Can You Go Independent With a Small Book? What the Minimums Actually Are

There is a question advisors ask us quietly, usually near the end of a first call, after they have described their practice in a slightly apologetic tone.

Am I even big enough for anyone to want me?

It is the most common reason advisors never explore their options, and the reason least often said out loud, because it sounds like an admission. So it sits unexamined for years while the advisor assumes a floor exists somewhere above them.

Here is the short version. The floor is far lower than you think, which means permission was never your problem. But the answer to the question you are actually asking is still probably not yet, and for reasons that have nothing to do with minimums.

The minimums, honestly

There is no regulatory minimum to start an advisory firm. Assets determine where you register, generally with the SEC above $100 million of regulatory assets under management and with your state below that, but they do not determine whether you may register at all.

Custody is the layer most advisors get wrong. Some custodians impose no asset minimum for custody whatsoever, and platforms built for smaller practices are explicitly designed for firms starting well under $30 million. Others do have thresholds, commonly around $50 million to $100 million, and at least one of the largest generally works with firms at $100 million and up. The spread across the market is close to an order of magnitude, which is why a blanket number is always wrong.

The independent broker-dealer lane gates on production rather than assets, and those floors are lower still. Published recruiting requirements at smaller firms run from roughly $10,000 to $50,000 of annual gross dealer concession. Several of the largest state that they do not impose complicated production thresholds at all. These are not aspirational figures; they are the stated minimums of firms actively recruiting.

The number that stops people is the wrong number

One correction is worth the price of this whole piece.

Advisors tell us, with confidence and usually secondhand, that the largest RIA custodian requires several hundred million in assets. The figure is real. It belongs to that firm's client referral program, where the custodian routes its own retail clients to participating advisory firms, and that threshold was raised to $500 million from $250 million.

Custody is a different service, and that custodian states no asset minimum for it. A new firm is not applying to the referral program. It is opening a custodial account, and those are separate doors with separate rules.

We have watched advisors abandon the idea entirely on the strength of that confusion. If you are carrying that number around, it is worth knowing which one you were quoted.

What a first year actually costs

Across market estimates, starting an RIA clusters around $25,000, with a usual range of roughly $10,000 to $50,000 depending on your state, your structure and how much you do yourself. A conservative first-year budget for a solo practice at $20 million to $40 million lands around $23,000 to $29,000: compliance consulting for a single-state registration typically starting near $8,000, errors and omissions plus cyber cover in the region of $6,000, a CRM near $1,200, planning software near $2,100, entity formation of a few hundred dollars, and filing fees that are nominal by comparison.

Tens of thousands, not hundreds of thousands. Most advisors assume the latter, and that assumption is doing a lot of quiet work.

So the arithmetic looks irresistible, and that is the trap

Take a practice with $40 million producing about $320,000 of revenue. In a captive channel at a 40 percent effective payout, that advisor takes home $128,000, with benefits on top and no operating cost to carry. The same revenue in a solo practice carrying a $29,000 budget leaves far more, and even discounting heavily for the realities of ownership the figure lands well above $200,000.

That comparison is true, and it is the one every article about independence stops at. It is also the reason small practices move too early.

What the comparison measures is the payout on day one. What it misses is everything that happens in year three.

Smaller RIAs have been losing market share to larger firms as the channel consolidates. Practices commonly stall between $100 million and $300 million, growing on market appreciation rather than organic wins. Operating margins at smaller RIAs reached historic lows in 2024 as expenses rose and revenue per advisor fell. The phrase the industry uses for the endpoint, unkindly but not inaccurately, is the small RIA poverty trap: a firm that is profitable enough to survive, too small to hire well, and too busy to grow.

The payout problem is solved the day you leave. The growth problem arrives eighteen months later, and it is the harder one.

The sequence we actually recommend

This is where our advice parts company with the internet's. The forums are full of small advisors talking each other into launching an RIA. As transition consultants, that is rarely what we would tell the same advisor.

Early, with a small book: stay where you are. Your constraint at this stage is growth, not payout. The grid is expensive and the platform is genuinely doing work you cannot yet replicate, including the brand that gets you in the first meeting. Build the book. Take the training and the designations on the firm's budget. An advisor who leaves at $20 million to save on payout has optimized the smaller number and kept the bigger problem.

Next, when the book is real and the note is clear: an independent broker-dealer. This is the step most often skipped and it is usually the right one. You get ownership of the practice and a payout in a different universe from a captive grid, while someone else still carries compliance, technology and supervision. That bundled support is worth more per dollar of revenue at $40 million than it is at $400 million, which is precisely backwards from how advisors tend to think about it. Timing matters here too: leaving before a forgivable note has amortized triggers repayment, which is its own analysis.

Later, when the assets carry the overhead: your own RIA. Convert when the operating cost is a small fraction of revenue rather than a meaningful one, and when you are close enough to monetizing that the valuation difference matters. Practices under a broker-dealer umbrella trade on revenue multiples; standalone RIA firms trade on EBITDA multiples several times higher. That premium is realized when you sell, not every year you hold it. Carrying two decades of RIA overhead to capture a multiple you will not use until the end is often a bad trade, and it is a trade a lot of advisors make without noticing they made it.

There are real exceptions. A practice that is already fee-based, already has infrastructure, and has an owner who genuinely wants to run a company can go straight to an RIA and do well. Some advisors are genuinely handcuffed where they are and the cost of staying exceeds the cost of moving early. The point is not that the sequence is a law. It is that the sequence is a question, and almost nobody asks it before picking a destination.

When the answer is simply no

Some practices should not move at all right now, and a piece that never says so is a brochure.

If your revenue is heavily transactional rather than recurring, the economics are harder and what you would sell later is worth less. If your growth genuinely comes from firm-generated referrals or a bank channel that does not travel with you, you are buying something real with your payout. If you are three years from retiring, the setup cost and disruption will not amortize. If a forgivable note is still amortizing, the repayment usually settles the question by itself.

And if you do not actually want to run a business, that is a complete answer. Independence hands you an operating company. Plenty of excellent advisors want nothing to do with one, and we wrote the case for staying in when does it make sense to stay at my wirehouse.

What to do with this

Stop treating the minimum as the obstacle. It is usually imaginary, attached to a service you were not applying for, or specific to one firm among many.

Do this instead. Write down your trailing twelve months and your effective payout after every adjustment, not the headline tier. Subtract a realistic operating budget. Then ask the question the arithmetic does not answer: in three years, at this size, where does my next twenty clients come from, and which structure makes that easier rather than harder.

That is the question that should pick your destination, and it is different for every practice, which is why we do not publish a shortlist. The four structural paths out of an employee channel are laid out in going independent as a financial advisor; the twelve questions that separate the platforms are in how to choose an independent RIA platform; what each layer costs is priced in what an independent RIA platform actually costs; and the point at which a broker-dealer starts costing more than it saves is in the IBD ceiling.

If you want the sequence run against your actual book, production and note schedule, including the cases where we tell an advisor to stay exactly where they are, that is what our RIA search and launch engagement does. Every SEC-registered RIA is mapped state by state from Form ADV in top RIAs by state, and a great many of them are smaller than you would guess.

The sequencing argument, and the valuation data that settles it, is taken further in the order most advisors get wrong.