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Now is the right time to start an RIA firm regardless of the COVID-19 pandemic and other challenges, but it is important that advisors make certain they are doing it for the right reasons, according to industry executives who spoke Friday during the RIA in a Box webinar "The Path to Independence: How to Build Your Technology Stack."
"I think any time is a good time … If you know who you want to serve [and] how you want to serve them" — whether it is an RIA firm you want to start or just about any other type of business, said James Carney, Morningstar head of independent advisor software.
It's also important that "you have a vision, you have a strategy, you have a plan" and know how you plan to execute it, he said. Carney also recommended that advisors looking to start their own firm talk to others that made that same transition and have been through the same experience.
Agreeing with Carney, Aaron Klein, CEO of fintech firm Riskalyze, noted that some of his best customers have told him they started their own firms in 2008, "right in the middle" of the prior major recession and did it out of necessity on some level and opportunity on some level. Despite starting firms in what might have seemed like a crazy time to do that, they have all found success and grown significantly, he said.
RIA in a Box has "seen an escalating interest in what we would call this path to independence" with advisors starting their own RIA firms in recent weeks and months, GJ King, president of RIA in a Box, said at the start of the webinar.
"Our industry saw a record number of new RIA firms created during" the 2008-2009 financial crisis, and "early signs indicate it's possible we may see a similar theme emerge out of this challenging time as well," King said.
However, Klein said advisors looking to start their own firms "need to really think about the unique value proposition you're going to try to deliver to your clients, and you need to be working backwards from there."
Carney agreed with that advice, noting: "Absolutely, you've got to start with the client," and then ask several questions: "Why do you want to do it? What is driving you this way? Why do you have passion about it? How are you going to do things different?"
