The author argues that raising capital from RIAs requires deep insight into their business model, a tailored approach, and a focus on building trust over time.

The following article examines how those with investment propositions, such as private equity, should interact with RIAs. The article comes from Abbas Hashmi (more on the author below). The usual editorial disclaimers apply to views of guest writers. Email tom.burroughes@wealthbriefing.com and amanda.clearviewpublishing.com if you want to respond.
 

This represents an untapped opportunity for the fund manager, private equity firm, or investment practitioner to acquire capital from Registered Investment Advisors. This is demonstrated in a recent analysis by the Investment Adviser Association and COMPLY: more than 15,000 RIAs manage an astonishing $128.4 trillion in regulatory assets under management and thus offer excellent access to high net worth individuals and institutional investors.

However, this potential is often lost due to misaligned strategies and a need to understand RIAs' operational dynamics. RIAs pride themselves on their client-centric fiduciary model, which demands precision and attention to relationship-building. Mistakes can be very costly – not just in terms of missed opportunities but also reputation damage.

The following is a detailed look at common mistakes fundraisers make when working with RIAs and some actionable ways to correct these problems.

1. Not understanding the RIA business model
RIAs are under a legal fiduciary standard to act in the client's best interests. At all costs, they will put the customer's goals above their own and be careful before offering any products or strategies that would compromise trust.

Best Practice: Position your message in a way that resonates with the RIA's priorities. If the RIA focuses on tech professionals and younger households, tailor high-growth alternative opportunities that better align with their area of interest and expertise. Explain how your offering helps them meet their fiduciary duty and serve the next generation of investors.

2. Bombarding RIAs with too much complexity in jargon and data
Despite RIAs' extensive expertise, overwhelming them with convoluted presentations, intricate terminology, and excessively detailed information may lead to confusion or disengagement.

Best practice: Focus your presentation on key takeaways. Use visuals, clear charts, and relevant case studies to present your value proposition. For example, show how a $1 million investment in high-growth alternatives can be transformed into predictable income over five years with risk-adjusted returns to meet the preferences of tech-oriented clients.

3. Not establishing credibility
RIAs are very protective of their clients and, for that matter, their reputation. Unless third-party validation or track record precedes them, they will not engage.

Best Practice: Lead with credibility. Share case studies from past success stories in the tech sector or with younger investors. Showcase your industry certifications and provide third-party validation, such as testimonials from tech entrepreneurs or Millennial investors. Being transparent about your track record, including successes and lessons learned, builds trust.

4. Assuming a one-size-fits-all approach
RIAs serve many clients, from retirees and business owners to tech entrepreneurs and philanthropists. A generic pitch or product offering rarely resonates.

Best practice: In advance, do your homework on the RIA's client demographics and investment focus. Position your offering to meet the needs of tech professionals and younger households, such as ESG-focused strategies, innovative tech investments, or multi-generational wealth planning solutions that appeal to next-gen investors.

5. Not recognizing the value of the relationship
Most fundraisers position the RIAs as transactional conduits rather than building trusted, long-term relationships. This can be a turn-off for RIAs who cherish trust and partnership.

Best practice: Nurture relationships through frequent interaction. Offer value through thought leadership programs such as white papers on emerging technology trends, educational seminars on alternative investments, or practical market insights relevant to the younger investor. Personalize your interactions by remembering key information about the RIA business and its tech-savvy clients.

Conclusion
Raising capital from RIAs requires deep insight into their business model, a tailored approach, and a focus on building trust over time. By avoiding these common mistakes and implementing client-centric strategies, fundraisers can unlock one of the most powerful capital-raising channels in the investment industry.

Remember, it is not just the fund documents and pitch decks that will make financial advisors recommend your offering. One key ingredient many fundraisers need to provide is familiarity with the product. This familiarity is achieved through regular training of the RIA staff, partnering on events, and supplying them with marketing and educational materials, including videos. In this way, you can position yourself as a valuable resource and regularly bring new concepts tailored explicitly for technology professionals and younger families to their attention.

More recent data from Fidelity's 2023 RIA Benchmarking Study evidences the value of capturing younger investors early. The study showed that three out of four Gen Y and Z investors will likely stay with their advisors, and about two want to consolidate more assets. This underscores the potential for RIAs focusing on tech professionals and younger households to leverage high-growth alternative opportunities that align with their clients' interests and expertise.

By adapting your approach to serve the evolving needs of RIAs serving tech-savvy and younger clientele, you can position yourself for success in this lucrative capital-raising channel. Building familiarity and trust via ongoing education and support is the linchpin to unlocking the potential of these 15,000 RIAs and their $128.4 trillion in assets under management.

About the author
Abbas Hashmi specializes in capital raising strategy focused on HNW individuals, family offices, and wealth management. With a background at Goldman Sachs Asset & Wealth Management in New York and leading AIG’s HNW business launch in the Middle East, Hashmi advocates the use of AI advocate and leveraging technology, data analytics, behavioral finance, and digital innovation to streamline capital raising, particularly for introverted capital raisers and founders.