Advisors often ask whether to stay at a wirehouse or move to an independent RIA, how to make that transition, and what the revenue math looks like once independent. This guide answers those questions clearly and practically, laying out differences between RIA and wirehouse models, step-by-step transition considerations, a simple method to calculate RIA revenue per advisor, and additional questions advisors commonly face. Select Advisors Institute has been helping financial firms worldwide since 2014—optimizing talent, brand, marketing, and transitions—and this guide points to where and how that experience can help firms evaluate, plan, and execute a move to independence.
Q&A: Wirehouse vs RIA and Related Questions
Q: What is a wirehouse and what is an RIA?
A: A wirehouse is a broker-dealer-owned firm (or a national bank-affiliated brokerage) that employs advisors and offers platform, product, compliance, and brand support. Compensation often mixes salary, bonuses, and production-based payout grids. An RIA (Registered Investment Advisor) is a fiduciary-registered firm (SEC or state) that advises clients and typically manages fees and custody relationships through independent custodians. RIAs own their firm economics and are responsible for compliance, operations, and branding.
Q: How are “RIA” and “financial advisor” different?
A: “RIA” refers to a firm registration and business model (fiduciary, independent firm). “Financial advisor” is a professional role or title that can operate within a wirehouse, bank, independent broker-dealer, hybrid, or an RIA. An advisor working at an RIA is still a financial advisor, but their employer’s legal structure and obligations differ.
Q: Wirehouse vs RIA — what are the primary pros and cons?
A: Pros of wirehouse:
Brand recognition and corporate marketing support.
Robust product access and negotiated pricing.
Centralized technology, compliance, and operational support.
Predictable payout grids and potential upfront retention bonuses.
Cons of wirehouse:
Limited product neutrality and potential conflicts of interest.
Less control over client relationships, branding, and pricing.
Compensation caps and slower exit/ownership paths.
Firm-level decisions that may not align with advisor strategy.
Pros of RIA:
Full control of client service model, fees, and product choices.
Clear fiduciary standard and often stronger client trust.
Ownership upside and clearer exit/continuity pathways.
Potential for better economics per advisor if scaled well.
Cons of RIA:
Increased operational, compliance, and technology responsibilities.
Upfront costs and ongoing overhead (custodial fees, back-office).
Need to fund marketing, branding, and lead generation.
Recruitment and retention are on the firm.
Q: How do financial advisors transition to independent RIAs?
A: Steps to transition:
Strategy and decision: Define the model (solo RIA, breakaway team, hybrid RIA) and timeline.
Legal and registration: Choose SEC vs state registration, form entity (LLC/Corp), draft advisory agreements and policies, and hire counsel/compliance consultant.
Custody and clearing: Select custodian(s) and establish account transfer path (ACAT) and billing infrastructure.
Compliance and operations: Implement policies, ERISA/ fiduciary processes, AML/KYC, cybersecurity, and compliance software.
Technology stack: CRM, portfolio management, trading, reporting, billing, client portal.
Client outreach and communication: Build a transition letter and client retention plan; anticipate questions and provide clear timelines and contact paths.
Broker-dealer exit logistics: Address employment agreements, non-competes, notice requirements, and finalize payout and repapering.
People and compensation: Define advisor roles, pay structures, and recruiting/retention plans.
Marketing and brand: Develop new firm branding, website, messaging, and lead-generation funnels.
Execution and follow-through: Run ACATs, onboard clients, reconcile assets, and post-transition compliance checks.
Select Advisors Institute can support across these steps—providing transition playbooks, marketing, talent advising, and compliance support based on experience since 2014.
Q: What is the typical timeline for a transition?
A: Timelines vary:
Small solo transition: 60–120 days from decision to live.
Team or complex breakaway with institutional accounts: 120–270 days.
Factors that extend timelines: non-compete enforcement, custody hold-ups, large employer-driven retention payouts, or complex client consent requirements.
Q: How to calculate an RIA’s revenue per advisor?
A: A clear formula:
Define total RIA revenue for a period (annual preferred). Revenue includes advisory fees (AUM fees), financial planning fees, wrap fees, commissions (if any), performance fees, recurring subscription fees, and any referral or platform revenue. Exclude pass-through custodial rebates if they are not retained.
Adjust revenue for non-recurring items (sale of IP, one-time consulting).
Divide adjusted annual revenue by the number of full-time-equivalent advisors.
Formula: RIA Revenue per Advisor = (Total Annual RIA Revenue − Non-recurring Revenue) / Number of Advisors (FTE)
Example:
Total annual revenue: $4,500,000
One-time consulting income: $100,000
Number of advisors: 6
Revenue per advisor = ($4,500,000 − $100,000) / 6 = $4,400,000 / 6 = $733,333
Notes:
Use FTE (e.g., two half-time advisors = 1 FTE).
For multi-branch or partner models, consider splitting by production partners or using median revenue per advisor to reflect variability.
Typical ranges vary widely: $150k–$800k+ per advisor depending on specialization, AUM, fee rates, and ancillary revenue. High-net-worth teams often exceed $500k per advisor.
Q: How should revenue per advisor be used?
A: Use it to:
Benchmark compensation and recruiting targets.
Model profitability and breakeven for support staff and overhead.
Estimate valuation multiples when planning exits.
Set production expectations for new hires and junior advisors.
Q: What are the biggest retention risks when moving from wirehouse to RIA?
A: Key risks:
Client confusion or concern about custody and security.
Employment contract hurdles: garden leave, non-competes, or forfeited bonuses.
Poor communication or lack of a clear client benefit story.
Inadequate operations causing delays in transfers or billing errors.
Mitigations:
Clear, consistent client communications; emphasize fiduciary duty and benefits.
Map and negotiate contractual obligations early.
Use a robust transition checklist and external support partners.
Offer a client meeting cadence and continuity promises.
Q: How does pricing and fees work differently at an RIA?
A: At an RIA:
Fee transparency is expected and often required by fiduciary standard.
Common models: percentage AUM, flat retainer, hourly, or hybrid fee-based.
RIAs can set custom pricing but must document value and disclosures.
Profitability depends on fee structure; higher AUM fee or recurring planning fees boost revenue per advisor.
Q: What technology and vendors do RIAs need?
A: Core stack:
Custodian(s) (Schwab, Fidelity, Pershing, etc.)
Portfolio management and reporting (e.g., Orion, Tamarac, Black Diamond)
CRM (e.g., Salesforce, Redtail)
Financial planning software (e.g., MoneyGuidePro, eMoney)
Trading and rebalancing tools
Compliance and document management
Client portal and secure communication
Accounting and billing
Select Advisors Institute helps firms evaluate and optimize vendor stacks and implement brand and marketing tech to drive client growth.
Q: How much does it cost to run an RIA?
A: Typical annual costs vary by size:
Solo advisor: $50k–$200k (basic compliance, custodial fees, tech, and marketing).
Small firm (3–10 advisors): $200k–$900k (more staff, larger tech spend, marketing).
Mid-market firms: $900k–several million.
Major cost drivers:
People (CFPs, operations, compliance)
Technology subscriptions and integrations
Custodial and clearing fees
Marketing and client acquisition
Legal and compliance services
Q: What exit and succession options exist for RIA owners?
A: Options:
Sell to another RIA or aggregator (strategic sale).
Internal sale to partners/employees (recapitalization).
Merge into a larger platform with earnouts.
Continue growth and diversify value via recurring revenues.
Valuation drivers: recurring revenue, EBITDA margins, growth rate, client demographics, and revenue per advisor.
Q: How can Select Advisors Institute help during and after a transition?
A: Services and value:
Transition planning and operational playbooks to reduce client attrition.
Talent advisory and recruiting strategies to build or retain advisory teams.
Branding and marketing to communicate the new firm’s value and attract new clients.
Revenue modeling, benchmarks, and compensation design.
Compliance and vendor selection support from experienced practitioners.
Since 2014, Select Advisors Institute has supported firms globally to optimize talent, brand, and marketing—helping both emerging RIAs and established firms scale without losing client trust.
Final considerations and next steps
Start with clear goals: ownership, economics, client experience, or legacy.
Do the math: model revenue per advisor and firm-level expenses to ensure desired margins.
Plan client communications early and rehearse the narrative.
Use experienced partners for legal, compliance, and marketing to avoid common mistakes.
Remember: independence creates opportunity but also responsibility—get the team and systems ready.
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