Finance
RIA Industry
How registered investment advisors are structured, regulated, and valued.
Updated 18 min ago
The registered investment advisor (RIA) industry is the independent, fiduciary side of US wealth management. This page is the high-level orientation; deeper topics get their own pages and link back here.
What an RIA is
A firm registered under the Investment Advisers Act of 1940 that provides personalized investment advice for a fee. Key distinctions vs. other channels:
| Channel | Regulator | Standard | Compensation |
|---|---|---|---|
| RIA | SEC (>$100M AUM) or state | Fiduciary | Fee-only or fee-based |
| Broker-dealer | FINRA / SEC | Reg BI | Commission + fees |
| Bank trust | OCC / state | Fiduciary | Asset-based + trust fees |
| Insurance | State | Suitability | Commission |
Industry structure
- Solo / lifestyle practices — 1-3 advisors, $50M-$500M AUM. Most firms by count.
- Ensemble firms — $500M-$5B AUM, multiple partners, dedicated ops.
- Enterprise RIAs — $5B+ AUM, often private-equity backed, multi-state.
- Aggregators / consolidators — roll up smaller firms; examples include Focus Financial, Hightower, Mercer Advisors, Mariner.
- TAMPs / outsourced platforms — Envestnet, AssetMark, Orion: outsource investment management and operations to smaller RIAs.
Common fee structures
- AUM-based — ~1.0% on first $1M, declining tiers above. Industry default.
- Flat fee / retainer — flat dollar amount per year, common for HNW or DIY-friendly.
- Hourly / project — niche, growing among Gen-X / millennial-focused firms.
- Subscription — flat monthly fee, emerging model (XY Planning Network).
Valuation rules of thumb
Practice values typically expressed as a multiple of either:
- Revenue — 2.0x-3.0x trailing 12-month revenue is the common range; higher for scale, recurring revenue, and growth.
- EBITDA — 6x-10x for mature firms; 10x+ for large enterprise RIAs with PE interest.
Quality factors that move the multiple:
- Recurring revenue % — higher = better.
- Client retention — 95%+ is healthy.
- Average client size & age — older client base = transition risk discount.
- Advisor concentration — one rainmaker = key-person discount.
- Service model documentation — replicable = higher multiple.
Where to go from here
- Reporting and billing operations → coming soon.
- Valuation models with comps → coming soon.
- Compliance and ADV filings → coming soon.