Things You Should Know When Starting an RIA From Scratch

Oct 4, 2022 | Starting an RIA

If you’re a financial professional who has secured a series 65 or other State approved licenses or designations, then you have probably done some research on how to start an RIA firm from scratch. You may even still be in research mode which is why you have landed on this web page.   

In the paraphrased words of Jerome Powel, if you’re even “thinking about, thinking about” starting a Registered Investment Advisory (RIA) firm then there are a few things you should know.  This is especially true when it comes to initial registration, average cost for registration, ongoing compliance, and the amount to time it may require from you to remain in compliance vs the amount of time you may gain by joining an RIA as an alternative to starting your own.  

In this article we will discuss these considerations and hopefully help you in making an informed decision on what is involved with starting an RIA 

Required Registration Forms When Starting an RIA 

When starting an RIA from scratch for the first time you are required to establish your FINRA account with forms SAA Creation & FINRA Entitlement. Once an account is established, you will have IARD/CRD Access to initiate and complete your submission. The initial submission will include the created firm’s brochure usually reference as the ADV2A and information about the IAR of the firm referenced as the ADV2B. Once this submission is complete, you will be contacted by the State for additional items. Requested items may include client agreements, privacy policy, business continuity plan, cybersecurity policy, ethics policy, policies and procedures manual, balance sheet, etc. For guidance of forms required by your specific State, please refer to your State’s financial division or select your State from the directory below for specific RIA registration requirements. 

Timing to become registered can take anywhere from 45 to 60 days once you submit all the requested information to the State. This timing is based on the amount of registrations the State is reviewing at the time of your submission.   

Cost of Starting an RIA 

Cost of starting your own Registered Investment Advisory firm is relatively low and will also be different depending on the state in which you register.  Plan on spending on average of $400 dollars for the initial registration fees.   

When considering annual fees, the cost will be similar, a few hundred dollars or so depending on the state.  However, if you bring on more IARs this cost will go up as the firm grows in members.  

All that said, it’s important to consider how valuable your TIME is, as it is the only thing we can never recover and is in essence priceless.   

While registering a firm on your own may have a low monetary cost, the amount of time you must allocate and the elimination of errors you may avoid it’s a worthwhile consideration of hiring a RIA consulting firm such as Simply RIA, to assist in the administration work. Yes, it may cost you more but it will also allow you more time.  

Hiring an RIA Consulting Firm 

Hiring a RIA consulting firm allows you to allocate more time towards other areas of your business such as client networking, drafting your vision statements, interviewing and hiring a marketing person to build your website, securing an office, reviewing business solutions software’s and all the other laundry list items associated with creating a business.  If you believe you time is of high value, then it may be best to outsource the process of starting your RIA, especially if you are doing it from scratch and with no experience.  

Should You Join A Firm 

All things considered if time is of the essence and your top priority is growing your book of business as fast as you possibly can, you may consider joining an existing RIA Firm as an alternative to starting your own RIA.  This can allow you to become registered with a firm within a couple of weeks, bring on clients quicker, have support by a compliance team, access to training, and guidance from the firm. At the same time, you can grow revenue and then later transition to your own RIA in a way that isn’t rushed.  

If this is the route you choose, we would advise you to interview the RIA firm and see if their values and services align well with where you would like to grow professionally.  This will make it a smoother experience when starting your own RIA as you have learned from an existing.  

Learn About Your State Requirements

Are you interested in learning about state specific requirements? Click the button and select which state you would like to learn more about.

Benefits Of Starting Your Own RIA

Starting your own RIA and the independence this will create gives you the autonomy to run your practice the way you want, without the limitations you currently have.

Our team of experts will alleviate the initial and ongoing burden of compliance requirements, which will allow you to enjoy the benefits of owning the practice you’ve always dreamed of.