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Becoming an independent Registered Investment Advisor (RIA) can help you grow your business, expand your skill set, and be more competitive in the market. An RIA is a professional responsible for advising clients on investments and providing advice on taxes, estate planning, or retirement strategies. As an RIA, you can make decisions and act as a fiduciary without outside influence. This allows you greater flexibility and provides added credibility to potential investors, which can result in increased revenue for your firm. Discover five steps towards becoming an Independent advisor so you can start taking control of the success of your business today.
Table of Contents
1. Obtain the Required Licenses
Becoming an independent Registered Investment Advisor (RIA) is a rewarding and potentially lucrative path for those serious about investing and managing assets. It starts with obtaining the required licenses: The Securities Exchange Commission (SEC) administers the Series 65 license, which enables advisors to give investment advice based on their research and expertise.
Advisors must also pass the Series 7 exam to be eligible for listing their firm as an RIA with their sponsoring broker/dealer. Passing these tests requires comprehensive knowledge of financial instruments, regulations, and applicable laws. Additionally, RIAs must meet other business requirements depending on their state.
Becoming an independent advisor is a major undertaking that can yield satisfying results for those dedicated to learning the craft of investment counseling.
2. Find a Custodian
Step 2 in becoming an independent RIA is to find a custodian. A custodian is a type of financial institution that provides services such as the safekeeping of valuable securities, the execution and settlement of transactions, and basic reporting. Identifying the right custodian for one’s business and clients can be challenging, as this choice involves finding a partner that meets the individual or firm’s requirements.
Furthermore, RIAs must carefully consider costs, services provided, technological capabilities, account minimums, and more before selecting a custodian. By doing thorough research on potential custodians, savvy advisors can make the selection process much easier and end up with a partner that fits their needs perfectly.
3. Develop Your Business Plan
Making sure that all of the details are taken into consideration is essential. You will want to clearly outline your offering and process, identify your target market and what services you will provide them, create budgets for revenues and expenses, decide on which technology platforms you are using, set goals above just financial success, such as employee satisfaction and customer delight, ensure compliance with regulatory requirements, define how to attract clients and grow the business in a scalable way, and keep track of performance metrics. If you want to take this career path successfully, these items must be included in your business plan.
4. Find Office Space and Hire Employees
Aspiring advisors need to find office space and hire employees. An office space for your business can be an anchor for developing clients. Staff can help manage operations and perform various tasks, from preparing client portfolios to handling administrative duties.
This can be a daunting task, but it is important as having physical space and staff will allow the advisor to scale their business more rapidly to accommodate more clients. Additionally, it provides legitimacy as clients feel more secure when they know there is somewhere physical you have designated as a workspace.
5. Raise Capital
Raising capital is the penultimate step in becoming an independent advisor. At this stage, the firm needs to establish a track record that credible investors are comfortable investing in. To do this, the firm must compile all relevant information about its business model and back-office infrastructure for potential backers to review.
Most firms look for investors who are asset management experts or have had success investing in similar businesses. By leveraging expertise from seasoned professionals, independent advisors can build credibility and increase momentum for growth. Finally, firms must obtain appropriate licensing and compliance requirements to handle investor funds before collecting any capital.
Becoming an independent advisor takes dedication, strategic planning, and a full understanding of the business landscape. However, with a firm commitment, the future looks bright for aspiring RIAs. This road may take time and resources, but the rewards at the end are usually worth it. Successful RIAs combine hard work with great ideas to create a mutually beneficial relationship with their clients. Good relationships are key in carving out your niche as an independent advisor.
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