Going independent is a strategic career move that many advisors pursue. However, it does take some careful planning, with RIA registration requirements being one of the topics you’ll most likely want to research. Doing so can help ensure you understand what’s needed to get your firm up and running while checking all the necessary compliance boxes.
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RIA Registration Requirements By AUM
Investment advisors may register with the Securities and Exchange Commission (SEC) or state regulatory authorities. Your assets under management determine where you’ll register as an investment advisor.
- Firms with AUM <$100 million will register with their state agency.
- Firms with AUM of >$100 million but <$110 million can register with their state regulatory body or the SEC.
- Firms with AUM >$110 million must register with the SEC.
Mid-sized advisors, meaning firms with $25 million to $100 million in AUM, must register with the SEC if one of the following is true:
- They’re not required to register as an advisor in the state where they maintain a principal office or place of business.
- They’re not subject to examination as an advisor by the state where they maintain a principal office or place of business.
Some advisors are exempt from SEC registration requirements under the Investment Company Act of 1940. They include investment advisors who solely advise venture capital funds, foreign advisors and private fund advisors.
SEC RIA Registration Requirements
The SEC outlines the requirements to register as an RIA. Here’s an overview of what you’ll need to complete registration.
Professional Certifications
You’ll need to have one or more securities licenses to register with the SEC. You can either:
- Obtain a Series 65 license, or
- Obtain both a Series 7 and a Series 66 license
These licenses are necessary to demonstrate that an individual has the knowledge and expertise to act as an investment advisor.
SEC RIA registration requirements don’t mention specific degrees you need to hold. You don’t need a degree in finance, for example, to sit for the Series 65 exam, though you might find it helpful to have that type of educational background.
IARD Account
The Investment Advisor Registration Depository (IARD) is the electronic filing system you’ll use to submit your RIA registration documents. FINRA maintains the IARD website.
On the IARD website, you’ll find links to the following:
The second form listed is required to create your IARD account. You can sign and submit this document to FINRA electronically.
Once your forms are received, FINRA will establish your IARD account, including your Flex-Funding Account. This is the account you’ll use to cover any registration fees due to FINRA. You can fund this account with a wire transfer, ACH transfer or paper check.
Form ADV
Form ADV is central to RIA registration requirements. This form has two key parts:
- Form ADV Part 1 includes detailed information about your advisory business, including your ownership structure, assets under management and disciplinary history.
- Form ADV Part 2 outlines the instructions for creating your brochure, which offers prospective clients a comprehensive overview of how your firm operates.
SEC-registered advisors who provide services to retail investors are also required to submit a relationship summary on Form ADV Part 3. This plain English summary covers the types of service you offer, the fees you charge, potential conflicts of interest and other information about your firm.
You’ll need to pay a fee to submit your Form ADV. The initial registration fee, which ranges from $40 to $225, is determined by your firm’s AUM.
Form U4
Form U4 (Uniform Application for Securities Industry Registration or Transfer) is required for each individual who will act as an investment advisor representative (IAR) within the firm. This form includes details about each IAR’s:
- Employment history
- Past disciplinary actions
- Residential history
- Financial activities
- Criminal and civil records
This form is also submitted through IARD.
Ongoing Requirements
Once your firm is registered with the SEC, you must file an updated Form ADV each year. The deadline for filing this form is 90 days from the end of your fiscal year. So if your FY ends on December 31, your updated Form ADV is due by March 30 of the following year.
You’ll also need to meet all applicable compliance requirements to maintain your registration. That includes having a written compliance policy and a written code of ethics.
State RIA Registration Requirements
If you plan to register with the state rather than the SEC, you’ll need to follow your state’s process for doing so. In general, states require the following for registration:
- Series 63 license (with some exceptions)
- Form ADV Parts 1 and 2
- Form U4 for each IAR
You’ll still need to create an account with IARD to submit your registration documents and pay the applicable fees. States may also require other documentation or fees to register.
Frequently Asked Questions (FAQs)
Does RIA Registration Expire?
Your RIA registration status may expire if you fail to submit your updated Form ADV by the required deadline. You could also be subject to fines, sanctions and other actions from the SEC. Not to mention, your firm’s reputation may suffer if clients learn that you’ve failed to maintain your registration.
Is There a Minimum AUM to Register as an RIA?
No, it’s possible to start an RIA firm with $0 AUM. If you’re starting from scratch, you could register with the state instead of the SEC. Once registered, you can work on drumming up new client assets to grow your firm.
Do RIAs Need Series 7?
SEC-registered RIAs don’t need a Series 7 license if they hold a Series 65 license. However, a Series 7 license combined with a Series 66 license can be a substitute for the Series 65 license.
Bottom Line
Registering a new RIA is a complex process, and it’s helpful to understand what’s required before you begin. If you plan to register in a specific state, such as Florida or California, you may want to contact your state regulatory agency to determine what additional steps are required, if any.
Tips for Growing Your Advisory Business
- Hitting the ground running with a solid marketing plan can help you position your new RIA for success. If you’re having trouble gaining traction online, you might consider partnering with an advisor marketing platform. SmartAsset AMP (Advisor Marketing Platform) is a holistic marketing service that 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.
- If you don’t hold a Series 65 license and you plan to register at the state level, you may be able to substitute other professional designations. Some states allow advisors who hold Certified Financial Planner™ (CFP®), chartered financial analyst (CFA), chartered investment counselor (CIC) and chartered financial consultant (ChFC) designations to sidestep the Series 65 requirement.
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