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Interested in starting your own RIA? Learn key processes, the average costs, and typical timeline for a successful launch.

Frequently Asked Questions about Starting an RIA - Answered

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With LPL Financial, there’s more than one way to RIA. Whether you’re looking to start an RIA, join an existing RIA, or explore new custodian options, we can help bring your perfect fit into focus. Through our consultative fit process, we’ll work with you to determine which path best suits your innovative spirit—so you gain more control to customize your business and deepen your client relationships. As a leading custodian and top RIA in the country, LPL empowers you to go RIA, your way.

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What you need to know

Many financial advisors consider starting an RIA to maximize freedom and control over their business. They’re comfortable setting the vision and direction for their firm as business owners. If that resonates with you, you’re not alone. In 2022, Cerulli estimated more than 2,100 advisors joined the RIA channel, bringing with them roughly $290 billion in client assets. Deciding to start an RIA is one thing—getting it up and running is another. Here, we’ll answer frequently asked questions about key processes and identify common pitfalls to avoid for a successful launch.

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Review your state’s registration requirements. You’ll likely register with the state if you manage less than $100 million in advisory assets and the U.S. Securities and Exchange Commission (SEC). If you manage $100 million or more in advisory assets (or will manage $100 million or more within 120 days of registration). Regardless if you choose an advisory-only or hybrid business model, you must comply with your state’s licensing requirements to register as an RIA. That typically means passing the FINRA Series 65 Uniform Investment Advisor Law exam. However, many states allow advisors who carry the following designations in good standing to waive the Series 65:

How do I set up an RIA?

• Certified Financial PlannerTM (CFP®) • Chartered Financial Analyst (CFA®) • Chartered Investment Counselor (CIC) • Chartered Financial Consultant (ChFC®) • Personal Financial Specialist (PFS)

Note that if you have one of these designations in good standing, you’ll still need to apply for registration as an investment adviser representative by filing Form U4 and paying associated registration fees to applicable state securities regulators.

Register your RIA with the Investment Adviser Registration Depository (IARD). Although you may complete these documents yourself, it’s wise to leverage an experienced RIA compliance consultant. It’s important to note that filing your registration may trigger notification to your existing broker-dealer and alert them that you’re leaving.

At a minimum, you’ll need:

• FINRA entitlement • Form ADV filing • Form U4 • Investment Management Agreement • Privacy Policy • Compliance Manual & Code of Ethics • Business Continuity Plan • Information Security Policy • Social Media Archiving

Compiling a list of typical startup costs and first-year expenses for RIA firms can help set realistic expectations. Startup costs can range from $10,000 to $50,000, depending on factors like state registration fees, legal and compliance consulting fees, technology costs, and operational expenses.

How much does it cost to start an RIA?

Common startup expenses include:

• Legal formation paperwork • Attorney and consultant fees • Office space and equipment • Business bank account • Tech stack • Payroll/invoicing systems • Marketing and branding • Hiring and onboarding staff

First-year expenses refer to everything after the initial startup phase. These costs will vary depending on your business model and service offerings, and can run between $20,000 and $30,000. Remember that some initial expenses will be recurring. Some expenses may be bundled if you join membership-based platforms or use other networks for back office, compliance, marketing, and technology assistance.

Examples of first-year expenses include:

• Compliance, ADV updates, audits • Custodian fees • Financial planning software • Portfolio management software • Tax planning software • Office supplies • Technology and cybersecurity • Office space • Employee payroll

What are some common mistakes to avoid when starting an RIA?

Failing to register properly with the SEC: Ensuring all necessary paperwork is filed on time and all requirements are met is critical to avoiding fines, penalties, and legal action. Not having a solid business plan: Your business plan can guide the growth and success of your RIA and keep you focused on your goals. Consider key factors like target markets, services you want to offer, and pricing structure. Ignoring compliance requirements: Failure to adhere to compliance requirements and regulations can damage your RIA’s reputation and potentially result in fines and penalties. It’s critical to stay up-to-date on regulation changes and ensure all employees are trained on compliance requirements. Rushing the process: On average, starting an RIA can take four to six months. Set yourself up for success by conducting thorough due diligence on the process, requirements, and strategic partnerships with custodians and vendors. Most importantly, determine how much responsibility and risk you’re comfortable owning. There are multiple paths within the RIA model; if you’re unsure which is right for you, review the benefits and key considerations in our post RIA 101: Understanding the RIA Model.

If you’re ready to begin the process of starting your own RIA, or exploring whether starting or joining an RIA firm could be right for you, LPL is here to help bring your perfect fit into focus. Contact our Business Development team to learn more.

1. *Cerulli Associates, U.S. Broker-Dealer Marketplace Report, 2022 2. Expense Checklist for an Advisory Firm's First Year, September 30, 2022. 3. How Long Does it Take to Launch an RIA? August 13, 2020.

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The views and opinions expressed by LPL Financial Advisor(s) may not be representative of the views of other Financial Advisors and are not indicative of future performance or success. Neither LPL Financial nor the LPL Financial Advisor can be held responsible for any direct or incidental loss incurred by applying any of the information offered. Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. Tracking #1-05376171

Disclosures

Interested in starting your own RIA? Learn key processes, the average costs, and typical timeline for a successful launch.

Frequently Asked Questions about Starting an RIA - Answered

What you need to know

Regardless if you choose an advisory-only or hybrid business model, you must comply with your state’s licensing requirements to register as an RIA. That typically means passing the FINRA Series 65 Uniform Investment Advisor Law exam. However, many states allow advisors who carry the following designations in good standing to waive the Series 65:

Originally published on LPL.com on July 31, 2023. Read original article here.

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