Six Common Business Models for Advisors in 2018

By Cory Roberson, Principal at FIN Compliance and FIN Lancer 

Considering opening an RIA Business for the new year?

For entrepreneurs who want to get started in the new year, we’ve put together a list six common firm business models based on our work with more than 160 advisors across the U.S. and Europe.  The following is for illustrative purposes and is by no means an exhaustive list of the business models that exist in the industry. 

Advisors may conduct business with a combination of the services listed below.

#1 - RIA Firm + Portfolio Management  

Firm Level	Rep Level	Services
Registered Investment Advisor	Investment Advisor Representative	Portfolio Management

#2 - RIA Firm + Financial Planning + Insurance  

Firm Level	Rep Level	Services
Registered Investment Advisor	Investment Advisor Representative	Financial Planning Insurance

#3 - RIA Firm + Portfolio Management + Financial Planning/Consulting + Third Party Consulting  

Firm Level	Rep Level	Services
Registered Investment Advisor	Investment Advisor Representative	Portfolio Management Financial Planning/Consulting Third-Party/Assets Under Advisement

#4 - RIA Firm + Portfolio Management + Financial Planning/Consulting + 
Registered Rep/broker-dealer  

Firm Level	Rep Level	Services
Registered Investment Advisor	Investment Advisor Representative Registered Representative	Portfolio Management Financial Planning/Consulting Securities products/Broker-Dealer

#5 - RIA Firm + Portfolio Management + Private Fund

Firm Level	Rep Level	Services
Registered Investment Advisor	Investment Advisor Representative Securities Agent (some states required if issuing securities/PPM’s)	Portfolio Management Private Fund

#6 - RIA Firm + Portfolio Management + Mutual Fund

Firm Level	Rep Level	Services
Registered Investment Advisor	Investment Advisor Representative	Portfolio Management Mutual Fund

Overview of Services*

Portfolio Management** typically involves investment supervisory services (e.g. directing portfolio investments, holding assets under management).  These can also include: Robo-Advisory and retirement planning management services.  

Third-Party Portfolio management (“Assets under advisement”) is a form portfolio management service.  This service is usually structured in a consulting, flat or shared fee arrangement with another investment firm, fund, insurance company, and/or retirement plan provider.

Financial Planning/Consulting typically involves hourly planning and/or investment consulting packages for clients (e.g. life, career, financial, college, emergency planning). This service can include plans for retail clients, retirement planning for a pension plan or third party services for a retirement plan provider.

Registered Reps/Commissions typically offer securities products for a commission through a FINRA or other SRO-registered entity. This means that the advisor is in a commission relationship with an affiliated or non-affiliated broker-dealer/securities issuer. 

Mutual Funds (“investment companies”) involves regulated investment vehicles sold to the general public (open or closed end funds).

Private Funds involves investment (“pooled”) vehicles that are sold to either accredited or sophisticated investors (Reg. D).  These funds typically rely on two Investment Company Act fund exemptions, 3(C)–1 or 3(C)–7 to avoid the same reporting burdens as mutual funds.  Investments can include:  real estate, stocks, venture capital, blockchain, and cryptocurrency. 

**Sample Quarterly Fee billing schedule (portfolio management/supervisory services)

Market Value ($)	Quarterly Calculation of Fees	Annual Fee Schedule (%)	Total Fees
1,500,000	$250,000 X .004875	1.95	$1218.75
	$250,000 * .0035	1.40	$875
	$500,000 X .0025	1.00	$1250
	$500,000 X .00175	.70	$875

Compliance Reporting Maps

Based on your firm’s model, we encourage firms to create their own reporting map for compliance purposes.  We believe that the process of breaking down reporting levels can make your firm’s ongoing compliance requirements* a lot easier to bear.

Reporting requirements are based on your firm’s model. These can include:  ADV’s, U-4, Corporate documents, subscription documents, Edgar filings, stress testing (e.g. SAS 70), and/or audited financial statements.

Below, we’ve created a sample reporting map breakdown.

Corporate Level	Firm Level	Rep Level	Securities Level	Fund Level
Corporate Documents LLC/C-Corp Securities	Registered investment Advisor (RIA)	Investment Advisor Representative (IAR) Registered Representative (Hybrids)	Securities issuer/agent Initial Public Offering Initial coin Offering Private Placements	Registered Fund (i.e. open/closed end funds Private Fund (registration or exemption)

Email us at: cory@riareview.com or call us at: 650-305-2688 if you’d like to evaluate your business reporting model or start an RIA.

Email Us to schedule a brief session to review needs

Compliance and Business Management

FIN Compliance (FINCompliance.io) is a consortium of compliance services including: RIA Consults-Roberson Consults Group, a compliance consulting firm, RIA Review, a compliance-management software tool (SaaS), B-D Review, a RIA/Broker-Dealer compliance management software tool, and FINLancer is a business management portal featuring:  E-signature tools; Invoicing integration, Vendor Directory, continuity directory*, business client document portal, and more (available by Q3 2019).  Access all services on one site: FINCompliance.io.

Impact

FIN Missions (FINmissions.com) provides business support group sessions for other entrepreneurs.  In addition, Cory has volunteered for more than fifteen youth programs in locations such as like S. Korea, China, S. Africa, Thailand, and India.