more towards smaller further out suburb, not in some big city, so while obviously not all clients from this area, that is something of an advantage, along with not being in a saturated finance market although there are obviously plenty of competitors and established firms.
Competition is EVERYWHERE. Downtown Omaha has like 5000 advisors.
Lastly, I want to do as well as possible, but if I felt i could comfortably take home 75k clear and away in income few years in, with upward trajectory, I'd be fine with that. I'm not coming from any big firms or anything, so no non competes or anything like that. It would be hard as heck I understand to raise AUM so organically, but I've got some 'on paper' credentials with the work I have done (trading was at a reputable firm, and I had some success, but the payout structure just too hard with the limited scalability of what I was doing, and just IMO not worth it unless willing to constantly be waiting for big moments and also regulatory concerns on some things).
Last time I'm going to say this, credentials will not raise you more then $25 from your aunt. It's all about sales.
I ultimately feel like taking the chance and building it from scratch would pay off majorly down the road and get me into a good long term situation and the perks of running my own shop. So any comments addressing the feasibility things I'm specifically talking about would be appreciated.
I know I was harsh here but I will give you names if you want. I personally think you are in the wrong business but that is just my opinion.
Thanks
Strongly Looking into Starting up RIA
- Thread starter DarthFader989
- Start date
I know my above post was harsh but I'm serious, I'll get you in touch with people who can offer advice. I tell it like it is but I do try to help.
Mav,
For now I'm still just looking at my options for what I can do given my education/experience, and I will contact you at a point where I'd be wanting to talk to anybody you know who would have advice about this RIA option.
The main thing is I'm not seeing why you think getting so many $million AUM is a prerequisite. I can see that it would be a hurdle to be asking a higher rate of mgmt fees than others, but if I could use things like free consultations or portfolio overviews, I could differentiate myself. I know I have a lot of invaluable experience in what moves stocks, general market sentiment, key levels, and also integrating things from TA to EW even, while just as importantly recognizing their limits. I also am a wonk about economics and understanding the futility of this grand QE experiment on so many levels, while respecting how it takes time for things to play out.
I believe in my own competence in that regard. Because purely looking at it as sales would be an issue if one has no solid ideas about constructing custom portfolios and is just looking to get AUM.
Even if I had a 1% fee, why would 10 mln AUM or so not cut it? I see E &O and other yearly costs generally are under 10k year, if not much less, probably leasing costs for the office, and the custodian for the portfolios probably would handle a ton of paperwork conveniently, and so that's 100 k minus the yearly fees and thus a decent income. I still see the bigger problem being acquisition, to even get to 10 mln, or even 5 mln. There'd have to be an advertising budget but upfront investments would hopefully pay off and a few years in the ball gets rolling. I'm fine with it being a project and I have to live tight for a few years. And I mean fine with living very cheaply. I'm focused on building the business and reaping rewards much later.
For now I'm still just looking at my options for what I can do given my education/experience, and I will contact you at a point where I'd be wanting to talk to anybody you know who would have advice about this RIA option.
The main thing is I'm not seeing why you think getting so many $million AUM is a prerequisite. I can see that it would be a hurdle to be asking a higher rate of mgmt fees than others, but if I could use things like free consultations or portfolio overviews, I could differentiate myself. I know I have a lot of invaluable experience in what moves stocks, general market sentiment, key levels, and also integrating things from TA to EW even, while just as importantly recognizing their limits. I also am a wonk about economics and understanding the futility of this grand QE experiment on so many levels, while respecting how it takes time for things to play out.
I believe in my own competence in that regard. Because purely looking at it as sales would be an issue if one has no solid ideas about constructing custom portfolios and is just looking to get AUM.
Even if I had a 1% fee, why would 10 mln AUM or so not cut it? I see E &O and other yearly costs generally are under 10k year, if not much less, probably leasing costs for the office, and the custodian for the portfolios probably would handle a ton of paperwork conveniently, and so that's 100 k minus the yearly fees and thus a decent income. I still see the bigger problem being acquisition, to even get to 10 mln, or even 5 mln. There'd have to be an advertising budget but upfront investments would hopefully pay off and a few years in the ball gets rolling. I'm fine with it being a project and I have to live tight for a few years. And I mean fine with living very cheaply. I'm focused on building the business and reaping rewards much later.
Let me say this. As you get older in life you get wiser so let me share this with you. There is nothing in the world that replaces the knowledge of those who came before you. Talk to the people in the industry that are doing it. I learned this very early. Whatever I wanted to do in life I sought the wisdom of those who did it before. Both those that failed and those that succeeded. They will tell you in words that you understand just how difficult it is to get assets. Everyone thinks their different. Everyone thinks they are better. I get that. But just reach out to people. Go to a local meetup where you know advisors will probably show up to get clients. Tell them you are in school doing research on the industry and you want to ask them some questions. They will open up to you. My buddies in this business are exceptionally intelligent. They also can sell ice to eskimos. They also put an insane amount of time in this business AND they got in early. And by early I mean over 10 years ago. This business really exploded post 2008 for a multitude of reasons. From reading your posts I can see you have a long way to go.
I would highly suggest looking at other career possibilities. Just look at them. For example, if you like macro as much as you say you do, and I do as well, take a look at macro advisory firms. You can make six figures writing fascinating research that you can actually SELL to these advisors. Supply and demand right. If the market is saturated with the supply of advisors, and it is, then logic would dictate there must be a demand for high quality research. Just look at that angle OK. I'm just trying to help here. I'm by no means old, but I'm old enough to have a few insights or two to add some value here.
I get how big of an undertaking this would be. I truly believe I possess great ability to assess whatever the current state of things is across markets (including commodities, and more obscure ones) and understand at least the risks involved, and the implications of, say, if the SPX makes a new ATH then that means likely this rally goes a LOT further and maybe the blow off top a lot of people are looking for whereas getting enough below Aug 24 lows means this thing is in big trouble. The market I do believe gives clues that provide something close to 'probability'. But as aggressive as I sound, I do have the humility to recognize nobody knows what is coming. I do think there is a lot of whistling past the graveyard be it copper, oil HYG, etc, and I think a lot of it to be honest is the not so invisible hand of the 'market' that is keeping indexes propped up. I feel like the industry unfortunately becomes stay long and strong, maybe lighten up somewhat here, but if it falls apart, 'who could have known'? One quote I heard is you look stupid now or later, whether too early in call for downturn, or staying bullish at highs.
So I guess on some sort of moral imperative I see that along with a viable business model to actually help people navigate through things and I've spoken to random strangers on planes and elsewhere about the market and opportunities and things like that, and believe I have the ability to relay my complex ideas to people. A lot of things I would plan on integrating that seem unconventional to the Wall Street world of bonds and stocks, are actually common sense to a lot of people, like getting involved in the long side of such beaten down commodities that maybe are unfairly getting beat down due to broad bearish sentiment in the space.
I am not a quantitative or math wonk. My ability is to integrate certain aspects of thinking like a trader with the bigger picture to look for opportunities and look for where things are going if levels get broken, like in SPX right now everyone is waiting for when this range breaks for good.
I understand there is a doom and gloom crowd that have been very off in terms of what has happened, and I would want to distance myself from that. But even just talking to friends/family, who don't know much about markets other than that there has been a rebound since last decade, I explain some things about what is going on below the surface, and you can see people start to see the risks, especially looking at a chart and other things. A lot of people don't know anything about stocks. Maybe it's more so because I'm not in a financial hub. I would like to hear advice about how one would go about raising AUM and from where those funds people put up with you, would come from. I know a lot of people are in their 401k and have little discretion save for certain funds that don't really offer a ton of diversification. So I get the onerous task this all would be, but Mav or anyone, if you have specifics about what would have to be done to acquire clients (not on a national basis, at least not initially that would not be my focus; I have no 'made 15%/yr x drawdown for 10 years straight' type deal, and this is a fiduciary deal, not a fund).
As I said, I've not been on an i banking or track that would be more so Excel spreadsheets, and would have to work hard to get back in that track, including Excel skill which I in any case lack and need to improve generally. This is an entrepreneurial deal and as I said I'd rather if I went this route go my own way than work under Edward Jones or whoever. The question is feasibility and how long it would take to get on solid ground I could count on (assuming competence in the mgmt part so as not to lose the funds!). I sure as heck wouldn't count on a few million dollar clients and that's all I need, but I also don't need to get tons and tons of clients. There is a wide range, from upwards trajectory people starting out in my peer group, whose account would grow or at least advisory service fees thus go up even if I don't manage it myself in terms of stocks, and then there are people who have quite a bit of wealth in their 60s or whatever, and would benefit not just from diversification but from talking to somebody who understands the trends going on (like yield reach in this ZIRP environment) that pertain to them. I don't see why it wouldn't be viable if say I did get to 10 mln and charge 1%, with an upwards trajectory as I would always be prospecting and never complacent.
So I guess on some sort of moral imperative I see that along with a viable business model to actually help people navigate through things and I've spoken to random strangers on planes and elsewhere about the market and opportunities and things like that, and believe I have the ability to relay my complex ideas to people. A lot of things I would plan on integrating that seem unconventional to the Wall Street world of bonds and stocks, are actually common sense to a lot of people, like getting involved in the long side of such beaten down commodities that maybe are unfairly getting beat down due to broad bearish sentiment in the space.
I am not a quantitative or math wonk. My ability is to integrate certain aspects of thinking like a trader with the bigger picture to look for opportunities and look for where things are going if levels get broken, like in SPX right now everyone is waiting for when this range breaks for good.
I understand there is a doom and gloom crowd that have been very off in terms of what has happened, and I would want to distance myself from that. But even just talking to friends/family, who don't know much about markets other than that there has been a rebound since last decade, I explain some things about what is going on below the surface, and you can see people start to see the risks, especially looking at a chart and other things. A lot of people don't know anything about stocks. Maybe it's more so because I'm not in a financial hub. I would like to hear advice about how one would go about raising AUM and from where those funds people put up with you, would come from. I know a lot of people are in their 401k and have little discretion save for certain funds that don't really offer a ton of diversification. So I get the onerous task this all would be, but Mav or anyone, if you have specifics about what would have to be done to acquire clients (not on a national basis, at least not initially that would not be my focus; I have no 'made 15%/yr x drawdown for 10 years straight' type deal, and this is a fiduciary deal, not a fund).
As I said, I've not been on an i banking or track that would be more so Excel spreadsheets, and would have to work hard to get back in that track, including Excel skill which I in any case lack and need to improve generally. This is an entrepreneurial deal and as I said I'd rather if I went this route go my own way than work under Edward Jones or whoever. The question is feasibility and how long it would take to get on solid ground I could count on (assuming competence in the mgmt part so as not to lose the funds!). I sure as heck wouldn't count on a few million dollar clients and that's all I need, but I also don't need to get tons and tons of clients. There is a wide range, from upwards trajectory people starting out in my peer group, whose account would grow or at least advisory service fees thus go up even if I don't manage it myself in terms of stocks, and then there are people who have quite a bit of wealth in their 60s or whatever, and would benefit not just from diversification but from talking to somebody who understands the trends going on (like yield reach in this ZIRP environment) that pertain to them. I don't see why it wouldn't be viable if say I did get to 10 mln and charge 1%, with an upwards trajectory as I would always be prospecting and never complacent.
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I disagree - there are tons of RIA's (including myself) charging 2%, many even more. If you have a multi year alpha generating track record with competitive net returns (mid teens to low 20's) with a peak to valley in the range of 10% to 15%, high net worth clients will flock to you and be eager to pay 2% or 1+20 if you want to go that route. The smart money understands that robo advisors are shit - anybody with half a brain can duplicate what they are doing by themselves for free. Robos are cheap by necessity; low alpha = low fees. Having said that, I have lost some clients to the Robos, clients who hyper focus on fees rather than net performance.
Bottom line: RIA is a business like any other based on supply/demand. There is a low supply of good strategies in managed money. If you can go to market with something attractive, the demand is definitely there among sophisticated investors.
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R1234-
What if any opinion do you have on the idea of bootstrapping it from the start and establishing a one person practice in terms of is it realistic, and how one would go about raising AUM? As I said, I do not have any audited track records and I'm not interested in running a 'fund'. I think there is a dearth of competent advisers when it comes to actually allocating assets and looking to unconventional classes of assets that are actually arguably prudent to invest in from a diversification and upside perspective, and in general of looking at the market and surveying the landscape from commodities to bonds to stocks to geopolitics. I'm not saying everybody ought to be trying to be the next 'big short' but it is way lopsided and insofar as one believes the government is there to prop up the market, that's its own argument to be long equities, but a lot of people I think are counting on way too much with their investments and don't appreciate the risks. A lot of people have earned their money in their career and even without great returns if they protect their wealth they should be setup for a solid retirement, and putting a ton of money they earned via their actual skillful trade, vs putting it at risk in a casino, isn't appealing. And I'm not saying the default is cash, because that is risky in its own right. A good company is a good company from an investment POV, and you try to buy at a perceived value price, but I'd rather in part certain companies' ships than ride out the dollar because even apolitically, fact is debt loads are enormous and portend more bailouts, more printing, and even if USD index looks good against other foreign fiat, it still isn't appreciating.
The best shot to me seems to be to get setup, get a physical location to add credibility, get at least some AUM going with acquaintances and friends of family maybe, and then word spreads and look to selectively advertise and differentiate my strategies vs the typical advisor, and it grows from there and at a point of 5 million sum charging 1.5%, that should be at least netting out to a living wage so to speak because with a one man practice, expenses per year are minimized. Fiduciaries/RIA isn't supposed to be like a fund. I don't want a hot hand reputation. I just want to be someone who helps people position and look for unique opportunities and be risk averse and do things like sell puts on things that look intriguing but not totally wanting to buy in. Things like that, and just to be there to help people as things can get bad in a hurry and a 2k handle on ES can become low 18s quickly. And CB ammo is not running high aside from paradrops of currency. I would not be telling people sell the farm in that flash crash few months ago, but warn them that probably getting into 1600s would confirm a strong chance that it isn't going to just bounce back, but rather go all the way down. There are a lot of EW folk and others who see 1k before 2.5k on ES. A lot is riding on what happens here either new ATH or break below Aug 24 low enough.
Solid post. But those numbers are really hard to hit consistently. So you need to be a great trader, great salesman and convince hnw clients to pay 2 and 20?! Fuckin A...
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DarthFader989,
To be honest, I could not follow you.
Basically, there are two types of RIAs. One, as Mav has said, generally works for an asset manager like ML,MS,GS etc or any of the many independent asset managers. Most of these provide a full suite of services including insurance and investments and "most" charge a yearly fee based on assets, but still some charge old style commissions. Management fees in my experience range from 65 to 150 basis points/year. Large accounts tend to pay less. In this model, you don't get a percentage of profits. You generally don't "trade" but allocate to funds or managers.
The other type are the managers that run separately managed accounts (SMA). These managers are often looking to start a hedge fund in the future, but start off with SMA where the client opens an account at the broker of their choice, not with you, and you get trading rights and receive a fee mostly based on profits. This business is all based on a strategy with a verifiable track record and your background. Fees here range from 0/25 to 2/20, but I have seen some deal as high as 0/50. (yearly management fee/performance fee)
Each of these requires the ability to run a business, sell yourself, keep your client happy over many years. Referrals will be the largest source of new clients after you get settled. Keep in mind that one man business are generally not ideal. The investors prefer a structured business with more bodies and support.
Which one of these business models do you want to start?
Bob
To be honest, I could not follow you.
Basically, there are two types of RIAs. One, as Mav has said, generally works for an asset manager like ML,MS,GS etc or any of the many independent asset managers. Most of these provide a full suite of services including insurance and investments and "most" charge a yearly fee based on assets, but still some charge old style commissions. Management fees in my experience range from 65 to 150 basis points/year. Large accounts tend to pay less. In this model, you don't get a percentage of profits. You generally don't "trade" but allocate to funds or managers.
The other type are the managers that run separately managed accounts (SMA). These managers are often looking to start a hedge fund in the future, but start off with SMA where the client opens an account at the broker of their choice, not with you, and you get trading rights and receive a fee mostly based on profits. This business is all based on a strategy with a verifiable track record and your background. Fees here range from 0/25 to 2/20, but I have seen some deal as high as 0/50. (yearly management fee/performance fee)
Each of these requires the ability to run a business, sell yourself, keep your client happy over many years. Referrals will be the largest source of new clients after you get settled. Keep in mind that one man business are generally not ideal. The investors prefer a structured business with more bodies and support.
Which one of these business models do you want to start?
Bob
I'm talking about a standard RIA which allows one to officially give financial advice. The one that requires licensure in a state and the Series 66 I believe, and then the ADV and prospectus with how the IAR will be compensated whether AUM or hourly fees or whatever.
An RIA isn't a hedge fund. It is a fiduciary, and supposed to be about custom to the clients' specific situation based on numerous factors like age, goals, family, etc. There are strict rules against advertising past performance unless the whole picture is given about returns. It is not a fund deal where prospects would be focused on the track record that is audited. Obviously to attain AUM as an RIA one would have to be able to demonstrate proficiency and a strategy that aligns with the client, but it is mud different than a performance based fund. I think higher wealth clients actually ultimately can have it where they are charged a performance fee even under an RIA, but I think in general if say someone has half a million under you, you don't get to charge any performance. It's just AUM x the fee which can be sliding usually going down obviously the higher $ of assets the client has with you. And the RIA as I understand it in many cases has the AUM custodianed with a standard retail brokerage, in client name I believe, but if it is a discretionary setup, the IAR is the one who actually does the executions on the brokerage platform, within the discussed guidelines with the client and within fiduciary standards. The Series 65 or whatever exam is mostly about ethics, in fact, and about the fiduciary nature, as opposed to a B/D/commission taker, although there are hybrid RIAs too I believe where one could be both the fiduciary and receive commission for transaction.
My standard view is open up the RIA, get registered, get AUM, charge NOT 2/20 but instead just the pure AUM % fee, and so 5 million would be with a 2% fee 100k in revenue minus all the yearly fees like E &O. There are numerous RIA assistance firms online that help people from the legal POV get their filing in order with the state and for random audits on an ongoing basis if one retains their services even after the RIA is up and running. This is not a CTA or hedge fund! It is an advisor role but if one has discretion over the account, instead of just charging consultation fees, then one really does--within fiduciary guidelines--have control over the account and allocations from stocks to bonds to ETFs and with other licenses, I think annuities, too, among other more unconventional assets. My main concern is about how one would be able to start up a one man firm and get the word out and get the AUM. I trust my competency and risk aversion and awareness that this is not a trading gig, but long term positioning, although medium term things can be done, too, certainly, and also options of course. I could see this as a selective advertising type deal, but primarily door knocking and cold calling, which doesn't sound pleasant but I'm not sure that would deter me. At least it is more steady once things get going than a pure eat what you kill PnL day in day out like trading, which is nice in its own way.
I see a lot of RIA people who just started out with their story online note that stye outsource the actual asset allocation aspect, and concentrate themselves on planning like college and things like that. As an RIA, I would be doing that, too, but my value add that is distinguishing me from others, is my market acumen so I would want to be the allocating person, although the other functions would be fine and probably important to making money in other ways aside from portfolio allocation.
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