Starting your own advisory firm

Before you can automate your practice – you’ve got to actually start it up and get it going. So if you’re still at the start-up phase, consider this a short, quick, no-BS guide of what you’ve got to get done. It’s not legal advice so please don’t look at it that way.

Getting Started

It’s an amazing feeling in a person’s life when they make the commitment to become an entrepreneur. The process can be exhilarating and yet at the same time, it can be a bit frightening.

Starting a Registered Investment Advisory Firm can release those same emotions. How often have you wished you could do things for your clients with complete autonomy? Tired of having hierarchy and management breathing down your neck? Below are a few items of interest to assist those that wish to begin the process of starting their own RIA Firm.

The Benefits…

Registered Investment Advisory firms are truly 100% fee-based and have a variety of competitors such as the remaining breed of fully-fledged brokers, Mutual Funds, Variable Annuities, and Hedge Funds. As an RIA firm one owns 100% of the firm and the revenue generated minus the operating expenses of course which the firm also controls. The firm selects the products it deems viable for the benefit of the clients.

• RIA firms build equity that can be monetized.
• Firms can have valuations of 1.8 to 3 time’s annualized revenue.
• Reliable recurring revenue stream.

The Process…

To begin you’ll need to decide if you will do all the registration yourself, hire a lawyer or a firm that specializes in starting RIA’s. Below are a few things that need to be done regardless of who does them.

1. You must start an S Corporation or LLC and register a business name.
2. Decide if you’ll register with the SEC or State. Current laws require at least $100M under management to register with SEC. Check with your state laws for guidance if under $100M.
3. The manager will need to have passed the series 65 or series 7 exams. In many states for certain professional designations such as CPA or CFP, the license is waived.
4. Anticipate a variety of fees such as IA representative fee, form U-4 fee, either the IA firm registration fee (State Registered) or the Notice filing fee (SEC Registered).
5. A wide variety of forms will need to be filed such as:

IARD Entitlement Forms – “IARD” (Investment Adviser Registration Depository) which is sponsored by the SEC and the NASAA (the association of state securities regulations, www.nasaa.org) but which is operated by FINRA. As the IARD system is an online system, these forms need to be manually completed and processed by FINRA before you can begin the registration process.

Form ADV – this is the form that all investment advisors complete. When a firm is registered with the SEC or within your state of business, filings can be seen here by typing in the advisor’s name.

Form ADV Part II – this is the part of Form ADV which provides more information on the advisor’s activities. It is sometimes referred to as the investment advisory “brochure.”

Form U4 – this form will need to be completed for all members of the firm which will be investment advisor representatives. If the IAR’s have been in the securities industry for a while, they will likely already have a U4 on file with FINRA.

Registration will generally take approx. 2-4 weeks for the SEC and anywhere from 2 weeks for a state such as (Michigan) and up to 8 weeks for a state such as (California) to become state registered.

For further information on how to start an RIA firm please go to the home page and register and/or contact us for further information.