How Do I Explain The RIA Model To Clients?
I'm Brad Wales with Transition To RIA (TransitionToRIA.com). This is episode #79 of my question and answer series where I answer RIA related questions I get from advisors just like you.
There are many advantages for why financial advisors transition their practices to the Registered Investment Advisor ("RIA") model. Equally compelling are the advantages for their clients.
It is important to be able to articulate to your clients what the RIA model is, why you are transitioning your practice to it, and how it benefits them.
I frequently ask advisors that have already made the transition, how they explained it.
In this episode I provide several talking points to consider, and I share my all-time favorite answer from an advisor on how they explained it to their clients.
Come take a look!
What I do: At Transition To RIA I help financial advisors understand everything there is to know about WHY and HOW to transition their practice to the Registered Investment Advisor (RIA) model.
RESOURCES & LINKS
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🔹 Website: https://TransitionToRIA.com/
🔹 Show notes: https://TransitionToRIA.com/how-do-i-...
🔹 Contact me: https://transitiontoria.com/contact/
🔹 List of all questions I've answered: https://transitiontoria.com/videos/
🔹 Podcast: https://transitiontoria.com/podcast/
🔹 Whitepaper ("11 Ways The Economics Of The RIA Model Are Superior To Other Advisor Affiliation Options"): https://transitiontoria.com/whitepapers/
🔹 Transcription of video:
How do I explain the RIA model to clients? That is today's question on the Transition To RIA question and answer series. It is episode #79.
Hi, I'm Brad Wales with Transition To RIA, where I help you understand everything there is to know about why and how to transition to the RIA model.
If you're not already there, head to TransitionToRIA.com, you’ll find all the resources I make available. This entire series is in video format, podcast format. I have articles, I have whitepapers. All kinds of things to help you better understand the RIA model, and what it would mean for your practice. Again, TransitionToRIA.com.
On today's episode, we're going to talk about how to explain the RIA model to clients.
I get asked this a lot when advisors are considering transitioning their practice to the RIA model. Making a transition needs to be good for the advisor, and the client. That’s what we’re going to talk about on this episode.
Equally important is how you articulate the benefits to the client. Why you’re making the move from where you are now, to this RIA model. Knowing the client probably doesn't even know what an RIA is, to begin with.
This also applies if you’re already an RIA and are explaining your arrangement to a prospective client. It’s works with both cases.
The key here is you can't use jargon that your client isn’t going to understand. You’re probably careful to not use too much investment jargon when you're explaining your investment suggestions to the client.
As an industry, we have all kinds of jargon to describe the structure of an advisor's practice as well.
We have broker/dealers, registered investment advisors, registered representatives, investment advisor representatives. All kinds of mumbo jumbo that while we understand, because we're in the industry, clients typically will not know what most, if not all, of it is. The key is explaining it using the least amount of jargon possible.
When I'm talking to advisors that have already transitioned into the RIA model, I like to ask, "How did you explain the transition to your clients?" Because then I can share that knowledge with the advisors I'm talking to, and hence the episode here.
I was recently talking to an advisor who made the transition about two years ago. He gave one of the better answers I've heard, the most articulate way of saying it. So, I want to share that specific verbiage, and then also note some additional examples you can use with clients.
This advisor, and I have it (the quote) in my notes here because I want to make sure I say it verbatim, because I thought it was so good. I wrote it down immediately when he said it.
His answer was, "To provide truly unconflicted advice required separating the function of custody from who is giving the advice."
With his prior affiliation model, the challenge was as he was giving advice, his firm was making revenue from the payout, and because they're self-clearing, they make revenue as the custodian on the assets as well.
As an aside, if you haven't seen it, I've done an entire episode on how a custodian generates revenue if you want to dive deeper into that topic. Con't.....
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