Thinking About Starting Your Own RIA? Read This First
Have you ever had a bad day at the office that made you toy with the idea of starting your own RIA?
Or maybe you’ve had a long string of bad days. Sure, most of us have at some point in our careers.
Frustrations with colleagues, bosses, and clients can make the thought of hanging our own shingle very appealing.
But of course, nothing is ever quite that simple and starting your own RIA is much more complex than many people realize.
Starting Your Own RIA in 10 Not So Simple Steps
There are variables in any scenario of course but generally, these are the basic required steps you’ll need to take when you’re starting your own RIA:
Choose your business entity and your domicile state.
Register your business with the secretary of state.
Obtain a federal tax ID number.
Complete FINRA’s Series 65 exam. If you have your CFP, CFA, CIC, ChFC, or PFS, some states will waive this requirement.
Register with the Investment Adviser Registration Depository (IARD) and get a CRD number.
Register your firm with the SEC or state of domicile. Generally firms with assets over $100 million register with the SEC, firms with assets less than $100 million register with the state of domicile.
Create your Form ADV (Parts I and II) on the IARD site and your client agreements.
Draft your compliance manual and policy notes.
Install your initial regulatory compliance program. *More on this below.
Set up books and recordkeeping.
Typically, this process takes between six and ten weeks.
“Ignorance of the law excuses not.”
“Ignorantia Juris Non Excusat.” This is Latin for “Ignorance of the law excuses not.”
The SEC provides a handy information sheet containing general information about certain provisions of the Advisers Act and selected rules under the Act which is...
“intended to assist newly registered investment advisers in understanding their compliance obligations with respect to these provisions As an adviser registered with the SEC, you have an obligation to comply with all of the applicable provisions of the Advisers Act and the rules that have been adopted by the SEC. This information sheet does not provide a complete description of all of the obligations of SEC-registered advisers under the law. To access the Advisers Act and rules and other information, visit the SEC’s website.”
The above paragraph comes directly from the SEC’s website. The Cliff Notes version of this guide to the Advisers Act runs 14 pages.
Confusingly, the document states that your policies and procedures are not required to contain specific elements; rather, you should analyze your own operations and identify conflicts and other compliance factors that create risk for your firm and then design policies and procedures that address those risks.
The Commission expects your policies and procedures, at a minimum, to address the following issues to the extent that they are relevant to your business.
I’ve Cliff Noted their Cliff Notes so you can get the gist without getting bored.
Portfolio management processes
The accuracy of disclosures made to investors, clients, and regulators
Proprietary trading by you and the personal trading activities of those you supervise
Safeguarding client assets from conversion or inappropriate use by your personnel
Accurate creation and maintenance of required records to secure them from unauthorized alteration or use and untimely destruction
Safeguards in place for privacy protection of client information
Trading practices that satisfy your best execution obligation, use client brokerage to obtain research and other services and allocate aggregated trades among clients
Marketing advisory services, including the use of solicitors
Processes to value client holdings and assess fees based on those valuations
Business continuity plans
If you want to do some digging on your own to ensure you’re covering all of your bases before starting your own RIA, you can go to the SEC website and search “Advisers Act and rules.”
Your query will return 192,166 results. You might want to take the next few days off. You’ve got a lot of reading to do.
Still thinking of starting your own RIA?
Your Turnkey Solution
Now that you’re appropriately overwhelmed, here’s the good news.
If you’re unhappy with staying at your current firm, you aren’t limited to striking out on your own and creating an RIA from scratch.
Don’t reinvent the wheel when finding a thriving one is far easier in most cases. I’m here to help you find turnkey solutions to challenges like:
Compliance
Investing strategies
Business model selection
Transitions and onboarding
Technology
Hiring and recruiting
What you’re looking for likely already exists, and I can help you find it. No need to go it alone to build on your terms.
Whether you are looking to transition to the independent channel or you’re looking to leverage more value out of it, I can help you achieve your objectives.
