Frequently Asked Questions about Starting an RIA - Answered

What you need to know: RIA setup process, costs, pitfalls to avoid

Many entrepreneurial-minded financial advisors are drawn to starting their own RIA because it maximizes freedom and control over their business. They’re comfortable seeing themselves as business owners, calling the shots, and setting the vision and direction for their firm. 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.¹ Arriving at the decision to start an RIA is one thing—getting it up and running is another. Here, we’ll answer some of the most frequently asked questions about key steps in the process and identify common pitfalls to avoid for a successful launch.

How do I set up an RIA? 

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 US 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 of whether you choose an advisory-only or hybrid business model, you’ll need to comply with your state’s licensing requirements to register as an RIA. In most cases, that 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:

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

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

Register your RIA with the Investment Adviser Registration Depository (IARD). Although you can choose to complete these documents yourself, it’s wise to seek assistance from an experienced RIA compliance consultant. This is especially important with respect to the timing of when you actually file for registration, which may trigger notification to your existing broker-dealer and make them aware 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

How much does it cost to start an RIA firm?

Compiling a detailed list of typical startup costs and first year expenses for RIA firms can help you set realistic expectations and gain momentum faster. 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.²

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 $30,000.² 

Remember that some of your initial expenses will also be recurring. Some of these expenses may be bundled if you join membership-based platforms or can plug into other networks for help with back office, compliance, and some marketing and technology needs. 

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 cyber security
• Office space
• Employee payroll  

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

Failing to register properly with the SEC: Ensuring that all necessary paperwork is filed on time and that all requirements are met is critical to avoiding fines, penalties, and legal action. 

Not having a solid business plan: A well-thought-out business plan can guide the growth and success of your RIA and keep you focused on your goals. As you design your ideal firm, keep in mind key factors like target markets, the services you want to offer, and pricing structure. 

Ignoring compliance requirements: RIAs are subject to a list of compliance requirements, and adhering to them is important. Failure to comply with regulations can damage your reputation and potentially result in fines and penalties. Therefore, staying up-to-date on regulation changes and ensuring all RIA employees are trained on compliance requirements is critical. 

Trying to rush the process: On average, starting an RIA can take four to six months.³ Set yourself up for success by taking the time you need to do thorough due diligence on the process, requirements, and strategic partnerships with custodians and vendors. And perhaps most importantly, determine how much responsibility and risk you’re comfortable taking on. Remember, there are multiple paths within the RIA model. If you’re not sure which one is right for you, review the benefits and key considerations of each in our post RIA 101: Understanding the RIA Model. 

How LPL Financial Can Help

If you’re ready to begin the process of starting your own RIA, or looking for skilled guidance to help determine whether starting or joining an RIA firm could be right for you, LPL is here to help. Contact our Business Development team to learn more.