In the RIA industry, the term “business model” usually refers to the various business model choices available to an advisor: "fee-only vs. hybrid" or "establishing a new RIA vs. joining an established firm or "RIA aggregator". Beyond this initial (and important) decision though, lies the world of business model design, a practice that can help both start-up and established RIAs manage their practices more effectively.
Client Segments. There are multiple client segments that an RIA may chose to target. Segmentation methods for advisors may be based on affluence, life stage, or other shared attributes like profession. Beyond individual investors, advisors may seek to develop the capabilities to attract institutional clients. After segmenting their potential market, advisors should then identify specific segments with needs that align with their capabilities and service models.
Key Resources. Think of these as your RIA’s “assets", both tangible and intangible. Early on in an RIA’s life cycle, these typically include financial assets (cash reserves), human and intellectual capital (advisory team, client relationships, personal reputation, capabilities) and technology (both hardware and software). Over time, an RIA will add to these assets and will ideally develop additional intangible assets like reputation, firm culture and processes.
Partner Network. Partnership opportunities within the RIA industry are plentiful. Custodians continue to expand their service offerings to support advisors on their platforms. Innovative outsourcing solutions are being formed as well. And there is a rich set of specialist consultants available to help RIAs in areas like operations, marketing and technology. Picking strong partners and incorporating them into their RIA's processes represents an incredibly powerful lever for most RIAs.