The Truth About Being an RIA: Kevin Thompson Speaks Out
Are you considering the leap to independence in your financial advisory career? Do you wonder what it really takes to become a Registered Investment Advisor (RIA)?
In a recent conversation, Steve Taylor sat down with Kevin Thompson, founder of Merited Wealth, to discuss the real challenges and rewards of transitioning to an RIA. This discussion is packed with insights that every advisor contemplating this move should hear.
Breaking Away from the Traditional Model
Kevin Thompson’s journey to becoming an RIA wasn't straightforward. Starting in the world of professional baseball, his path took a sharp turn when he got involved in finance after an injury ended his sports career. Like many advisors, Kevin began his career at a traditional broker-dealer, where he quickly recognized the limitations of that model.
"When you're tied to a big firm, you're often forced to follow a one-size-fits-all approach," Kevin explained. "The compliance manuals are hundreds of pages long because they have to account for every possible business model under the sun."
For Kevin, this environment became increasingly restrictive. As his business grew, so did his frustration with the unnecessary fees and the lack of flexibility. He started asking himself a crucial question: Is the value I'm receiving worth the 30% haircut I'm taking on every dollar I earn?
The Financial Realities of Going RIA
One of the most eye-opening moments in the conversation was when Kevin discussed the financial benefits of going independent. By moving away from the broker-dealer model, Kevin found that he could offer his clients lower fees while simultaneously increasing his own revenue.
"I started realizing that the tools and platforms I was using at my broker-dealer were available to anyone," Kevin said. "Why was I paying extra just to have them approved by my firm when I could access them directly?"
Kevin highlighted that becoming an RIA allowed him to streamline his practice, eliminate unnecessary costs, and truly focus on serving his client’s best interests. He pointed out that many advisors don't realize how much they're overpaying for services that offer little additional value.
Overcoming the Fear of Compliance
One of the biggest hurdles advisors face when considering the switch to RIA is the fear of compliance. Kevin admitted that this was a significant concern for him as well, particularly the fear of being audited.
"Compliance can be intimidating, but it doesn't have to be," Kevin reassured. "When you're independent, you're not dealing with FINRA's rigid rules. The SEC is primarily concerned with two things: Are you charging what you say you’re charging? And are you doing what you say you’re doing?"
By focusing on clear, transparent practices, Kevin has found that compliance as an RIA is more manageable than he anticipated. He also emphasized the importance of seeking out mentors and building a community of like-minded advisors to share insights and strategies.
Is Going RIA Right for You?
Kevin was clear that while the RIA model has many advantages, it isn’t for everyone. If your business thrives on offering the latest financial products and you enjoy the security of a large firm, sticking with a broker-dealer might be the better choice. However, if you’re passionate about providing advice-based services, enjoy marketing, and want to be truly independent, becoming an RIA could be a game-changer.
“Know your numbers,” Kevin advised. “If you’re paying out 30-50% in overrides and not getting enough value in return, it’s time to rethink your strategy. Going RIA isn’t just about making more money; it’s about being able to run your business your way, without unnecessary restrictions.”
Conclusion: Ready to Make the Leap?
Transitioning to an RIA can be daunting, but as Kevin Thompson’s journey shows, the rewards are substantial. You can build a more fulfilling and profitable practice by taking control of your business, cutting out the middlemen, and focusing on client-first practices.
If you’re interested in learning more about Kevin’s journey and gaining deeper insights into the RIA model, be sure to watch the full conversation on YouTube, Spotify, or Apple Podcasts. This is a must-watch for any advisor considering the leap to independence.