At first look, it may seem that a Registered Investment Adviser (RIA) is much the same as any other financial adviser. This is far from true; an RIA has a fiduciary duty and has RIA compliance regulations to meet. So when you want to become an RIA, you will need to register as well as meet the compliance requirements, and you might benefit from RIA Services that can help you with both. Investment professionals prefer becoming registered investment advisers to registered representatives as once can practice with much more latitude.
At the same time, as an RIA, you will also be held to a higher standard and must follow the code of conduct required. RIAs are finance professionals who advise and oversee asset portfolios and investments.
The necessities; license & qualifications
As an RIA, you will be offering financial advice to investment firms or individual investors, helping with asset management, and more. To do this efficiently, certain licensing and qualifications are crucial. To this end, the Series 65 exam of the Uniform Investment Advisor Law exam by the FINRA (Financial Industry Regulatory Authority) must be taken.
Contrary to other Securities exams issued by the FINRA, you do not need to be sponsored by a broker-dealer for the Series 65 exam. In this exam, you will have to answer 140 multiple-choice questions, of which 10 are pretest, and you need to answer at least 94 correctly. The questions will be about federal securities law, investment advice, and related topics, which you will have to answer in the 3-hour exam period. You can use RIA Registration Services to help you through this process.
Passing the Series 65 exam is more than enough to become an RIA. Also, having other designations will make it easier to find business and help you waive the Series 65 exam. Some of these designations are:
- CFP – Certified Financial Planner
- CFA – Chartered Financial Analyst
- PFS – Personal Financial Specialist
- ChFC – Chartered Financial Consultant
RIA registration: federal & state
To become an RIA, you will need to register with the SEC or the state where you’ll be doing your business. This is especially accurate if you intend to provide asset management advice or investment advice. Make sure to check out the eligibility required to register with the SEC. While you can always use SEC Registration Services, you should still know what you’re up against.
If you are registered with the SEC, you do not need to register with the state; only a notice of your SEC registration in each state you operate will suffice. In most states, though, you are only required to do this if you have over five clients and/or an established place of business in the state.
The form ADV
Once you’re done with the RIA Registration Service, you must create an account under the IARD or the Investment Adviser Registration Depository overseen by FINRA. Once your account is open, you will be given a CRD number as well as Accound ID Information by FINRA, after which you will have to file Form ADV and Form U4 with the specific states or with the SEC.
*Not all states demand this. Check the states, and if you have business only in said states, you don’t have to do this.
What is ADV form?
When you apply to become an RIA, the government will use your Form ADV as your official application form. You will have to fill in all the sections in the form; the first section should be submitted to the SEC or relevant state governments electronically, and the second section is more of a disclosure record, thus, should be given out to all your clients where all the services that you provide, fees, compensations, code of ethics, financial conditions, educational background, affiliated parties, credentials, and most importantly any conflict of interest must be divulged.
The preparation of this form may take a couple of weeks; you can then upload it to the IARD online and give it to your new and potential clients. The SEC must respond to your application within a span of 45 days or begin rejection proceedings by then. For further statements on compliance, you should work with RIA compliance Services.
While you may get a response within just 30 days, remember that delays are possible as they may request additional information or clarifications for some questions. Besides, if you register with the SEC, you will also have to create a compliance program that is not only detailed but should also cover all the services you provide. It should go over your practice, trading, sales, account administration, marketing, and even internal disciplinary procedures. While this can sound complicated, you can work with an RIA Services provider for professional help.
You can only work as a registered investment adviser after all of the above is complete and the SEC has given the green light to your application. After this, you will have to file an annual amendment to Schedule 1 of ADV with updates on your firm’s information.
The Surety Bond is a requirement by RIAs who have failed to meet the net worth demand of the state or states in which they operate. In general, most states require that the RIAs should have a net worth of at least $36,000 if they have their client’s funds in custody. Otherwise, the rate stands at $10,000.
In case of failure to meet this demand, a surety bond must be posted, and it can vary from state to state. Be sure to find state-specific information, and you can do this with the help of RIA Registration Services.
RIA registration, as well as RIA Compliance Service, can be complex, but it is doable. Work with RIA registration and compliance services to ensure everything is in order.
If you need help with your RIA registration or compliance, get in touch with MAH Advising and get experts on your side.