5 Registered Investment Advisers Requirements To Open A Firm


Registered Investment Advisers (RIA) requirements are important for those who want to start an investment advisory firm or want to work as an independent investment professional. If you are planning to open your own firm or become an adviser, you need to comply with industry regulations to act in the best interest of your clients. Becoming a registered investment adviser would definitely meet regulation standards, paving your way for a successful advising career.

Registered Investment Advisers Responsibilities

Registered investment advisers are usually firms that manage assets and investments for their clients. However, individuals can also register as RIAs. These individuals are more commonly known as Investment Advisory Representatives or IARs. The primary role of these firms or individuals is to provide advice about investing in securities. These securities can include stocks and endowments. They are paid the equivalent of about 1% of assets under management, which is similar between most firms. To hold advisors and representatives accountable, the Securities and Exchange Commission (SEC) regulates any suspicious advice that they give to their clients.

Take The Series 65 Exam

First, you will need to take the Series 65 Uniform Investment Advisor Law exam if you have not already. This test is registered by the FINRA. It is comprised of 140 multiple choice questions about federal securities law and investment advice. You will need to know way more than basic investment definitions to have any hope of passing this test. In order to pass the Series 65 test, you need to score at least a 72%. Then, you can apply to become a registered investment adviser.

Who Is Required To Register?

Before learning the steps to register as an investment advisor, you need to know if you are even required to register by law. Any individual or firm is required to register with the Securities Exchange Commission, or SEC, if you are an investment adviser as defined in Section 202 of the Advisers Act and you are not exempted or prohibited from registration by sections 203A or (b). If you meet these qualifications, you need to register with the SEC as an investment advisor if you ever hope to work for or own a place like Visium Asset Management.

Steps To Register An Investment Adviser

Registering as an investment adviser requires an application approval for a license to conduct business. However, individual IARs are required to be qualified before their applications are approved, you do not want to be looking for lawsuit loans due to negligence. The qualification requirement varies from state to state, but the most common ones are: passing the Series 65 exam and earning a CFP or CFA designation. After successful completion of both of these requirements (or either one in some states), you have to register with the SEC or the states that you intend to work in. Typically, RIAs with less than $25 million worth of assets under management do not require to register with the SEC. Once your application is approved, you can do business as a legal investment adviser.

Reasons To Register Your Business

Registering with the SEC or state regulators allow for greater freedom to structure your practices. Unlike brokers working on commission, you can charge your customers directly, as long as you know how to form an llc. To simplify their record-keeping and administration, many RIAs also use a discount broker to house their clients’ assets instead of holding the accounts in house. By registering successfully and using a discount brokerage house, you can provide investment strategies or asset management advice as your primary business.

Becoming a RIA can be a great option for your investment business. You are more likely to be paid reasonably than those who work for commissions. Plus, you will enjoy more freedoms on how to conduct your business. However, being a registered adviser would also require you to adhere to rules and regulations as strict as IRA rules, demanding a greater commitment to client serve. You should carefully go through these guidelines and uphold them as a successful professional adviser.

Image from http://www.thefiscaltimes.com/Articles/2014/06/05/5-Ways-Spot-Fraudulent-Investment-Adviser

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