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How financial advisors can engage and manage high-net-worth clients
How financial advisors can engage and manage high-net-worth clients Apr 24, 2024 12:20:30 PM In this guide, we’ll walk you through ways to better serve high-net-worth (HNW) households, including how to attract and retain their business. By 2027, it’s estimated that there will be over 26,000 millionaires in the United States according to Credit Suisse’s Global Wealth Report. These wealthy households pose a rewarding opportunity for RIAs looking to grow their practices by serving the unique needs of this demographic. In this guide, we'll walk you through ways to better serve high-net-worth (HNW) households, including how to attract and retain their business. In this guide, we’ll walk you through ways to better serve high-net-worth (HNW) households, including how to attract and retain their business. Table of contents: The basics: What is a HNW individual or household? The benefits of serving HNW clients What makes HNW clients different? What services do HNW clients look for from RIAs? How do financial advisors attract HNW clients? Simple tips for maintaining HNW client relationships The basics: What is a HNW individual or household? A HNW individual or household typically refers to those with liquid assets over $1 million but is commonly broken down into three levels of wealth: HNW (High-Net-Worth): HNW individuals typically have investable assets ranging from $1 million to $5 million, not including primary residence and other non-liquid assets. VHNW (Very High-Net-Worth): VHNW individuals are those with investable assets in the range of $5 million to $30 million. UHNW (Ultra-High-Net-Worth): UHNW individuals possess investable assets exceeding $30 million. Additionally, HNW clientele includes anyone who meets the SEC’s definition of a “Qualified Client” having $1,100,000 in assets under management or a net worth of $2,200,000. The benefits of serving HNW clients For financial advisors, working with HNW clients may provide three distinct benefits. Greater revenue potential: HNW clients typically require a more extensive range of services compared to the average client, and can be willing to pay more for the value you provide as their advisor. Additionally, these relationships can last years or even span generations within families. Professional growth: With more complex needs, HNW clients may present you with unique challenges from client to client. This can require you to dive deeper into the intricacies of financial planning, including tax and estate planning, to effectively manage their financial transactions. Referral benefits: HNW clients often have extensive networks and connections in their communities. As you build strong relationships with your HNW clients, you may see a spike in referral business and organic growth. Serving clients of all backgrounds can be a rewarding experience. What’s important is your goals as an RIA align with the goal of the target market you desire to serve. What makes HNW clients different? All clients have unique needs, but expectations and need for guidance may increase as a household’s wealth grows. HNW clients often demand a higher level of service and commitment. Consider the following as you develop strategies to serve HNW clients: Tailored advice for complex scenarios: From investment advice to tax planning—and a lot in between—HNW clients value bespoke, 1:1 advice to help grow and preserve their wealth. Responsiveness to urgent needs: HNW clients may also expect proactive and prompt responses to potentially urgent financial matters. Be prepared to help them navigate decisions as they arise—potentially outside of a typical nine-to-five schedule. Greater involvement in planning: HNW clients choose to work with advisors for their expertise, but many want to feel more involved in planning decisions given they typically know what they want, but not how to get there. Pro tip: During the onboarding process with HNW households, explain how you’ll work with them, how they can reach you when needed, and how you’ll involve them throughout ongoing planning processes. What services do HNW clients look for from RIAs? HNW clients look to financial advisors for comprehensive wealth management to help them grow and preserve their wealth. In addition to investment management and retirement planning, other common areas of planning for HNW clients include: Tax planning: Depending on the tax-related credentials of your firm, HNW clients stand to benefit from tax planning and advice specific to their investments, compensation, charitable contributions, and estate. HNW clients may look to you to ensure that their wealth is taxed as efficiently as possible. Your firm will likely coordinate with a HNW client’s tax attorney or CPA® to plan their tax strategy. Estate and succession planning: Many HNW clients require comprehensive estate and succession planning to ensure multi-generational wealth preservation and a smooth transition to their beneficiaries. This may involve creating trusts, drafting wills, and planning for business succession, often in coordination with other legal and tax professionals. Executive compensation: It’s common for the compensation packages of HNW executives to include elements like stock options and deferred compensation. As their advisor, you can guide them in navigating and optimizing their compensation packages. Liquidity and cash management: HNW clients may need guidance on cash management strategies to ensure they have access to liquidity when needed, while also optimizing the return on their cash and investment holdings. This can be increasingly important when large amounts of wealth are in illiquid assets or as interest rates change. Alternative investments: As a client’s wealth grows, they may be interested in diversifying their investments. These investments may include private equity, hedge funds, real estate or farmland, commodities, cryptocurrencies, art, and other collectibles. Managing the wealth of HNW clients is complex. In order to serve these individuals and families, it is essential to find a balance between having the right credentials and providing a satisfying experience for your clients. How do financial advisors attract HNW clients? To attract HNW clients, your firm will need to develop a strong personal brand that highlights both your expertise and the tailored level of service you can provide affluent consumers. Below are the ingredients for building an effective marketing strategy. Acquiring the right credentials: HNW clients expect their financial advisors to have a strong educational background and professional certifications that attest to their expertise. Credentials like CIMA®, RMA®, CFA®, CFP®, ChFC®, CWPA®, and CPA® are highly regarded in the industry. Branding that resonates with HNW clients: Your firm's branding, including your name, website, and logo, should reflect the elevated level of service that HNW clients expect. A sophisticated and professional brand image can impact a potential client's first impression. Pricing strategy focused on value: When pricing your services, emphasize the value you provide rather than competing on price. HNW clients can be less sensitive to fees and more concerned with the quality of your advice, the personalized service you provide, and the financial value you create. Structuring your fees to reflect the comprehensive and customized solutions you offer can justify your pricing and appeal to clients looking for more complex, long-term wealth management partners. Specializing in a niche: Focusing on a specific niche within the HNW market, such as tech entrepreneurs, executives, or clients from particular industries, can set you apart from competitors. Specialization allows you to focus your services and expertise on your target niche's unique needs and challenges. This specialization may also help foster referrals within an industry. Building personal connections: When engaging with any potential client, regardless of their net worth, take the time to ask detailed questions and genuinely listen to their answers. Use the discovery meeting to show that you care and are committed to building trust over the long term. Remember, developing strong client relationships can lead to organic referrals within the HNW community. Position your firm for success by making sure potential clients feel confident in your strong brand presence and your ability to provide high quality service. Simple tips for maintaining HNW client relationships Once you start working with HNW clients, maintaining relationships and meeting their needs is the name of the game. Proactive and responsive communication: HNW clients expect a high level of attentiveness and personalized service. Whether it's a market downturn, a sudden change in their personal life, or a question about their portfolio, proactive and timely communication can make all the difference. Demonstrate your value: HNW clients want to know that you are keeping pace and staying ahead in evolving markets. Regularly update clients on regulatory changes, innovative strategies, and market trends that are relevant to your clients. Leverage technology: Use technology to offer your clients a portal with real-time access to financial information, personalized financial planning tools, and secure communication platforms. Being a tech-forward advisor can help cement your value with those who favor a digital-first client experience, this may include the younger generations in HNW households. HNW clients have similar expectations as any advisory client, but there is more on the line when managing these relationships. Much of it comes down to establishing protocols and communicating your value so your clients know you’re dedicated to their success. -
Introducing the eMoney direct data feed integration
Introducing the eMoney direct data feed integration Apr 23, 2024 7:00:00 AM By popular demand… a new advisor data feed with eMoney is here, allowing you to sync all client account information, holdings, transactions, and tax lot information from Betterment to the financial planning software. The new advisor connection is expected to improve client data accessibility in eMoney, helping you get a more comprehensive view of your clients' needs and streamline planning decisions. Leverage the combined power of Betterment for Advisors and eMoney to deliver investment strategies that are more informed and aligned with your clients' overall financial goals. To turn on the integration on the Betterment for Advisors side, simply send a set up request to support@bettermentforadvisors.com. Our team will then enable the connection, which should be operational in 2-3 business days. To complete the integration with eMoney, follow the instructions below: Log in to the eMoney portal Navigate to your “Connections” Select “Add Advisor Connection” Select “Betterment” and follow the prompts to enter your Betterment Advisor ID The connection should be operational by the following day. All data will update on a daily basis. -
What's new from Betterment for Advisors
What's new from Betterment for Advisors Apr 4, 2024 6:55:00 PM At Betterment for Advisors, our customers are our first priority. We’re constantly working to elevate the advisor-client experience, and building scalable technology with your goals in mind. 2024 is off to a great start: Read on to get a sense of what’s new. Table of Contents Portfolio and cash management Mutual funds and more added to custom model menu Simple account migration Bring cash into focus with 5.00%* APY (variable) and recurring transfers Advisor dashboard Co-pilot: Onboarding lockouts and Summary page notifications Client activity reporting Advisor service Get the support you deserve with Transition Services Additional improvements 401(k) matching on student loan payments Editable custom model portfolios Automated 401(k) force-outs Mutual funds, Bitcoin ETFs, and more added to custom portfolio menu This year, we’re increasing our investment choice to give advisors more control in meeting growing client demand for personalization. Take a look at the most recent updates to the custom portfolio menu: Mutual funds: We added over 2,000 mutual funds to the custom portfolio menu, including Vanguard, PIMCO, T. Rowe Price, and Fidelity, in addition to the 1350+ existing ETFs. Stay tuned as we roll out thousands of additional funds in the coming months. Bitcoin spot ETFs: Advisors who want to increase investor exposure to Crypto can now access 11 Bitcoin ETF tickers in custom model construction: GBTC, BITB, HODL, ARKB, EZBC, BTCW, BTCO, FBTC, DEFI, BRRR, and IBIT. Dimensional funds: We offer access to Dimensional funds at a low cost. Now, you can create custom models combining Dimensional funds and other mutual fund families with ETFs, and set custom drift thresholds and capital market assumptions for Dimensional models. Simplify firm-wide portfolio updates with bulk actions Betterment for Advisors’ custom model portfolio builder helps RIAs construct personalized investing strategies at scale. Now, you can move all accounts from one portfolio strategy to another in a single, bulk action. To move accounts, simply: Navigate to the current portfolio assigned to relevant client accounts Select your desired destination portfolio and configure your desired allocation using risk level mapping Choose a tax-aware migration strategy to transition accounts with greater precision and tax-efficiency. You’ll be able to review impacted accounts before submitting the bulk portfolio change request. Bulk portfolio actions power you to make strategic decisions for your clients even faster. Bring cash into focus Managed cash accounts bring more of your clients' assets into your overall orbit, helping you better advise on short and long-term goals, gauge the right amount of risk to take in your clients’ investing portfolios, and open up conversations on investing excess cash. Your clients can now set their own schedule for recurring transfers from Cash Reserve† to IRAs and investing goals—and rest easy knowing there are no overdraft fees. They’ll earn a high yield on cash up until the day it’s transferred (now at 5.00% APY* variable), and you can get the visibility you need to offer more holistic advice. Learn more about Cash Reserve. Streamline client onboarding and the KYC process with Co-pilot Co-pilot is designed to intelligently surface unresolved client tasks, from pending invites and account approvals to failed ACATs and missing beneficiaries. This quarter, we introduced a new section, Onboarding lockouts, to help you quickly surface clients who are blocked from completing their onboarding due to KYC issues. Co-pilot will now signal when clients are actively stuck in the identity verification process, presenting the date of account suspension and the current status of ID review. From the Co-pilot dash, you can quickly unblock clients and streamline your personal to-do lists by: Resending identify verification instruction Uploading your client’s identity verification documents Removing accounts from the list that were already addressed offline. Our product squad is also sprucing up the dashboard Summary page. The new Co-pilot notifications display gives you an overview of active and recently resolved Co-pilot tasks as soon as you log in. Client activity reporting We rolled out a new Clients page experience, with comprehensive search functionality and reporting tools built in. You can now view historical transactions across all your clients from the Activity tab. Sort and filter transaction history by date, account type, and transaction type to get a more detailed view into total weekly flows (no client impersonation necessary). You can also search for an individual client or household by name. When you're ready, export the data you need as a CSV file. We also introduced a recent client transactions display on the new and improved Summary page. Get a detailed summary of the latest account transactions—deposits, withdrawals, rebalances, fees, and more—right from your dashboard. Get the support you deserve with Transition Services Our dedication to independent, small RIAs extends beyond technology. We've long had a human support team in place, and firmly believe that our commitment to service excellence is what sets us apart from other custodians. To that end, we’re actively growing our Transition Services Team. This team works with advisors to minimize disruption to practice operations and clients, from communicating the change, to supporting account opening, facilitating ACATs, and building the new client experience after asset transitions are complete. And the best part: no AUM commitment is required to engage our team. The Transition Services Team has hit the ground running in 2024. See how one $125mm firm with over 300 clients recently made a switch. Gain a competitive edge with 401(k) matching on student loan repayments In January, our 401(k) team introduced a new, bundled solution to help bridge the gap between retirement planning and debt repayment. Student loans are a significant financial obstacle for millions and investors are increasingly looking to their companies for help.1 With this new benefit, your plan sponsor clients can offer employees a 401(k) match on eligible student loan repayments—and gain a competitive edge in attracting top talent. "We know that student debt can be a major impediment to saving for retirement," says Sarah Levy, CEO. "Our industry-first student loan 401(k) matching solution is a compelling addition to our modern 401(k) that will help to broaden plan participation to those whose student debt previously kept them from saving for retirement." How it works: Plan participants can record qualified loan payments on their Betterment 401(k), and employers can then match those payments with a contribution to the individual’s 401(k) account annually or during each payroll period. Edit custom portfolios Managing your custom portfolios is now easier than before. With editable models, you can routinely adjust strategies across accounts to better meet your clients’ needs amidst evolving markets. To edit portfolios assigned to client accounts, simply: Add or remove portfolio holdings Update your desired target allocations Select a tax-aware migration strategy to implement changes across clients. Automated 401(k) force-outs Cut down on time and potential expenses for your plan sponsor clients with 401(k) force-outs. This feature automatically removes former employees' assets from the 401(k) plan, or transitions the assets into an IRA when their total balance is less than $5,000. This automation not only reduces per-participant record keeping fees, but can help keep plans below the 100+ participant threshold for annual independent audits. -
5 Ways Financial Advisors Can Use Cash Management to Help Boost Business
5 Ways Financial Advisors Can Use Cash Management to Help Boost Business Mar 25, 2024 5:40:45 PM At Betterment for Advisors, we’ve identified five benefits for financial advisors who offer a cash management solution to clients. The numbers don’t lie. Cash makes up a large percentage of total investable assets, whether you manage it or not. Research from Capgemini reports that cash and cash equivalents have made up about 25% of high-net-worth portfolios from 2018 to 2022. In the wake of a turbulent market, that number increased to 34% in 2023. A survey by Allianz Life found that 61% of Americans would rather have their money sit in cash than have it endure market swings. Yet, 82% of Americans are saving in low-rate savings and checking accounts, missing out on high yield that can help combat inflation. If you’re not managing your clients' cash, you’re missing out on seeing their full financial picture. And seeing that entire picture is key when your firm’s success depends on providing the best, fulsome financial guidance to clients. At Betterment for Advisors, we’ve identified five benefits of bringing cash into focus and offering clients an all-in-one cash management solution. Cash management can: Help you provide better planning services and advice Bring assets into your orbit, serving as a pathway to investing Strengthen your client relationships Decrease risk for your clients (and your firm) Turn your client experience into a competitive advantage The 5 key benefits of bringing cash into focus Let’s explore how a modern cash management solution can help boost your firm’s bottom line and provide your clients peace of mind. 1. Cash management can lead to better advice Gaining visibility into your clients’ held-away cash can help you uplevel and personalize your financial plans. By understanding your clients’ needs outside their investing portfolio, you can better help them reach both short- and long-term goals. Clients may be holding cash for many reasons. They could be saving to buy a home, planning to fund educational expenses, or may simply be worried about the economy. Knowing your client’s goals—and worries—can help you provide better advice to manage their cash and investments. For example, you may be able to advise them to open a 529 account for education expenses or move cash into a high-yield cash account for a mortgage down payment. If you find your client is holding more cash than expected, you can use this as an entry point to discussing why, and exploring your client’s unique needs. You also could be better equipped to respond to sudden influxes of cash such as: Annual bonuses or raises Lump sums in low-rate savings accounts Cash gifts, inheritances, or profits from selling assets These large sums of cash often end up sitting in a checking or savings account earning little interest. You’re in the perfect seat to coach clients on how to make the most of large sums of cash. As your clients’ advisor, you’re committed to your fiduciary obligations, and managing their cash can put you in a better position to serve them. 2. Cash management can be a path to responsible investing Picture this: The stock market starts to rise. Your client has $20,000 that you are unaware of sitting in a savings account at a bank. They get the urge to buy so they don’t miss out. In a hurry, they open a brokerage account one evening and buy some tech stocks. Now what? If you are managing your clients cash, not only will you have more assets under management, but you’ll be able to advise them on responsible investing, helping them manage risk through approaches such as dollar cost averaging. The path from cash to investing can look like this: Understand your clients’ total cash available and their goals for that cash Understand what they are earning on their cash When the time is right, you can invest either the earnings from your clients’ cash or larger portions of the cash While your clients' cash isn’t invested, there is an opportunity to increase their portfolio’s overall yield. With the federal funds rate at its highest point since before the Great Recession and with only 18% of consumers taking advantage of high-yield cash accounts, now is the time to help your clients make sure their uninvested cash earns the highest return possible. By keeping a pulse on your clients’ cash, you can avoid having your clients keep cash at other institutions and potentially make poor investment choices. Most importantly, you can create a streamlined approach to investing clients’ cash at the appropriate time. 3. Cash management can strengthen your client relationships Frequent and strategic conversations about cash with your clients can bolster your relationship. We recommend having “cash conversations” at these three pre-planned moments: Client onboarding: Provide your clients with an intro to cash management, explaining the benefits like the potential for higher yield and more holistic advice. Use it as an opportunity to show how you can bring additional value and how cash management can help your clients reach their short-term and long-term goals. Quarterly or biannual cash reviews: Schedule time when you have your regular meetings with clients to review cash. Make sure you focus on the cash you manage and the cash in external accounts. Ad hoc new cash situations: Coach your clients to contact you when they have increased their cash holdings. This allows you to advise them on what to do with the newfound cash. We recommend the following “Cash Questions” to begin discussing the importance of cash with your clients: Do you have cash at other or new institutions? What rate(s) is your cash earning? What are your goals for the cash? Knowing the answers to these questions can help you in providing options for your clients’ held-away cash that prioritize their financial well-being. 4. Cash management can decrease risk for your clients (and your firm) By offering cash management, your firm can decrease the risk of losing clients to a competing firm, where cash management is provided. By decreasing that risk, you potentially gain: The ability to increase your AUM as you move cash into investments The possibility of additional revenue streams via cash management services Your clients benefit from a decrease in the risk of making uninformed decisions without your holistic advice. Reducing that risk positions your clients to benefit from: Earning potentially higher interest rates to keep up with inflation Your guidance to “stay the course” and take the appropriate amount of risk Bringing cash management under your roof can help demonstrate your value in volatile market conditions, mitigating risk for you and your clients. 5. Cash management can create a competitive advantage with modern technology As we know, people have cash needs. Why not meet those needs while creating a competitive advantage at the same time? New cash management platforms may offer: Modern technology for you and your client to manage and automate savings Higher yields compared to traditional bank savings accounts to earn more from your client’s cash Additional FDIC insurance if covered by multiple program banks Recurring / automated transfers into investing, which can create dollar-cost averaging opportunities Whether your clients hold their cash at banks or other wealth management firms, a modern platform can give your RIA an edge in a world where liquidity, yield, and security are valued by investors. We’ve built a modern cash management solution for advisors At Betterment for Advisors, our high-yield Cash Reserve account lets you offer your clients a competitive cash management solution on our easy-to-use platform. Your clients can set savings goals and use automated tools, all while you guide their financial plan. -
Introducing Mutual Funds in Custom Model Portfolios
Introducing Mutual Funds in Custom Model Portfolios Mar 21, 2024 8:00:00 AM Thousands of mutual funds have been added to the custom portfolio menu. This upgrade gives RIAs even more control in meeting growing client demand for personalization. Betterment for Advisors has been laser-focused on delivering a holistic platform that includes flexible portfolio options for RIAs, across both retirement and wealth management. Today, we’re announcing that thousands of mutual funds have been added to the custom portfolio construction menu for the first time. As roughly $20 trillion in assets are held in mutual funds in the United States today, offering advisors a custodial platform that can manage those funds for clients is essential. This update gives our customers even more control in meeting growing client demand for personalization in portfolio construction. They can now combine mutual funds and ETFs in their custom models on the Betterment for Advisors platform. Options include funds from such firms as Vanguard, PIMCO, T. Rowe Price, Fidelity, with many more to be added in the coming weeks. Derek Tharp, Founder of Conscious Capital, says "I have enjoyed the ease of use and powerful capabilities of Betterment for Advisors since I started working with them, but I appreciate even more that the team continues to enhance the offerings and improve the advisor experience. The addition of mutual funds in custom portfolios allows me to use the full suite of features with even more of my clients.” (Non-paid client of Betterment.) -
How to Start an RIA (A Guide to Going Independent)
How to Start an RIA (A Guide to Going Independent) Feb 15, 2024 5:52:26 PM The process of becoming a registered independent advisor can be daunting. Here’s what you should know as you start your own advisory practice. Congrats, you’ve decided to start your own RIA! This exciting step can grant you the freedom to create a practice that better aligns with your vision, for both your business and your clients. Whether your goal is to provide personalized investment management or to expand your client base and increase profitability, we’ve got the details to help you get started. In this guide, we’ll cover how long it can take to get set up, key questions to determine if you’re truly ready, and the three phases of launching your firm. How long does it take to start an RIA? While it can take a few months to register as an RIA, the bulk of the transition work will take longer. We recommend allowing four to six months for implementing your plan to transition to an independent RIA. This process, however, could take more or less time depending on the complexity of your firm. Are you ready to go independent? At the outset, we recommend taking a thoughtful approach to answering the following questions: 1. How will your current job influence your transition to independence? 2. Are you prepared to cover the costs of launching and running your new firm? 3. Are you committed to the time requirements for starting a new firm? The next three sections in this article provide a more detailed roadmap, broken down into three phases, to fully assess your readiness to make the transition to being an independent RIA. We’ll review how to leave your current job, along with the steps involved in starting a successful firm. Please note that this content is meant to serve as general guidance, and is not legal advice. Phase 1: Leaving your job and laying the groundwork This first phase is all about building the foundation for your success. As a new business owner, you have a critical advantage: your desire to leave your current role and venture into your own firm. This motivation will give you a head start and can lead to a shorter gap between your last paycheck and your new firm’s first client invoice. Obtain legal counsel and tax guidance Throughout the entire transition process, your legal counsel can help provide guidance on specific subject matter. From reviewing your non-compete agreements with your current employer to helping you set up your business entity, your attorney will help protect your interests. If hiring an attorney for certain steps, such as establishing a legal entity, is too expensive, you may want to consider leveraging affordable services such as LegalZoom. Additionally, having access to a tax advisor early on will be convenient for addressing your tax-related questions. Consult with other RIAs who have taken this path Gaining insight from peers who have started their own RIA can help boost your confidence and better plan ahead for unexpected issues. If possible, speaking to RIAs who transitioned from your current firm can provide even greater insight. (Read how Jason Hamilton, founder of Keep It Simple Financial Planning, launched and built his $40 million firm.) Non-paid client of Betterment. Views may not be representative, see more reviews at the App Store and Google Play Store. Obtain necessary certifications You’ll most likely need a Series 65, or similar license from FINRA, to work as an Investment Advisor Representative. However, some states may waive the Series 65 if you hold another designation such as a CFP® or CFA. Find your office space It’s best to think about your office space early on to avoid potential delays later in the process. Before selecting your office space, whether it be a home office, coworking space, or a standalone physical office, remember to examine your firm’s needs. To help determine what is best for your firm, consider your own work preferences, potential growth for your team, and your clients’ desired working style. Budget for personal income and spending As you transition from your current employer to building your own firm, you’ll most likely experience a decrease in income until you rebuild your book of business. Make sure to plan ahead for personal and business expenses. Identify prospective clients While you likely can’t tell your clients that you’re leaving your existing job or starting your own firm, you can start planning. Think carefully about the types of clients you’d like to work with at your new firm. It may be helpful to select a niche you would like to serve. One way to identify a niche is by segmenting prospective clients based on factors such as their profession, age, and interests. By targeting clients who align with your existing book of business or your new firm’s vision, you can more effectively reach your ideal customers. Create a business plan A business plan will serve as a guide for your firm and should, at the very least, explain your target market, outline the unique services you will offer, define your strategies for reaching your key audience, and establish metrics to evaluate the success of your plan. Additional areas to consider including in your business plan are financial projections, competitive analysis, risk management, and a tech stack strategy. Plan your business branding It’s important to choose your firm’s name early on, as you will need it for obtaining a website, registering your business, and developing a marketing plan. Consider whether you want to use your personal name in the firm’s name or choose a new, branded name. Be sure to conduct thorough research on your preferred name to avoid any potential trademark conflicts. If you are a small firm and you are the face of the brand, your personal name can work well. However, opting for a branded name may be a strategic choice if you have a smaller niche in mind, plan to grow into a larger firm, or desire to differentiate yourself from competitors. Use your current job’s benefits While you are still employed, plan to take advantage of all the employee benefits you will miss when you are self-employed. You will have to replace some benefits, like health insurance, but some you may outright lose unless you can afford to pay for them. Maximize your current benefits by fully utilizing your healthcare plan, participating in employee-sponsored training, and acquiring certifications covered by your employer. Phase 2: Starting your business and getting your first client This phase is when the heavy lifting to get your firm up and running kicks in. From legally registering your firm to launching your first marketing campaign, you’ll end this phase with your first few clients, ready to grow. Register your business entity You’ll need to formally create a company by registering in the state where you are located or in a favorable state such as Delaware. RIAs commonly choose to establish their business as either a corporation or a limited liability company (LLC). However, your attorney and tax advisor can help determine the best option for your firm. Set up a business bank account and credit card To set up your bank account, you’ll need to get your EIN from the IRS website. With your EIN, you can go to the bank of your choice and open a business bank account and credit card. While we can’t recommend a bank, a good starting point would be your own personal bank or seeking a referral from a trusted small business. One tip: Avoid fees whenever you can. It’s worth shopping around for a bank account if your current options impose high fees. Select an RIA compliance consultant You’ll need a Chief Compliance Officer for your firm. You can serve in the role yourself, hire internally, or outsource the function to a consultant. Outsourcing can help manage risk and save time upfront during your firm’s registration. A compliance consultant can streamline the registration process with the SEC or state authorities. We recommend working with RIA in a Box, a preferred partner in the Betterment for Advisors’ RIA Tech Suite for new firms. Register your firm with the SEC or state regulators Depending on which state your firm is in and your starting AUM, you may have to register with the SEC or your state regulatory authority. Typically, if your RIA manages more than $110 million in AUM, it is required to register with the SEC. If your AUM is between $100 million and $110 million you may still be eligible to register with the SEC, depending on your state's rules. And if your RIA manages up to $100 million in AUM (or up to $110 million in some cases), it generally needs to be registered with the state securities regulators where you operate or have clients. It's important to note that states have their own specific regulations, so consult with your attorney or compliance consultant to make sure you register correctly and file all necessary forms and documents. Obtain relevant insurance You’ll want to obtain insurance to protect your firm against common risks. Common types of insurance include directors and officers liability, professional indemnity, errors & omissions (E&O), fiduciary liability, cyber liability, employment practices liability, and health/dental/vision insurance. The larger and more complex your firm becomes, the more insurance you may need. Choose an RIA custodian There are many custodian options available for your firm to choose from. If you select Betterment for Advisors, you’ll have access to a vertically integrated solution that allows you to Custody assets Build and manage custom model portfolios Open new client accounts in minutes Control billing Streamline your practice’s back-office operations with cutting-edge features Within portfolio management at Betterment for Advisors, utilize automated trading, rebalancing, tax-loss harvesting, asset location, and more. Set up your tech stack Your tech stack will include many different and often integrated softwares. The four essential pieces of software for RIAs are wealth management, financial planning, CRM, and compliance. In addition, you may also require other tools for tasks such as accounting and invoicing, file management, email marketing, and video conferencing. Create a website and email address While you can use online tools to create your own website, it may be more efficient and produce better results to hire a small, affordable web design agency. In addition to logo and website design, agencies can also provide help with setting up email accounts using Google or Microsoft, if needed. Create a marketing plan and launch your firm Launching your firm is a one-time opportunity, making it crucial to thoroughly plan your marketing strategy for both your current network and your desired target audience. You can leverage a marketing agency, hire freelancers, or choose to market yourself if you have the necessary skills and resources. As part of this initial go-to-market campaign, you’ll also want to incorporate a plan to message your current clients and introduce them to your new firm. Consult with your attorney on all marketing communications to ensure you are compliant. Phase 3: Establishing yourself in your first year Now that you’ve launched your new RIA, your first year is about establishing your firm as a leader within your financial planning niche. Establish your client pipeline Now is the time to implement your marketing strategy to grow your pipeline. Common marketing activities include networking, sharing thought leadership content on a blog or social media, attending events, and utilizing email marketing. Additionally, implementing a robust sales process, can help you move prospects from cold leads to warm opportunities and eventually, active clients. Establish your client experience The initial experience your clients have with your firm is critical. First impressions help drive future client retention and referrals. Ensure that your onboarding processes for new clients are clear and enjoyable, while also building trust both as an advisor and (more importantly) as a person. As a client’s tenure with your firm increases, it’s important to strategize tactics such as video calls, in-person meetings, newsletters, performance reports, and webinars to continue to build a strong client relationship. Establish your operations As a business owner, your operations will need to be evaluated on an ongoing basis. After implementing your tech stack, the next step is to establish processes to efficiently run your business. During your first year, it is beneficial to have monthly or quarterly process reviews to ensure that you are maximizing the potential of your tech stack. Besides managing daily business operations, it is important to plan for accounting tasks, tax filing, and other reporting requirements. Your firm’s long-term success It takes confidence and leadership to start an independent RIA. It’s very hard work. But it can be truly rewarding, and we’re here to support you. Betterment for Advisors is ready to be your end-to-end custodian, supporting your firm with our cutting-edge technology. We’re here to help you grow—you have a dedicated relationship manager who pairs with our operations and customer service teams to help scale your practice. Our platform streamlines onboarding, billing, portfolio management, and reporting to help you deliver a high-quality, personalized client experience. Ready to learn more? Get a demo today.