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Industry Spotlight > RIAs

A Smaller RIA Has a ‘Duty to Refer’

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Freedom comes with independence and independence brings greater responsibility. If you are an advisor in a large wirehouse or bank, many decisions have been made for you. For example, the product menu is already in place, the fee schedule is set, brochures are designed and the services you offer will be limited to those allowed by your company. As an advisor in this type of environment, your task is to learn to operate within the constraints established by your employer.

If you are an independent broker, you will have a great deal more freedom, but still, many decisions have already been made. At the other end of the spectrum, an RIA platform requires that the advisor make all decisions pertaining to how the company will operate. Of course, in all cases, one must work within the constraints set forth by the applicable regulatory authorities. 

In other words, you must be ethical, you must adhere to the suitability standard if you’re a broker, or the fiduciary standard if you’re an RIA, and you should treat each client fairly and strive to do the right thing at all times. However, if you’re an RIA or plan to become one, your first decision is whether you will offer a broad range of products and services or specialize in a few areas. Beyond this, you must establish your fee structure, design your brochures and company branding and determine every nuance, small or large, as it pertains to the operation of your company. 

It’s been said that one person cannot be an expert in all things. While this is true, it doesn’t mean a one-person office can’t offer a broad array of products and services. You must simply utilize the power of referrals to qualified “partners.” This “Duty to Refer” should always be an option when faced with a situation about which you do not possess or cannot quickly acquire the requisite knowledge. This is also a good way to cultivate relationships with other professionals who can help you and your clients meet their needs. 

I am grateful to work with professionals who I trust and who trust me. After all, trust is the most valuable commodity we possess. 

In short, we can accumulate riches and all the trappings that come with material success. But in the final analysis, all we really have is our reputation. Therefore, whatever your situation, remember: always be ethical, always be respectful and always do what’s best for your clients! 

Thanks for reading and have a great week!


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