Why RIAs?

This post is designed for those of you who are new to the RIA Channel or who want some reinforcement on “Why RIAs?”. The RIA Channel can mean a lot of different things to a lot of different people, so I’ll explain how we view the RIA Channel.


Many firms throw around a lot of large numbers as it relates to the RIA Channel and the number of RIA firms, however the only number that matters is the number of RIAs that use outside, active managers to create portfolios.


There are roughly 13,500 registered investment advisors in the SEC’s publicly available database. However, it’s a very small percentage of those 13,500 that allocate to outside, active managers, which I’m assuming you are one if you are reading this.


In our database of RIAs, for instance, we have 1,009 that we call on that we know use outside managers over $200 million in assets. It has taken us 13 years to curate our list, so it is time-consuming trying to figure out who to call on.


For definition purposes, we focus on RIAs above $200m that custody at Schwab, Fidelity, TD and Pershing. 


The RIA Channel is growing rapidly as many FA’s from Morgan Stanley, UBS and Merrill Lynch are leaving to start their own firms and achieve independence. This trend will only continue which is why the RIA Channel is such an important Channel. It’s comprised of over $1.2 trillion in assets.


Contrary to what many believe, RIAs use a variety of product structures, even though mutual funds are their core product structure. So if you have a separate account, an LP or an interval fund that houses your strategy, you should be calling on the RIA Channel.


How important is the RIA channel to your growth efforts? It’s critically important if you manage a mutual fund and/or manage long only equities or fixed income. Since the RIA  Channel is growing so quickly and because they are more and more willing to use different product structures , it’s becoming more and more important for hedge fund managers and private equity, private credit and private real estate managers.


There are many ways to approach the channel. Having raised over $5 billion in the RIA channel to-date and with over 360 RIA clients, we approach the RIAs in this fashion:


First, you need is a good data set. Prequin, Discovery Data and RIA Database are very good databases, but their data is raw and it requires the sales person to research who to call on. We recently created our own database of RIAs called Draft Data and it is 100% qualified that they use outside managers, so there is no extra research work required. Just go to a Metro Area, pick a firm and start scheduling meetings.


The second thing you need is a good strategic approach. We use a “City Scheduling” approach, which means we go to a Metro Area, Boston for instance, and go to each qualified RIA and ask for a meeting. We always have 7-10 cities on the calendar that we are scheduling for. Do this for a year and you can make a significant dent in the RIA Channel.


Third, you need a place to track all this information. Find a CRM that you like, take the data you have from your dataset, enter it in your CRM and then track all your activity. Create lists and pipeline reports so you easily track your progress and follow up. (The good news is that if you use Draft Data all of this is done for you).


In closing, I highly recommend spending time building relationships with RIAs. It’s been a successful channel for us as RIAs are smart, sophisticated investors who are always looking for new and interesting investment ideas. They look for sales professionals to deliver them good ideas, so don’t ever think they don’t want to meet with you!


Feel free to email me at gcostin@dakotafunds.com or call me at 610-764-0539. I’d be happy to answer any RIA questions.

Did you know?

The RIA Channel is growing rapidly as many FA’s from Morgan Stanley, UBS and Merrill Lynch are leaving to start their own firms and achieve independence. This trend will only continue which is why the RIA Channel is such an important Channel. It’s comprised of over $1.2 trillion in assets.