The following are 7 key questions and answers you should ask yourself and consider when trying to analyze whether to sell your product in the RIA channel. Hopefully, they will demystify some things you may have thought to be true, and give guidance on how RIAs think and act.

    My firm has been selling to RIAs since 2006, and I personally have been selling to them since 1997. We have made a career out of selling to RIAs, and currently have approximately $6 billion on the books that we have raised for our clients. We are an outsourced sales and marketing organization, commonly referred to as a 3rd-party marketer, for a group of boutique investment firms. In total, we have raised over $30 billion since our founding in 2006.


    1. Which RIAs should investment managers call on?

    The RIAs that we call on are independently-owned wealth management firms that use outside managers to create portfolios for clients. Clients’ sizes range from under $1 million to tens of millions to billions, depending upon the size of the firm.

    We focus on RIAs that custody assets at Schwab, Fidelity, TD and Pershing. For the purposes of this article, we do not focus any effort on calling RIAs who are affiliated with Independent BDs.

    We, generally, call on RIAs above $200 million with an average size of $2.5 billion. While many investment firms place an artificial limit of $1 billion and above, we do not because we understand that there are significant opportunities with RIAs below $1 billion. In some cases, a $600 million RIA will have a larger allocation to an asset class than a $2.4 billion RIA. We, therefore, strongly encourage sales professionals to call on RIAs in the $400M to $1B range.

    Currently, we have 1,052 RIAs that are qualified and use outside managers in our database.


    2. The RIA channel is vast. How do you recommend attacking the channel?

    First, you need to make sure you are calling on RIAs that use outside managers. Without that knowledge, you will have to do a ton of research work just trying to figure out who to call on, which is very time consuming.

    Once you have a list of qualified RIAs to call on, we segment the RIAs in two ways.

    First, we simply sort our list from the top to the bottom based on AUM, and then we go down the list. Our goal is to be in a sales cycle with each firm on our list and, over time, when you run the list, you should be able to know where you stand just by eyeballing the list. This is a great way to cover the RIA channel.

    [ tip/idea: create a custom field on the Account screen called “Product Name Sales Cycle” and include the key sales cycles. Ours are Client, Finals, Red Zone, Due Diligence, Relationship Stage, Long-Term Evaluation. This way, you can quickly run reports with just the stages you want to see.]

    The second way we segment is by metro area or city. We define a metro area based on the airport that you fly into, and there could be multiple cities within that metro area. So, you have all the RIAs in the Philadelphia metro area, and the goal, just like the AUM list, is to be in a sales cycle with each RIA in that metro area. Since we are in August of 2020 and still in a COVID world, travel is not happening. However, in the pre-COVID days, we would schedule a day in Philadelphia and call all the RIAs to schedule meetings. It’s a great way to segment and cover the RIAs.


    3. Do RIAs want salespeople to call on them?

    This is my favorite question, and we even dedicated a panel to this one question at our New York City Conference in September 2019.

    RIAs have very thin research staff members when compared to banks, BDs, consultants and State Pension Funds. The due diligence analysts at RIAs, thus, play many different roles beyond due diligence. On average, they spend only 20% of their time researching investment strategies. So, they do not have a lot of time to do research.

    As a result, RIAs count on investment sales professionals to bring them ideas. Most RIAs will tell you that they found out about a strategy because a salesperson called them or emailed them for a meeting. So, YES! RIAs want to be called on to discuss your investment strategy. Now, they cannot take 250 meetings a week, but they want to hear from you. In fact, they count on you calling them and introducing your strategy because they see you as an extension of their research team.


    4. Are RIA analysts as sophisticated as analysts in other channels?

    Yes, they are. To think of the RIA Channel as “retail” is a big mistake. In general, the due diligence analysts at RIAs are as sophisticated as any other group, if not more so, when it comes to understanding and picking managers to invest in. Most analysts are CFAs and have deep experience. Because they can invest in almost anything, they see and evaluate a lot of investment opportunities. This depth gets them in front of a lot of interesting ideas, further solidifying their sophistication.

    In any given city, there can be a lot of musical chairs between analysts at consultants, foundations, endowments, RIAs, Family Offices, etc. So, the analyst in the seat at an RIA could have just come from a consultant or an endowment. This just further proves the point that this is as institutional an approach to investing as at any other institution.


    5. Do RIAs invest in alternatives?

    Most RIAs will invest in alternatives. But to really understand their alternative investment approach, you need to consider their preferred investment vehicles. RIA firms will, in general, use mutual funds and separate accounts as their primary investment vehicles. They, absolutely, will use L.P.s and quarterly tender structures, but on a limited basis.

    Why mutual funds primarily? Because it is an easy way to run and manage their business. Schwab and Fidelity, with their robust backend technology, make it very easy for RIAs to trade and manage client portfolios. Non-mutual fund structures are inefficient and time-consuming to manage. So, unless they have a high need and desire to access the investment strategy, they will stick with mutual funds and ETFs.

    All that being said, RIAs frequently invest in illiquid and LP-type structures. So, if you market a product that is delivered in those vehicles, you should absolutely be calling on or building relationships with RIAs. In general, the larger the RIA, the more likely they will invest in illiquid structures.

    Many RIAs, like many other allocators, have used liquid alternatives as a convenient way to access alternative strategies that are housed in mutual funds or ETFs. The problem with liquid alts is that they have not performed well or according to their mandates, which has raised a lot of concern. That being said, if you have a liquid alt product, RIAs should be one of the main channels you target.


    6. Should I only call on RIAs that are over $1 billion in AUM?

    No. No. No. We believe the only artificial line is around $200 million, and even that can be risky.

    Many firms we speak with only call on RIAs above $1 billion for some unknown reason. RIAs between $200 million and $1 billion are extremely fruitful. Here’s why:

    • Many smaller RIAs have higher absolute allocations to certain asset classes versus RIAs that are $1 billion and above. So, the win is bigger at a $600M RIA than at a $2.4B RIA.


    • New RIAs are formed weekly, and, after they leave a wire house, it can take a few years to bring over all of their client assets. Thus, they appear to be small, but, in reality, they are growing rapidly. Many investment salespeople will avoid calling on them, but what we have found is that by calling them now and getting an initial allocation, you can grow with them as they grow.


    • The greatest thing about the RIA channel is that these are growing firms. Some of the most rapidly growing firms are those firms sub-$500 million in AUM. Build a relationship when they are small, and you will have them for life.

    So, yes, we strongly recommend calling on RIAs below $1 billion in AUM.


    7. Do I need a PM in RIA meetings?

    We have always felt that investors eventually want to meet the wizard, the one managing the money. So it’s not mandatory, but you will eventually want to get the PM on the phone. One of the greatest assets an RIA can have with their clients is to be able to say “Well, I just got off the phone with Susan, the lead PM on our small cap value strategy, and this is what she said about the market.” Access to a PM is a big deal for RIAs. So, if you have a PM who is willing to do calls, then this is a great use of time.

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