How much does it cost to start an RIA firm? (2024)

FAQs

How much does it cost to start an RIA firm? ›

Fearless advisors-turned-entrepreneurs who went ahead with their plans of establishing their own advisory firms will say that their startup costs ranged from $10,000 to $50,000. These costs can be lower or higher, depending on your location. Startup costs can vary from state to state.

Startup costs can range from $10,000 to $50,000, depending on factors like state registration fees, legal and compliance consulting fees, technology costs, and operational expenses. Common startup expenses include: Legal formation paperwork. Attorney and consultant fees.

RIA firm regulatory fees

Each state charges an initial and annual firm filing fee, which can vary by location. The average cost is reportedly about $215, but you'll need to budget an additional $100 for each additional representative at your firm.

Starting an RIA firm is a multi-step process that can take several months to complete. Planning ahead ensures that you're working toward your goal of opening your own firm on a realistic timeline and that you're not skipping any vital tasks.

RIA Firms can have a valuation of 1.5 to 3.3 times their annual revenue.

While it may only take a month or two to get a firm registered as an RIA, typically advisors take about six months to fully complete the transition. Depending on the complexity of your business model, however, this timetable can be expanded or compressed down to weeks or even days.

Paid much like mutual fund managers, RIAs usually earn their revenue through a management fee consisting of a percentage of assets held for a client.

If you're starting a small firm with a few partners, you'll need to raise at least $1 million. This will give you enough capital to hire a few employees, cover your operational costs, and marketing expenses. If you're starting a larger firm, you'll need to raise more money.

According to Investment News, 25% has been the benchmark for RIA's profit margins. However, in 2021, RIA's profit margins jumped to 30.6%. Therefore, it is possible to reach your eight-figure exit with $1.5M or more in gross revenue.

Bank Ownership of a Registered Investment Advisory Firm

A key business driver for financial institutions considering an affiliated RIA is the prospect of full control of the business activity.

Can anyone become an RIA? ›

While there are no legal requirements for RIAs to get certified, clients may prefer to work with an RIA who holds an industry-specific certification. Consider seeking the following certifications to enhance your qualifications and provide proof of your competency as an RIA: Certified Financial Planner (CFP)

The report identified at least 21 RIAs with an average account size over $100 million, as well as an overall mean client balance of $2.7 million and median of $386,646 across the thousands of firms.

It depends on who you ask but a typical answer is anywhere from 50 to 150 clients per advisor. Having 50 clients could be enough if you're focusing on high-net-worth individuals. Meanwhile, 150 clients are usually considered to be the upper limit of what an advisor can realistically manage.

One of the simplest methods to value a wealth management firm relies on a multiple of revenue. This multiple is often applied to Trailing 12-month (TTM) revenue but may be applied using a 3-year average, quarterly annualized, and projected 12-month revenue.

This means that Series 65 allows you to practice in a fiduciary capacity, offering independent advice and financial services. While most investment advisor representatives take one or both of the Series 6 and Series 7 exams in addition to their Series 65 exam, it is not required.