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If you’re a financial professional with a passion for helping individuals manage their assets and providing financial guidance, starting your own registered investment advisor firm might be the right path for you. Forming your own registered investment advisor allows you to create a thriving practice that operates on your terms and prioritizes your clients’ best interests. Let’s delve into the essential steps and considerations for starting your own RIA and thriving in this dynamic field.
What do I need to know about registered investment advisors and investment advisor representatives?
Before we dive into the nitty-gritty, let’s clarify two key terms: registered investment advisor (RIA) and investment adviser representative (IAR). An RIA is a legal entity (e.g., an LLC, corporation, etc.) authorized by the Securities and Exchange Commission (SEC) or a state securities regulator to offer advisory services for a fee. On the other hand, an IAR is an individual who works for an RIA, who has met the licensing requirements to provide investment advice. While these terms might seem similar, they bear important distinctions that shape the landscape of financial advising.
How do I start?
As all IARs must be affiliated with an RIA in order to give investment advice, getting your RIA firm registered is the first step.
Form ADV
The SEC and all state regulators require prospective RIAs to file a Form ADV. This multi-part document is the first thing regulators will look at when considering an RIA application, and it is carefully scrutinized. Among other requirements, applicants are expected to clearly and honestly answer questions related to what types of services their RIA will offer, what types of investments their RIA will manage, and whether any prospective IARs affiliated with the RIA have negative criminal, civil, or regulatory histories. As part of their ADV filing, applicants are also expected to create a firm brochure, describing in plain English the services which the firm will offer and whether the firm has any potential conflicts of interest, among other things. Applicants will be expected to respond to regulator requests throughout the application process, and they will also need to be prepared to submit other documents for the regulator’s consideration, such as any agreements to be signed by the prospective firm’s clients
Where do I file?
Where you file your ADV depends largely on the amount of assets you plan on managing, how many clients you will have, and where your clients live. While other considerations may be relevant, smaller, newer firms are typically regulated by the state in which they conduct business, while larger firms are typically regulated by the SEC. Additionally, many small or mid-sized firms may need to register in more than one state — depending upon how many customers they have and where those customers live.
How do I register as an IAR?
You cannot register as an IAR without being affiliated with an RIA. Once your RIA is registered in the appropriate jurisdiction, you can then register as an IAR with your new firm. In most cases, before you can register as an IAR and begin giving investment advice, you must pass the Series 65 exam.
The Series 65 exam is a comprehensive test covering federal securities laws and pertinent investment advice topics. Administered by the Financial Industry Regulatory Authority (FINRA), this exam is your gateway to becoming an IAR. Education and training don’t end with the Series 65, however. Many jurisdictions want their IARs to stay abreast of the latest developments in the industry and thus require IARs to take continuing education.
Navigating Federal & State Registration
Whether your firm will be state or SEC-registered, the financial services industry is one of the most heavily regulated industries in the United States — so getting your RIA registered is only the beginning.
Crafting A Comprehensive Compliance Program
In order to avoid running afoul of regulators, it is vital that you create and maintain a robust compliance program that covers all facets of your practice. This program will range from trading and account administration, to sales and marketing, and it should be a reflection of your firm’s commitment to ethical and transparent practices. Your firm should endeavor to meet and exceed regulator expectations by maintaining accurate, current, and clear books and records — to be made available to regulators at all times. Completing this comprehensive process is crucial for gaining approval and demonstrating your dedication to maintaining high industry standards.
Embracing Fiduciary Duty
Central to the role of an RIA is the fiduciary duty to act in the best interests of your clients, putting their needs before the firm’s. This ethical responsibility promotes advice that aligns with client goals and risk tolerance, fostering trust and long-term relationships. Fiduciary duty is the cornerstone of the RIA-client relationship — distinguishing it from other relationships in the financial services sector and underscoring your commitment to client welfare.
The Road Ahead
Starting an RIA is an empowering journey that demands careful navigation of regulatory requirements, comprehensive compliance, and unwavering dedication to client well-being. As you venture into this world of owning your own firm, remember that your commitment to transparency, expertise, and fiduciary duty will set you on a path to success — helping you to build a thriving practice rooted in trust and excellence.
Empower your journey to own an RIA with AdvisorLaw.
AdvisorLaw is here to guide you through a tailored RIA registration and setup process designed especially for new RIA firms. Our comprehensive registration package shepherds your concept into a fully operational business. With a recommended lead time of 60 to 90 days prior to your launch, our services cover a wide array, including articles of incorporation, ADV filings, compliance and policy manuals, advisory agreements, cybersecurity protocols, business continuity plans, and more.
AdvisorLaw serves as a dependable partner for RIA firms’ compliance needs. Our comprehensive compliance program guides the creation of a unified framework that encompasses all operational aspects. Our specialized ongoing compliance consulting directly tackles potential audit concerns linked to insufficient “RIA template services” — bolstering your defenses against regulatory scrutiny. Leveraging advanced technology, our proactive compliance team streamlines tasks and introduces automation, via personalized portals.
We offer a comprehensive range of ongoing RIA compliance services, encompassing form updates, policy reviews, and marketing assessments, all of which reaffirm our unwavering commitment to industry standards. From cybersecurity to the option of an outsourced chief compliance officer, AdvisorLaw equips RIA firms with tailored solutions, fortified by experience, technology, and a commitment to excellence.
Contact us today!
Let’s embark on this journey together — make the move to owning a registered investment advisor with AdvisorLaw’s expert guidance and tailored solutions.