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How to Start a State-Registered Investment Advisor Firm

The following guide is designed to help any individual or group learn how to start a state-registered investment advisor (RIA) firm in the United States. As an overview, this article provides a general outline of the basic process, timing, and fees associated with creating a new RIA.

For specific state registration requirements, we encourage you to visit the state-by-state directory below.

Basic Qualifications for Starting a State-Registered RIA Firm

There are two basic qualifications all investment advisor firms need to meet to initiate the RIA registration process with any given state. These requirements are:

  • Your firm must have a legal entity, such as a Limited Liability Company (LLC) or Corporation set up to house the RIA firm, unless you plan to register as a sole- proprietorship.
  • Your firm must have at least one Investment Advisor Representative (IAR). The IAR must demonstrate his/her qualifications to the state(s) where you are registering your firm. The IAR can demonstrate their qualifications by passing the Series 65 or Series 66 exam (if they already have an active Series 7), or obtaining any one of the following industry designations: CFP®, CFA®, PFS™, CIC or ChFC®.

Navigating Between a State vs. SEC Registration

Once you have decided to start your own RIA firm, you will need to determine if you need to register your firm with a state or with the Securities and Exchange Commission (SEC).

In general, new firms with Assets Under Management (AUM) less than $100 million are required to register with the individual states. In addition to registering in your domicile state, you will need to register your RIA firm in each state where you have a place of business, and in any state where you have more than five (5) clients.

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Please note that Texas and Louisiana have not adopted a de minimis exemption and require state-registered firms to be registered in those states before onboarding the first client.

State Registration Filing Requirements for RIAs

The application process for a state-registered investment advisor firm is similar for most states. All states require the submission of the Form ADV Part 1A, 1B, 2A, and 2B. Unlike the SEC registration process, states do not require the submission of Client Relationship Summary (Part 3 of ADV, also know as  Form CRS).

In addition to submitting the Form ADV, a Form U4 is generally required to be filed for each investment advisor representative (IAR) associated with the firm. All firms should include a written compliance program that includes the following:

RIA Registration Renewal step 1

Client Advisory Contract

RIA Registration Renewal step 2

Code of Ethics

RIA Registration Renewal step 3

Cyber Security Policy

RIA Registration Renewal step 4

Business Continuity Plan

RIA Registration Renewal step 5

Privacy Policy

Written Supervisory Procedures

Please note that most states require supplemental materials to be filed directly to the Securities Division, such as a balance sheet, specimen copies of the client advisory agreements, as well as your compliance program.

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State Registration Fees & Approval Timeline

All state-registered investment advisors must pay the firm and IAR registration fees to each state where the firm has an office and where any IARs are located. The cost of these fees vary from state to state.  In addition to the state registration fees, FINRA, which acts as a service provider to each state, charges a $15 annual processing fee for each IAR. 

Once all of the required documents have been filed, and the registration fees have been paid, the state regulators generally have up to 45 days to review your RIA registration. It is  common practice for the state examiner to issue a deficiency letter after reviewing your firm’s initial registration. 

Depending on the state, the individual regulator, and the complexity of your firm’s business model, the deficiency letter can cite a few, to many areas where the examiner wishes to gain additional insight and clarity. Your firm’s registration liaison will need to address these areas in question with the examiner prior to getting the firm approved.

The time it takes your team to resolve any issues outlined in the deficiency letter will ultimately impact your firm’s approval timeline, but if it goes well you should expect to get your firm approved within 6 – 8 weeks from the date you filed your initial registration. 

[Please Note: Due to the COVID-19 pandemic, some states are taking longer than usual to complete the initial review and approval process.]

RIA Registration Requirements by State

While the application process for a state-registered investment advisor firm is similar for most states, some states like California, Florida, Minnesota, New Jersey, Tennessee, and Washington have specific net capital and/or supervisory experience requirements that must be met for an RIA registration to get approved.

The following state directory provides additional insight into the varying state requirements and fees associated with registering a firm in different states.

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