RIA Start-ups Face a Complex World, but Help Is at Hand

Wealth managers striking out on their own are turning to custodians and other service providers for support.


“It’s exciting, and everything is moving very fast,” says David La Placa, founder, chairman and CEO of Intellectus Partners, a registered investment adviser focused on ultrahigh-net-worth clients. La Placa has had his hands full since he launched San Francisco–based Intellectus in June with president Jay Casey after the pair left Deutsche Bank Alex. Brown, the U.S. wealth management arm of Germany’s largest bank, where they oversaw roughly $3 billion.

Whether a wealth manager departs an investment bank, a private bank or a fee-based RIA, starting a new business is daunting. The founders must think about everything from regulatory filings and back-office support to investing in the right technology. In some cases, noncompete and nonsolicitation contracts come into play.

While adviser head count keeps falling at banks and brokerages large and small, independent firms have been bucking the trend for the past five years. By 2018 independent RIAs will oversee 28 percent of all U.S. retail assets, versus about 20 percent today, Boston-based research firm Cerulli Associates forecasts. The logic behind going it alone is simple: Although advisers can profit handsomely as relationship managers at a big bank or brokerage, at the end of their careers they won’t have equity.

The main worry for RIA start-ups is how many clients will follow them. Some experts say there’s no need to fret. In 2013, Cerulli estimated that on average, advisers leaving wire houses to set up their own firms kept 91 percent of targeted assets from their prior accounts. Also, moving individual accounts from one custodian to another has become more streamlined in recent years. “The process, frankly, is almost clinical,” says Peter Dorsey, San Diego–based head of sales, recruiting and transitions for TD Ameritrade, one of the largest U.S. custodians catering to RIAs.

Before clients can come through the door, though, a new RIA must have a clear direction. “The biggest mistake some advisers make is trying to wing it,” Dorsey warns. “It’s critical to have a business plan, and part of that plan needs to be deciding on how you measure success.”

Specialized consultants can lend a hand. “We focus on helping [advisers] to understand exactly what type of practice they want to create,” says Christopher Winn, founder and managing principal of AdvisorAssist, a Pembroke, Massachusetts–based consulting firm. Decisions can range from choosing the right office to determining if the firm needs several custodians for clients with different needs, Winn explains.

In a bid to keep clients whose advisers have launched their own firms, big banks claim that only they have the means to offer specialized services. Although some capital markets transactions are difficult, if not impossible, for independent wealth managers, custodians that cater to these businesses are offering more sophisticated platforms. “Things have changed a lot in the past ten years as major RIA custodians have pushed to create new technologies,” says TD Ameritrade’s Dorsey.

For Intellectus’s La Placa, whose clients include many tech entrepreneurs, investment banking’s role in wealth management has changed with the recognition that even after the credit crisis, Wall Street hasn’t shed its conflicts of interest. “The problem with the big banks is that they are built upside down,” he explains. “The client’s interests often come last instead of first.” As an independent, La Placa says, Intellectus can work with a broader set of commercial and investment banks to meet client needs without the conflicts that arise from doing everything in-house.

The firm chose Dynasty Financial Partners to manage all back-office and technology functions so it can focus on managing client relationships and investments. New York–based Dynasty offers a full-service, turnkey solution for major adviser teams going independent or seeking a single provider in place of à la carte offerings from specialist outfits.

“For the corner office, multimillion-dollar producer used to giving up 60 percent of revenue for complete support, it can make sense,” AdvisorAssist’s Winn says of full-service offerings. “For more modest practices, advisers with clients that have specialized needs or a practice that combines another discipline such as accounting, it may not.”

One thing many start-up advisers agree on is that their hard work is worth it: “The clients are more satisfied, and so are we,” La Placa says. •