How to Become a Registered Investment Advisor


Authored by Jayant Row in Investments
Published on 04-08-2009

An investment or financial adviser, is one who advices his clients where to invest and if necessary also manages their portfolio for them. An investment adviser can be registered with the authorities and have a license to operate after he passes the SERIES 65 exam or the Uniform Investment Advisers Law examination. Qualified candidates can then operate as registered investment advisers. The test consists of 130 questions plus 10 pretest questions. In three hours the candidate has to answer at least 89 questions correctly to obtain the SERIES 65 qualification. There are no educational pre qualifications and with just a study of four weeks a candidate can give the exam and obtain the necessary registration.

A registered investment adviser is allowed to charge a fee for his services. This is generally a fixed proportion of the portfolio managed, and is not dependent on any sales or buys made, as would be the case if a broker is involved. A customer with a registered investment adviser is under no pressure to buy or sell, as would be the case if he is linked up with a registered broker, as their commissions are solely dependent on the trading done.

The qualification of a SERIES 65 is not mandatory in all states, but if you are thinking of becoming an investment adviser, do make it a point to get this registration. It automatically gets you the confidence of your potential customers and the few weeks of study would enable you to really understand the business and laws and regulations that govern it.

Many insurance agents and financial planners come to a stage in their careers where they need a challenge and what better way to do this than being registered as an investment adviser. They are then able to use all the knowledge that they have gained during their professional stint and convert it to their gain. Once you have decided that that is the way you want to go, just do it. After all you already have an existing office and business that you are managing presently and do not need any further infrastructure.

As a RIA (Registered Investment Adviser) you would first need to assess what your fixed expenses are likely to be. This should include insurance coverage, software and record keeping systems. Of course do not forget the traditional business expenses of telephones, office rentals, computers and possibly staff. You should then set yourself a target to cover all these expenses from the fees that you charge. As these are generally fixed by associations and competitors you would have to be sure that your fees are in the same range. This would then allow you to estimate how much business in the form of customers portfolios you need to have so that you can cover your expenses.

As you have already been in the field you will be aware of how to manage a portfolio, and the amount of research and hard work that goes into doing this. Do this for your customers and if they are satisfied, you will almost certainly get additional customers through their references or by word of mouth. See that you are linked up with a good and efficient custodian as you would need their services. A custodian is a financial institution that would be responsible for safeguarding your customers’ assets, arrange sales and purchases and provide information on companies besides managing all cash transactions.

A RIA needs to ensure that he is complying with all the laws and regulations as because of his license he will be audited every couple of years by the concerned authorities and he must make sure that he is in full compliance mode. A good RIA has a separate section to ensure this so that he does not fall foul of the law.


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