Brooke’s Note: Lyman Howard recently wrote a column about all the decisions he made about technology in forming his newborn RIA, Point Bonita Wealth Advisors LLC of San Francisco. See: How I picked technology — from Black Diamond-in-SSG to Dudamobile — to use in my startup RIA. His style, disarming transparency, smarts and humor made me hungry to hear much more about his efforts and thinking that led him to this juncture. Lyman was game. I think he has produced a column here that is long overdue in the RIA industry — a start-up story delivered from a laptop in the start-up trenches with mortars whizzing by. Please give him encouragement for this effort that consumed part of his President’s Day weekend. I’m hopeful we can convince him to continue sending missives as he reaches various milestones and speed bumps. I promise it’s stuff we can all relate to.

At some point, having collected all of the advice, analyzed and planned, you have to actually step out of the nest, flap your wings, and hope that you’ll fly.

I am talking, of course, about starting up an RIA the hard way. My business partner and I are eight months into our creation of an independent, state-registered firm and find ourselves in the crucial growth period that will make or break us. We started up without an existing client base and so have to go about creating one of our very own. We feel great about the marketplace, that there is a need for our advisory services. Still, progress takes time and lots of effort. They say everything worthwhile does, however (don’t they?).

Chewed up, spit out

Globalization and technology finally caught up with me and my role as a transactional middle-man in the bond markets, just as they did to the stock jockeys, the research analysts, and many industries you could easily name from today’s headlines before me.

The goal of leaving the securities business to join a RIA fueled my progress through the chartered financial analyst program, the certified financial planner exam, and plenty of deliberate networking. See: Why you should pay attention to proliferating advisor credentials.

As it turns out, my very close friend since childhood, Jim Mitchell, was coming to the same conclusions I was about helping regular people, having a balanced life ourselves, and sharing our financial markets experience with justifiably concerned fellow citizens. We wanted to be in complete control of the client experience, and we thought that starting an RIA firm together would be the best way to achieve that. See: How a formerly homeless Vietnam veteran became a big-time RIA.

One does not simply make such as drastic change, however, without careful planning and lots of thought. It would have been more comfortable to pick up and move an existing “book” of clients from another firm, but we weren’t in that situation. It would have been more conservative to gain experience at a large RIA firm first, but they weren’t exactly hiring in the wake of the financial collapse. Better still would have been to win the lottery and then proceed with plenty of breathing room, true?

Three years of sucking it up

Winning the lottery doesn’t happen too often, so beginning in 2011 Jim and I began talking about what it would take to get things started at our own company. We inventoried the drawbacks and our concerns:

1. It would take two to three years to build up the revenue to begin paying ourselves a salary, meaning we would each go through six-figure amounts of savings.

2. The savings drain and the slow and sometimes invisible results would test our families’ and our own resolve throughout the process.

3. As newcomers, we would face unfamiliarity and lack of a track record at the same time, a hurdle when convincing new clients to come on board. See: 6 reasons why RIAS can’t — or don’t want to — have track records.

4. Without employer health benefits and retirement savings plans, we’d be putting ourselves and our families at increased risk of financial misfortune.

Off the diving board

I wish I could say that these issues have gone away, but they have not. They still rank as critical challenges today, and still create lots of unwanted daily stress. We somehow managed to be motivated enough to proceed, anyway. Here is how:

Much of the impetus to launch came from a fantastic panel discussion at the local CFA Society chapter wherein a handful of RIA proprietors answered audience questions and shared their experiences starting their own firms. I diligently wrote down the practical pointers and useful details they so generously shared that day. The panel event armed us with new expectations, some practical data and a lot of positive reinforcement. See: CFA Institute chief minces no words about blaming and shaming bad behavior.

Based on that event and a wonderful article in the November 2008 issue of CFA magazine about starting up an independent RIA firm, Jim and I produced a business plan and got some feedback and a few nods from friends in the business. Multiple edits later, following some tweaking and the addition of deeper detail, our spouses became more willing to give us the green light. Let’s face it, without support of the immediate family, something like this just doesn’t happen at all.

By several months later much of the groundwork was laid, registration paperwork prepped, and I was ready to quit my securities business job to start full time at our new firm. Even though none of the trepidation and concern had abated, there was no turning back. The decision had been made months earlier, so quitting was just another step in the process at that point. See: Veteran Merrill Lynch manager leaves seven registrations on the table to return to his pure-RIA roots.

Firsthand experience

So, from a business perspective, how do we meet the challenges today, now that we are up and operating? How do we execute a marketing plan to build our business while keeping our costs at a manageable level? Here is what we think is some key advice to others:

Use the latest technology
We get lots of mileage from web-based cloud programs. They allow for little or no set-up costs thanks to video tutorials and call center assistance, and typically allow monthly commitments, rather than yearly. No additional hardware or square footage is required, and technology is doing amazing things for us: forwarding our phones (Line2 at $14.95 per month), integrating our customer relationship management system with financial planning and portfolio software (Redtail Technology, MoneyGuidePro, Black Diamond all together cost us approximately $500 per month), and allowing us to easily produce and share reports (thanks, Nitro PDF Pro for $120).

Social media has taken over for snail mail and other postal/printing costs, so we pay very little there (sorry, USPS). With Zipcar, we have a “company car” as needed for out and back trips to the suburbs, saving us a bundle in downtown parking fees. Because our company website is our main calling card, we are blogging, adding video, and making it mobile-ready to keep a professional and cutting edge look and feel (expect to pay at the very least $2,000 to get a properly designed and functional site). See: As advisors flunk social media 101, CRM makers are starting to pick up the slack.

Maximize networking opportunities
Building a quality network for us means attending receptions, volunteering around town, buying some lunches, and having many chats over a beer or coffee during the week. Jim and I go to alumni events from grade school, high school and college. My face is getting known at the FPA chapter, local CFA Society, an estate planning group, and several LinkedIn discussion forums. See: How to use LinkedIn to win more business in your niche.

I am exercising some weekends in a running club, working for the America’s Cup events in San Francisco, and watching for opportunities to share educational tips on the Internet where appropriate. Jim is getting to know even more potential customers and referral sources through his children’s school, his interest in fine wines and sports, and his many industry contacts. See: 10 indispensable questions for advisors to ask — and 10 to answer — at networking events.

You might be surprised to hear that the most enthusiastic and supportive bunch we have found to be our fellow independent RIAs and financial advisors, since they have been in our shoes. We have been floored by their willingness to share not only advice, but sometimes even business opportunities.

Rely on friends and family
Thanks to friends and family, we got great deals on video production, website design, our company logo, tax preparation, entity filings and office rent. Our families, of course, bear the burden of generating income as we gain a foothold. Friends and family together have been our best referral source and patient clients themselves. We thankfully have their personal networks to lean on, since ours are only so broad.

Who we are, what we do

Keep repeating the message: We hear about the value of our profession all the time, whereas our potential clients do not. See: What is the value proposition of a financial advisor — and how is a budding RIA culture upping the ante?. Therefore, we need to constantly convey how we help people in simple and understandable terms. We attempt to include this in almost every blog post and newsletter. We also drafted an elevator pitch for the networking events to ensure we don’t overlook it there, either. See: What exactly is an RIA?.

There are multiple levels to address:

- Financial advisors can save people time and money guiding them to smart choices about major financial issues and life decisions, including investments.

- Independent advisors, by charging explicitly for advice and being held to a fiduciary standard, make it clear that a customer’s interests are being put first in the relationship. See: One-Man Think Tank: The fiduciary standard may sink Wall Street’s advisors-on-yachts. Should we care?.

Our own firm’s unique value originates with our lifelong friendship, which provides an unparalleled team approach. We translate our personal institutional level experience and discipline into helping individuals and families develop and manage their personal investment process.

In conclusion, a good analogy to our challenge might be a marathon. We are at the beginning of the event, sprinting to get clear of the starting gaggle and achieve forward momentum. We must keep up this dash long enough to gain our own space and become established in the field. If we do that, it will just be a matter of picking our route and our pace from that point onward. We know others who have done it before, so there is certainly hope for us. Now, any idea how far it is to the next water station?

Lyman Howard works as half of the team at Point Bonita Wealth Advisors LLC of San Francisco. He is a Bay Area native and lives there with his family. Following eight years in the Navy and 12 as an institutional bond broker, he shifted gears and partnered with a lifelong friend to start a state-registered advisory firm. He would probably tell you that blogging is one of the more enjoyable parts of the job.