Setting Up A RIA Firm

The reasons to become an independent Registered Investment Advisor (RIA) are numerous and the benefits can be extraordinary. As an RIA you are in 100% control, from the financial planning software you choose to where you where you decide to custody your assets. The biggest hurdles you will run into are the decisions you will make during the transition. These choices will have an impact on your transition. This is why you need to plan accordingly. Making the right choices now will impact both short term and long term success. Here are some things to consider that will help you make the transition as smooth as possible.

What level of independence best suits your needs?

  • Start your own RIA – You have 100% control.

  • Join an existing RIA – Think long term and choose wisely as not all RIA’s are created equally.

  • The Hybrid RIA – This is a great option if you want to maintain your commission-based business.

There are a lot of options with the Hybrid RIA model so this is an area that you will need to research extensively before making the move. Do you currently have a non-compete or some other type of arrangement with your existing firm?  You will want it to be reviewed before exiting the firm. Find a good labor attorney to review your existing employee agreement and any other areas they should be able to tell you the dos and don’ts around it. You will want to keep your intentions as discreet as possible. This discovery phase of the transition is extremely important and cannot be overdone.

What business structure should you use and in what state should you register?

  • Choose a name for your company.

  • S corp, C corp or LLC? If not sure, consult your tax advisor.

  • If this is a partnership of some sort you will want to have an attorney draft a detailed business agreement and articles of incorporation.

  • Insurance: E & O, disability, key man, buyout, and general business are policies to consider.

You’ve done your research and have decided on starting a RIA. The complex registration process begins.  Confidentiality is key up to this point!!! Your current firm will most likely know your plans as soon as the registration process starts not when it is approved.  There are many steps to follow, requirements to be met, as well as forms and documents to be filed. Because of this the registration can take a few weeks or a few months. Get a few items wrong and you can easily add weeks and months to this time frame. If you currently have clients to transition it is a good idea to use a compliance firm that specializes in RIA registration and compliance. This is money well spent as the registration process is complicated and very time consuming. Hiring a compliance firm to do this will allow you to focus on transitioning your business to your new firm. If you do not have an existing book of business, the time and feel up to the challenge of dealing you’re your states bureaucracy, it can be done. In this case, you may want to consider a DIY registration package from a RIA compliance company. A DIY package will allow you to have the specific forms, documents, requirements and steps needed for your state. If you will have AUM in excess of $100mm you will want to register with the SEC. If you will have AUM less than $100mm you will want to register with your state. To learn more about the RIA model and registration process contact Aurora today visiting, email: info@AuroraComliance.Solutions or call (860) 856-8862