Why work with us
Offerings for RIAs
- Technology & Platforms
- Investing & Wealth Management
- Business Solutions & Support
- Contact us
How to become an RIA
Transitioning from representative at a broker-dealer or a wirehouse to a registered investment advisor (RIA) involves a series of steps that can take several months.
Because dispensing investment advice for a fee is a regulated activity under the Investment Advisors Act of 1940, it's important to understand the order in which this process must happen.
Step 1: Pass the Series 65 exam
The first step to becoming an RIA is to take the Series 65 exam, or the Investment Advisers Law Exam, administered by the Financial Industry Regulatory Authority (FINRA). Applicants who have an active Series 7 exam may take the Series 66 exam instead of Series 65. Also, many states waive the requirement for either exam for applicants with an advanced designation such as Certified Financial Planner® (CFP) or Chartered Financial Analyst (CFA).
Step 2: Register with your state or the SEC
After passing the exam or receiving a waiver, applicants must register as investment advisors, either at the federal level with the Securities and Exchange Commission (SEC)or at the state level with the state regulatory authority.
The threshold for registering with the SEC is holding $100 million in assets under management (AUM). Most new RIAs will not reach this when starting out, which means they must register with the state of their principal place of business.
To register, advisors must file Form ADV. This form has several parts and some must be filed online through the Investment Advisor Registration Depository (IARD). Some RIAs elect to hire a compliance firm to help with registration filings, which can be complicated and vary considerably by state.
Step 3: Set up a business
The next step to becoming an RIA is to tackle the decisions, regulatory issues, and other details associated with launching a business.
Business structure. RIAs establishing independent firms should start by choosing a legal structure for their business, such as an S-Corporation or Limited Liability Company. Some might hire a lawyer for this step.
Compliance questions. RIAs are responsible for a range of ongoing regulatory requirements. Many hire a consultant to ensure they remain in compliance.
Logistics and operations. New RIAs must make a variety of business setup decisions, such as staffing, location, compensation, and so on.
Insurance. Many new firms will also choose to buy an errors and omissions insurance policy, although it is not required in every state.
Written procedures and policies. RIAs must establish written supervisory procedures, such as compliance policies and a code of ethics.
Step 4: Choose a custodian
As the institution that maintains the RIA firm's client assets and securities holdings, the custodian is a key member of the RIA team. Custodians are chosen based on their level of customized service, options for investment platforms, technology offerings, and so on.
Step 5: Invest in technology
Setting up an RIA firm comes with a fair amount of technology needs, including:
|•||Hardware (computers, printers, scanners)|
|•||Domain name and website|
|•||Email marketing solution|
|•||Customer relationship management software|
|•||Performance reporting software|
|•||Financial planning software|
|•||Client billing software|
|•||Client presentation/portfolio analytics|
|•||Social media compliance and archiving software|
Step 6: Complete the transition to becoming an RIA
When leaving either an independent broker-dealer (IBD) or a wirehouse, new RIAs must follow the Broker Protocol, which governs the type of information they can ask of clients and what they can say about their former place of business.
In general, advisors should not tell anyone at the IBD or wirehouse, or any of their clients, that they plan to leave until the day they do so. They should resign in writing and list the client information they are taking (which cannot include client account numbers).
Some advisors hire attorneys to help them comply with this step. Failure to adhere to each step of the process correctly could result in a lawsuit or temporary restraining order.
The transition from broker-dealer to RIA can seem like a big step, not to mention a stressful process. However, financial professionals who follow these steps to become RIAs report an improved lifestyle (76%) and increased net income (64%), which means it may well be worth taking the plunge.1
1. Source: "The truth about transition: The grass often is greener." Investment News. October 14, 2016.
TD Ameritrade Institutional, Division of TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2019 TD Ameritrade.
Content provided is for educational purposes only and is not intended to be advice for any firm.
Call 800-934-6124 and talk to one of our experienced consultants today.
Complete this form
And we'll reach out to start the conversation.
Thank you for your interest. We treat each inquiry with the highest confidentiality. We're getting your question into the right hands and someone will be in touch with you shortly. We look forward to helping you.