While the model has become a go-to for advisors seeking independence, understanding the variety of types and options can be challenging. Here’s a breakdown of what advisors need to know.
In an industry brimming with jargon, acronyms, and opaque terminology, it’s no surprise that advisors find it challenging to keep up with the ever-growing variety of models that exist in the industry landscape.
Even just within the independent space, the “Supported RIA” model has exploded, becoming a popular and compelling choice for breakaway and independent advisors alike.
Supported RIAs are commonly (and loosely) referred to by an array of different names, such as Platform RIAs, Service Providers, Outsourced Solutions, Tuck-ins, Aggregators, and Roll-ups—among others. Semantics aside, what each provides is a level of support to help advisors run independent registered investment advisory (RIA) businesses. For the purpose of this article, we will refer to all of these as “Supported RIAs.” This is in contrast to advisors who opt for “do it yourself independence,” whereby every vendor decision and ongoing operations sit with the business owner. Neither option is better than the other; it all comes down to an advisor’s goals, passions, and bandwidth.
While we won’t delve into the value propositions of the myriad firms in this channel, it’s important for advisors to understand what they solve for: the benefits of independence, including business ownership, self-branding, and a method of serving clients with absolute creativity and autonomy, but with additional layers of support for critical functions like compliance, technology, human capital, and real estate.
All that said, how is an advisor to know if this model is right for them, let alone which platform or firm within the channel might be the best fit?
By our definition, the criteria for qualifying as a “Supported RIA” is surprisingly simple and boils down to two criteria:
- RIA Registration—Supported RIAs are overseen by the state or the SEC and are distinctly separate from FINRA (though they may have so-called “friendly” broker dealers attached to them that allow for commissionable business).
- Existing Infrastructure—These firms provide scalable platforms and support to empower advisors to run a wealth management business.
Given the low barrier of entry to be considered a Supported RIA, it is important to dig deeper to find criteria that help delineate the different types of options available and how each can serve to fulfill different goals and reach different outcomes.
Below are three aspects of any supported offering worth examining:
- Registration: Shared ADV vs. Own ADV
A key consideration is how the ADV (formal registration with the SEC as an RIA) is structured. Firms typically follow one of two models:
- Shared ADV—In this model, advisors join the firm’s existing RIA as 1099 independent contractors or Investment Advisor Representatives (IARs). This approach removes compliance responsibility from the advisor’s plate and offloads most middle- and back-office functions, including billing and technology. It’s a cost-effective option for advisors seeking a deeply integrated partnership while still enabling the advisors to own their practices with their own branding. For some, affiliating with an RIA provides all the autonomy and flexibility they need. Yet those who want complete control over everything may bump up against some limitations. For example, since the RIA owns compliance, they have the final say over whether to approve a new alternative investment offering. NewEdge Advisors is an example of a Supported RIA firm whereby advisors join the shared ADV.
- Own ADV—Here, the advisor operates under their own RIA while contracting for a bundled array of services to help launch and grow their RIA firm. This model offers maximum control and freedom since compliance decisions are ultimately up to the advisor. However, it requires managing additional operational and regulatory responsibilities. Dynasty Financial Partners is an example of a support partner in which advisors maintain their own ADV.
- The Level of Support: À la Carte, Full Service, and Everything in Between
The appeal of any Supported RIA lies in the ability to leverage existing infrastructure, support, and capabilities that have already been built out. Some refer to this as “synthetic scale,” where an independent advisor can outsource key functions that they would otherwise need to hire internally. The scope and level of these support services can vary drastically between firms, but it is important to note that this alone is not a measure of a firm’s quality. The level of support provided is usually intentional, designed to attract a specific population of advisors with particular needs. Broadly speaking, these can be divided into three categories:
- À la carte menu—These firms offer a platform for independent advisors to run their business with a high degree of control afforded to the advisor. Typically, the platform firm provides compliance oversight and access to a wide range of technology providers and investment options, including the option for an advisor to operate as a portfolio manager. Advisors are free to select and bear the cost (at scaled pricing) of the specific solutions they believe best meet their needs. This model appeals to those who seek to maximize their payouts or invest in their practices in the areas most important to their client needs.
- Full suite of services—At the other end of the spectrum are firms that provide a comprehensive scope of services and support. These often include fully built-out, proprietary solutions for everything from technology to investment offerings, marketing, and more. They offer a turnkey solution to empower advisors to serve their clients and grow their business within an RIA model, without the burden of building and maintaining their own platform. Importantly, advisors who opt for this type of firm typically pay a premium for the high degree of support, and they are often not free to “strip out” those services that they might not need. It’s a true bundled experience designed to replicate the turnkey world of large brokerage firms.
- Everything in between—In the middle, there exists a wide range of solutions that blend the value propositions of the two aforementioned anchors of the spectrum. These firms typically focus on providing one or two proprietary solutions while allowing advisors to customize their own solutions to fill in the rest. For example, a firm may offer a sophisticated investment management platform but provide minimal marketing support, or vice versa. This option enables advisors to leverage support in specific areas where they find the most value, while assuming responsibility for areas they feel they can manage better on their own. As clients are demanding more from advisors, many firms have added subject matter expertise in the areas of advanced financial planning, tax advisory, estate planning, tax preparation, and even life coaching.
- Acquisition Structure: All, Some, or None
Advisors who opt for supported independence typically do not do so for the largest upfront deal or even the highest ongoing payout. Rather, what’s really compelling is the ability to monetize all or a portion of the business for a very significant multiple. So logically, the question many advisors ask is: “How might a platform firm impact my decision to sell now or in the future?”
- Majority Buyers—These firms acquire 100% of the advisor’s business, effectively representing a complete asset sale. This option is ideal for advisors looking to exit the business entirely or transition out of ownership responsibilities.
- Minority Buyers—These firms typically acquire around 20% of the business, often through a combination of cash and equity. This approach allows advisors to “take chips off the table” while maintaining majority ownership and control. It’s well-suited for those seeking liquidity without relinquishing their leadership role.
- No Stake—Selling all or a portion of the business is not a prerequisite for leveraging a supported partner. This option allows advisors to retain full control over the business, offering the highest degree of freedom and control moving forward. Advisors owning the entirety of their practice then look to their support partners to help them grow faster and set them up for an optimal exit at day’s end.
The flexibility and customization afforded by Supported RIA models are precisely what makes it such a compelling solution for many advisors. Yet, these same qualities also create complexity, making it challenging to navigate or draw apples-to-apples comparisons. For example, a shared ADV, full-service RIA that acquires a majority stake in an advisor’s business is fundamentally different from an own ADV, à la carte platform that requires no ownership stake.
For advisors seeking to better understand this model and the opportunities it presents, the three criteria outlined in this article – ADV structure, level of support, and acquisition structure – serve as essential starting points. By evaluating firms through these lenses, advisors can begin to cut through the noise, categorize the options, and ultimately identify the platform that aligns best with their unique goals, values, and vision for the future.
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