This material is for informational purposes only and is intended for licensed financial

professionals. It does not constitute legal, tax, or compliance advice, and it does not

account for the specifics of any particular firm or advisor. The points below are

general characteristics of each model, not guarantees.

W2 vs 1099

W2 Employment

Advantages:

• Stability with consistent income and more predictable compensation

• Employer-provided benefits (health insurance, retirement plans)

• Employer handles tax withholdings and pays portion of Medicare/Social Security taxes

• Training and professional development provided by employer

• Compliance and regulatory support from the firm

• Team environment fostering collaboration

• Perceived greater job and income stability compared to independent models

Disadvantages:

• Limited autonomy in business decisions

• Fixed compensation with potential income ceiling

• Less control over practice management and client relationships

• Limited tax deduction opportunities compared to independent contractors

• May be required to sell proprietary products

1099 Independent Contractor

Advantages:

• Entrepreneurial freedom and autonomy over business decisions

• Higher income potential with no preset earnings ceiling

• Business expense deductions (home office, marketing, travel, etc.)

• Flexibility in structuring practice and client relationships

• Ability to build equity in your own business

• Freedom to choose products and services based on client needs rather than firm

mandates

• Greater work schedule flexibility

Disadvantages:

• Income variability and less predictable cash flow

• Responsible for all business expenses (office space, technology, staff)

• Self-employment tax burden (paying both employer and employee portions)

• No employer-provided benefits; must secure independently

• Responsible for compliance and regulatory requirements (to the extent not covered by

your BD/RIA)

• Less structured support system

• Greater business risk and liability

RIA vs Hybrid RIA Models

RIA

Advantages:

• Full fiduciary obligation aligns advisor–client interests

• Fee transparency simplifies client communication

• Complete control over investment options and service model

• Ability to keep the full advisory fee at the firm level, subject to your own

overhead costs

• Independence from broker-dealer constraints

• Growing market acceptance and client preference for fiduciary models

• Potential for higher practice valuation at exit

Disadvantages:

• Limited ability to offer commission-based products

• Full regulatory and compliance responsibility, which can be a major operational

burden

• Higher startup costs plus ongoing expenses

• Need to establish and maintain your own technology infrastructure

• Requires direct SEC/state regulatory interaction

• Potentially complex transition of existing commission-based assets

• May require outsourcing for non-advisory and specialized services

Hybrid RIA

Advantages:

• Flexibility to offer both fee and commission-based products

• Retain access to alternative investments and insurance products

• Ability to serve diverse client needs with various compensation structures

• Potential for higher earnings, depending on product mix and payout structure

• Can maintain existing commission-based client relationships during transition

• Has been one of the faster-growing affiliation models over the past decade,

according to industry research

• Broker-dealer support for compliance and operations

Disadvantages:

• Dual regulatory oversight (SEC/FINRA)

• More complex compliance requirements

• Potential conflicts between fiduciary and suitability standards

• Higher operational complexity managing two business models

• May face broker-dealer restrictions on certain RIA activities

• Potentially confusing for clients to understand dual roles

• Additional licensing and continuing education requirements

Regional vs Independent BD

Regional Firms

Advantages:

• More personalized, high-touch service than some national wirehouses

• Often stronger local market knowledge and community presence

• Typically less bureaucracy than larger wirehouses

• May offer higher payout rates than national wirehouses

• More accessible senior management

• Often more flexible in accommodating advisor business models

• Potentially stronger local brand recognition with clients

Disadvantages:

• Limited geographic footprint may restrict expansion

• Potentially fewer resources than national firms

• May lack the most advanced technology compared to larger firms

• Generally smaller research departments

• Potentially less competitive in recruiting packages

• May have more limited product offerings

• Less name recognition outside local markets

Independent Broker-Dealers (IBDs)

Advantages:

• Higher payout rates than wirehouses or many regional firms

• Freedom to structure practice according to personal vision

• Access to wide array of products and services without heavy proprietary pressures

• Ability to build equity in your own business

• Supportive framework with compliance assistance

• Established technology platforms and operational support

• Community of peers for sharing best practices

Disadvantages:

• Responsible for more business expenses than employee models

• Less brand recognition compared to large wirehouses

• Potential challenges in client transition during move

• Must handle more administrative responsibilities at the practice level

• Ongoing FINRA oversight and broker-dealer compliance requirements

• Less structured marketing support compared to major wirehouses

• May face restrictions on outside business activities

Solo RIA vs RIA Tuck-In Options

Solo RIA

Advantages:

• Full autonomy and control over all business decisions

• Full ownership of firm equity and profits (unless you choose to sell or bring in

partners)

• Complete freedom in selecting custodian, technology, and service providers

• Build brand and culture from scratch to match your vision

• No revenue sharing with a parent organization

• Flexibility to adapt quickly to market changes or client needs

• Maximum potential long-term equity value, assuming you successfully build and grow

the firm

Disadvantages:

• Higher startup costs and ongoing operational expenses

• Full responsibility for compliance, technology, and operations

• Business development falls entirely on you

• Potentially difficult transition without established infrastructure

• Succession planning challenges if there are no partners

• Need for business management skills beyond advisory expertise

• Responsible for all hiring and personnel management

RIA Tuck-In Options

Advantages:

• Established infrastructure and operational support

• Reduced startup costs and faster time to launch

• Built-in compliance, technology, and back-office support

• Potential for client referrals within the existing firm

• Possible access to more sophisticated investment offerings

• Marketing and business development support

• Clear succession planning pathway

Disadvantages:

• Less autonomy than a solo RIA model

• Revenue sharing reduces take-home economics

• Limited control over the strategic direction of the firm

• May face restrictions on investment offerings or business practices

• Less control over branding and marketing

• Potential cultural misalignment with the parent organization

• Exit options may be more restricted and governed by firm agreements

Other Considerations

Client Transition Strategy

• Develop a clear communication plan for existing clients

• Understand regulatory restrictions on soliciting clients

• Prepare a detailed comparison of service models and benefits

• Create an FAQ document addressing common client concerns

• Consider timing of announcements and transfers

• Establish a realistic timeline for complete transition

• Prepare for potential pushback from former employer

• Assume some client attrition during any move and model the financial impact

Financial Planning

• Calculate realistic transition costs and runway needed

• Consider potential for temporary revenue disruption

• Evaluate recruiting deals and their long-term economics

• Understand tax implications of different entity structures

• Plan for technology investment and ongoing expenses

• Consider E&O insurance costs and requirements

• Account for compliance and registration expenses

• Stress-test your plan under slower-than-expected client transition and lower market

returns

Legal and Compliance

• Review employment contracts for restrictive covenants

• Understand Protocol for Broker Recruiting applicability

• Prepare for registration and licensing requirements

• Establish a compliance framework appropriate to your chosen model

• Secure necessary insurance coverages

• Review client agreements and needed documentation

• Consider professional legal and compliance assistance for the transition