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How to Become an Independent Financial Advisor


Becoming an independent financial advisor is something you might consider if you’re ready to step out of the traditional model and reshape your career path. Independence has its benefits, though there are some considerations to weigh in determining whether it’s the right move for you. If you’re interested in how to become an independent financial advisor, there are a few different pathways you might explore.

Are you looking to expand the marketing of your financial advisor practice? Try SmartAsset AMP, a holistic client prospecting and marketing automation platform.

Independent Financial Advisor Models

What it means to be an independent financial advisor is ultimately defined by the advisor. There are several models that financial advisors may choose from when making a move to independence. Here are four common models to consider:

  • Start an RIA firm. The first and most obvious choice when going independent as an advisor is to start a firm of your own. Starting an RIA can give you complete control and allow you to build a business that reflects your experience, knowledge, goals and values.
  • Work with an existing firm. If you’re not quite ready to become fully independent, you may consider joining an established RIA that allows you greater freedom in deciding which clients to work with and how to serve them. You can have a degree of independence without bearing the full burden of running a firm yourself.
  • Consider an RIA aggregator. RIA aggregators can provide independent advisors with the tools and framework they need to serve clients, without having to build a brand-new firm from scratch. You can work independently, with the aggregator’s support behind the scenes.
  • Join an independent broker-dealer. Working with an independent broker-dealer can serve as a precursor to starting your own firm. You might choose this option vs. joining an existing RIA if you follow a commission-based model for pricing services.

In evaluating different options, it’s important to consider both your capacity for going independent right now and your long-term vision and goals for doing so. While you may be mentally ready to launch your own firm, for instance, you also need to consider how much time and money you’ll have to invest initially to get up and running.

How to Become an Independent Financial Advisor

An independent financial advisor works with clients at their home.

Assuming that independence means starting a firm of your own, there are some specific steps involved in the process. Here’s an overview of what you can typically expect when setting up an independent advisory business:

1. Take the necessary exams

Independent advisors must pass the Series 65 exam administered by the Financial Industry Regulatory Agency (FINRA). This multiple-choice exam is designed to test advisors’ knowledge of federal securities law as well as topics related to investment advice.

You may consider taking the Series 6 or Series 7 exams, which are also administered by FINRA. The Series 6 exam tests your competency to run an investment business, while the Series 7 exam tests your ability and knowledge to trade securities. Depending on which state you’ll do business in, you may also need to obtain Series 63 and Series 66 licenses.

2. Consider additional certifications or designations

While it’s not necessary to obtain additional certifications beyond the exams listed above, you may consider doing so in order to enhance your professional credentials. For instance, you may choose to pursue a designation as a certified financial planner (CFP) or a chartered financial analyst (CFA).

Holding these types of designations could give you an advantage when trying to attract new clients to your business. Keep in mind that these types of designations may require you to meet continuing education requirements in order to maintain them.

3. Develop your business plan

Creating a business plan is important as it can serve as a blueprint for building your new advisory firm. A comprehensive business plan encompasses your firm’s mission, values and goals, as well as your operational details, financial projections and marketing strategy.

Writing a financial advisor business plan isn’t a requirement for starting a new firm. However, taking the time to create a blueprint for starting and growing your business can help you set realistic expectations and build in contingencies for any potential setbacks you may encounter along the way. Having a business plan can also be helpful for planning your budget.

Starting a firm can be costly if you’re leasing premises, purchasing office supplies, spending money on advertising and hiring support staff. Keeping your budget as lean as possible in the beginning may be a priority and you can flesh out all the financial details in your business plan. A thorough plan could also make it easier to get approved for business loans or a line of credit if you plan to finance your firm’s launch.

4. Register with federal and/or state agencies

Independent advisors will need to register with the Securities and Exchange Commission or their state regulatory agency before they can begin working with clients. Which one you register with can depend on the amount of assets under management you’re responsible for.

Here are the guidelines, as established under the Dodd-Frank Act:

  • Firms with less than $25 million in AUM cannot register with the SEC if their principal business is located in a state that regulates advisors.
  • Advisors with $25 million to $100 million in AUM are only required to register with the SEC if their principal place of business is located in New York or Wyoming.
  • Firms with $100 million in AUM may choose to register with the SEC but they also have the option of registering with their state agency.
  • Once a firm’s AUM reaches $110 million, SEC registration is required unless the firm is eligible for an exemption.

Assuming that you’ll register with the SEC, you’ll need to complete Form ADV to do so. This form collects information about your firm, including the type of clients you serve, the amount of assets you manage and your overall investment strategy. Form ADV can be submitted online through the Investment Advisor Registration Depository (IARD).

If you’re registering with the state instead, you’ll need to contact the applicable regulatory agency to find out what paperwork you’ll need to file.

5. Choose a custodian

RIAs are required to work with a custodian in order to be compliant with federal regulatory guidelines. An RIA custodian maintains client assets on behalf of a registered advisor. You may need to do some research to find the right custodian to work with.

In doing so, it’s helpful to consider things like the support services a custodian offers, what type of tech tools they employ in managing client assets and how much they charge for their services.

Tips for Building an Independent Advisory Firm

Once you’re registered you can begin working on building your business. Establishing your client base is central to that task.

If you’re leaving an existing firm to start your own business, you’ll need to verify whether you’ll be able to take your current clients with you. While some firms are willing to allow advisors to retain their client list when leaving, others may not. So, it’s important to know what client information, if any, you’ll be allowed to keep when setting up your own firm.

You’ll also need to think about how you plan to market your business to attract new clients. If you’ve chosen a specific niche that you’d like to serve, that can make it easier to tailor your marketing tactics to attract the right clients. Your marketing plan may encompass:

When marketing your firm, it’s important to emphasize your credibility and authority. Some of the ways that you can do that while increasing your firm’s media exposure include being a guest on financial podcasts, writing articles for online financial publications and offering to share your knowledge as an expert source for articles on authority websites.

If you’re having trouble attracting new clients, you may consider using an online lead-generation tool to connect with prospects. SmartAsset’s Advisor Marketing Platform (AMP) offers financial advisors services like client lead generation, automated marketing and more. Learn about SmartAsset AMP today.

Bottom Line

Clients meeting with an independent financial advisor to review different options for their financial plan.

There’s quite a bit that’s involved in how to become an independent financial advisor and it’s important to evaluate the pros and cons of doing so to decide if it’s right for you. Should you decide to move ahead with going independent, proper planning can ensure that the transition goes as smoothly as possible.

Tips for Growing Your Advisory Business

  • Get help with your own marketing activities. SmartAsset AMP (Advisor Marketing Platform) is a holistic marketing service financial advisors can use for client lead generation and automated marketing. Sign up for a free demo to explore how SmartAsset AMP can help you expand your practice’s marketing operation. Get started today.
  • Meeting compliance requirements is an important part of running your business and failing to do so could have serious consequences. There are a number of federal guidelines RIAs are expected to meet and new rules are introduced periodically. Hiring a compliance officer to manage things like reporting and recordkeeping can be a smart investment if you don’t have one on staff already.  

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