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More Progress, but Still, RIA or B/D?

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This week on the Road I saw more progress. My RIA is now approved by the state and I can accept financial planning fees. I have two financial planning clients to begin with. One is an executive with a large corporation and the other is a young professional with a very successful practice in the medical field.

I am still looking for a place to hold the assets. I have been leaning toward the RIA platform ?EUR” which seems to be a trend ?EUR” but am unsure at this point. While an RIA offers more control and a higher payout (100% versus 90% +/-), it will require more work and cost to set up. Is the extra cost worth the additional 10% payout? If the production is large enough…certainly!

I think of it this way: It’s as if the RIA arrangement provides a storefront and it’s up to me to determine what to put on the shelves. For instance, if I want to offer insurance products, should I secure a general agent contract with each company I want to do business with or find a “one-stop shop” and run all insurance business through them? I think the latter would be more efficient but would love to hear your comments.

Let’s get back to the asset management decision.

I’ve had plenty of experience with broker/dealers over the years, some good and some frustrating. Since I plan to write and accept speaking engagements, I am concerned that B/D compliance could be an impediment to this. Do any of you have experience with this as it relates to your writing, speaking, radio programs, etc.? It seems that the increased scrutiny surrounding B/Ds over the past several years is simply a result of the scandals that have occurred. In the future, as the RIA channel grows, the pendulum could swing and the RIAs could experience something similar. Another factor in this decision is the type of client I am seeking. Generally speaking, it has been my experience that wealthier clients are more accepting of fee-based asset management than less wealthy clients. It seems that one of the biggest advantages a B/D has is the ability to offer commission-based products. Yet if I am managing larger accounts, the commission products may not be such a significant factor.

As I ponder this decision, I think back to the corporate environment I left, where these decisions have already been made. As an independent those decisions fall on me. So what to do? Hmmmm….. To borrow a phrase originated by Archimedes, the philosopher and math expert, as he ran into the streets?EUR”Eureka! I think as a result of arguing the pros and cons in writing, I’ve just made my decision.

Perhaps you’d consider telling your associates about this blog and making this a forum for those who desire to go–or are already in the process of going–independent. For those of you from the home office who want to recruit me to your B/D, I appreciate the interest, but maybe you should e-mail instead of using the blog comments–let’s reserve this forum for practitioners.

Again, thanks for your indulgence and I welcome any comments you may have.