Becoming an independent RIA - Financial Advisor

Guidebook Transition

Becoming an independent RIA

Your guide to breaking away, becoming an RIA and knowing what true freedom feels like.

This Guidebook is for informational purposes only and is not intended to address any specific situation. TD Ameritrade does not provide legal, regulatory, employment, tax, financial, or investment banking advice. Business transitions can pose a risk to an advisor; therefore, they are not for everyone, and whether they are appropriate for a particular advisor or not, there are still risks. Nothing in this Guidebook shall constitute an endorsement by TD Ameritrade of any course of action and/or whether a particular advisor is fit for a transition. There is no guarantee of a successful outcome for an advisor related to a transition. TD Ameritrade makes no representations or warranties regarding (i) the success of any transition or advisory business, (ii) the retention of any client assets by any Advisor, or (iii) the acquisition of any client assets by any Advisor. This material is designed for an audience of financial professionals. Content is provided for informational purposes only and should not be construed as legal or professional advice. TD Ameritrade Institutional disclaims any loss or liability that is incurred as a consequence, directly or indirectly, from the use or application of this publication.

Table of contents

1 Introduction 2 Bridge to Independence 3 Actions

CHOOSE YOUR PATH

4 Choose your path 6 Your future advisory model 8 Choices for independence 10 Help from RIAConnect? 11 Considerations of going hybrid 12 Gains of going independent 14 Questions to consider 15 Importance of business planning 16 Elements of a business plan

STRUCTURE AND SET UP YOUR BUSINESS

18 Obtaining legal counsel 20 Common legal entities 24 Compliance and insurance needs 26 Your technology needs 28 Your technology 29 Important investment tools 30 Setting up your office 32 Staff composition by firm size 33 Your team 34 Launching your brand

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TRANSITIONING YOUR CLIENTS

36 Transitioning your clients 38 Joining an existing RIA 40 Starting your own RIA

MANAGING FOR SUCCESS 45 Managing for success 46 Gain technology efficiencies 48 Maximize team performance 49 Growing your firm

50 Pulling it all together 52 Appendix

Introduction

AT A GLANCE

2020

28.1%

2015

23.3%

The RIA and dually registered channels are expected to grow from 23.3% combined asset market share in 2015 to 28.1% by 2020.2

The financial services landscape has experienced tremendous change over the past 15 years. Financial advisors are choosing to move into the independent Registered Investment Advisor (RIA)1 channel over the traditional broker-dealer model. In fact, the number of advisors in the RIA and dually registered channels grew 16.3% from 2005 to 2015, while the number of advisors in wirehouses declined 3.2% in the same period.2

The maturing of the independent advisory space

As advisors' preferences have changed, the RIA channel has blossomed, with a large ecosystem of custodians, technology providers, and strategic partners all developing solutions to better compete and succeed. In addition, asset custodians and related providers have dramatically improved their ability to help advisors make a smooth transition to independence.

These RIA channel enhancements have created a positive feedback loop. Many advisors have experienced a positive outcome, which in turn has helped boost the confidence of professionals considering the transition.

1 Registered Investment Advisors (RIA) are separate from and unaffiliated with TD Ameritrade Institutional. 2 Cerulli Advisor Metrics 2016: Combatting Fee and Margin Pressure.

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Introduction 1

Bridge to Independence

Becoming an RIA is a big step, and every financial advisor has different goals, ambitions, and needs. As you consider your future in the financial advisory space, ask yourself: Could I better serve my clients as an independent advisor? Would I be able to grow my business faster and find additional clients by becoming an RIA? If the answers to these questions are "yes," you are likely a good candidate for independence.

We have developed this guidebook as a resource for financial advisors like you who are seriously considering becoming an RIA. Our goal is to arm you with valuable information to help take the guesswork out of the transition process.

TD Ameritrade Institutional's Bridge to Independence program brings you a step-by-step approach to help you assess your situation, understand your options, and outline a path for your transition.

Guidance every step of the way

Our Bridge to Independence program brings you an easier way to make the move to becoming an independent RIA--whether you want to join a firm or start your own. We help take the guesswork out of the process so you can stay focused on your clients and your business.

Introduction 2

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