Originally posted on October 24, 2020
Last updated on June 1, 2022
The RIA Channel is one of the most dynamic channels to cover and call on for an investment sales professional. However, there are two problems that we face when selling to RIAs: The first is “Where do I begin?” and the second is “With approximately 13,500 RIAs, how can I find out who uses outside managers?”
So it's both a size and a qualification issue. Our firm, Dakota, has been calling to RIAs since 2006, and has raised over $6 billion from 362 RIAs and counting. Has it been easy? Not at all, but the work has been worth it.
In this article, I’m going to show you a good starting point for calling RIA firms that use outside managers. We have over 1,100 RIAs in our RIA Marketplace database, so this list represents about 10% of the total market of RIAs that use outside managers.
Most RIAs and their due diligence staff have limited time to research and meet with managers because they are asked to play many different roles, especially client-facing, revenue generating roles. However, today more than ever, RIA due diligence staff rely on salespeople to bring them investment ideas. They are always looking for new and interesting investment ideas.
It's an incredible conflict: analysts depend us on, but have limited time to meet with us.
What does this mean for us as outside managers? We have to keep calling on them, asking for meetings, adding value through short update emails, and constantly keeping our strategies in front of them. This is a dirty job, meaning it requires a lot of push on a daily basis. Most salespeople will not keep pushing, so if you keep pushing, you give yourself a great chance to win.
This is my favorite question, and we even dedicated a panel to this one question at our New York City Conference in September of 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.
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 extensive experience. Because they can invest in almost anything, they see and evaluate a lot of investment opportunities. This level of experience 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 that this is as institutional an approach to investing as at any other institution.
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.
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, however, 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.
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.
It should be noted that this is NOT a "best of list" because in our RIA Marketplace database we have approximately 1,100 RIAs who use outside managers, all of whom we love. This list just represents a starting point to begin to build your list in your CRM.
1. Diversified Trust Company
2. Homrich Berg Wealth Management
3. Callan IAG
4. Edge Capital Partners
5. Signature FD
7. Frontier Asset Management
10. Arcus Capital Partners, LLC
1. SCS Financial Services
3. The Colony Group
4. Ballentine Partners
5. Ropes Wealth Advisors
6. Twin Focus Capital Partners
7. Lake Street Advisors
8. RINET Company
9. Daintree Advisors
10. O’Brien Wealth Partners
1. CIBC Private Wealth
2. William Blair
3. Mesirow Financial
4. Cresset Wealth Advisors
5. Springtide Partners
6. Crescent Grove Advisors
7. Strategic Wealth Partners LLC
8. ArchPoint Investors
9. Vantage Financial Partners
10. Promus Capital
1. First Command Financial Planning
2. Avantax Wealth Management
3. Tolleson Private Wealth Management
4. True North Advisors, Inc.
5. Crow Holdings Capital
6. Lee Financial
7. View Capital
8. Diesslin Group Inc.
9. Annandale Capital, LLC
10. HFS Wealth Management
1. Innovest Portfolio Solutions
2. Strategic Capital Advisers Inc.
3. AMG National Trust Bank
4. Crestone Capital Advisors LLC
5. IWP Wealth Management
6. Michaud Capital Management
7. IFAM Capital Advisors
8. GHP Investment Advisors
9. BSW Wealth Partners
10. Schaefer Financial Management, Inc.
1. Sageview Advisory Group
2. Beacon Pointe Advisors
3. Bel Air Investment Advisors
4. Signature Estate and Investment
5. ICG Advisors
6. Evoke Wealth
7. EP Wealth Advisors
8. Camden Capital Management LLC
9. Westmount Asset Management
10. Mozaic LLC
1. Bessemer Trust
2. Brown Advisory
3. Silvercrest Asset Management
4. Cerity Partners
5. Rockefeller Capital Management
6. BBR Partners LLC
7. Wealthspire Advisors
8. TAG Associates LLC
9. Manchester Capital Management LLC
10. New Providence Asset Management LLC
1. Hirtle Callaghan & Co.
2. myCIO Wealth Partners
3. Mill Creek Capital Advisors, LLC
4. Pitcairn Trust Company
5. Zeke Capital Advisors
6. Forbes Family Trust
7. Drexel Morgan Capital Advisors
8. Westscott Financial Advisory Group Inc.
9. Radnor Financial Advisors Inc.
10. Legacy Advisors
1. Iconiq Capital
2. Hall Capital Partners
3. Makena Capital Management
4. Northside Capital Management
5. Wetherby Asset Management
6. Bordeaux Wealth Advisors
7. EPIQ Capital Group
8. Robertson Stephens Wealth Management
9. Bitterroot Capital Advisors, LLC
10. Gordian Wealth Advisors
1. Mason Companies
2. Clark Enterprises
3. Cassaday & Company, Inc
4. Sullivan Bruyette Speros & Blayney (SBSB)
5. Keel Point
7. Dyson Capital Advisors
8. SOL Capital Management Company
9. Lynx Investment Advisory LLC
10. Bogart Wealth Management
If you’re in the process of researching a CRM for your investment firm, chances are you already...Read Now
The following is a list of the top institutional investor databases for investment sales...Read Now
As an investment salesperson, adding meetings to your calendar, Zoom, Salesforce, and other...Read Now
925 West Lancaster Ave
Bryn Mawr, PA 19010
Tel: (610) 642-1481