Making the leap to independence as a financial adviser is a bold and exciting decision—one that holds the promise of greater autonomy, the ability to shape your own firm culture, and the potential for increased long-term growth. But as empowering as it can be, the journey to becoming an independent Registered Investment Adviser (“RIA”) also comes with a unique set of challenges.
If you’re exploring the idea of launching your own practice, you’re likely feeling a mix of anticipation and uncertainty. That’s completely normal. Transitioning from a wirehouse, broker-dealer, or another firm to starting your own RIA involves more than just changing your business address. It’s a complex process that includes building out your operational infrastructure, navigating regulatory compliance, setting up technology and workflows, and—perhaps most importantly—maintaining and nurturing client relationships throughout the shift.
The road to independence doesn’t have to be overwhelming, though. With the right guidance and preparation, you can make the transition smoothly and confidently. This article is designed to help you understand the key elements involved in becoming an independent investment adviser and to give you a clearer view of what lies ahead as you begin building your own firm.
While all financial advisers aim to help clients reach their financial goals, not all operate under the same rules, standards, or compensation structures. RIAs are distinct from other types of advisers—such as broker-dealer representatives—in several key areas. Understanding these differences as illustrated on the chart below can help clarify what it means to operate as an independent RIA and what sets them apart in the financial services landscape.
| RIA | Broker-Dealer | |
| Registration/Regulatory
Authority |
SEC or state regulators | FINRA and SEC |
| Fiduciary | Yes | Suitability and Best Interest (typically based on FINRA rules) |
| Typical Fee Structure | Annual fee based on a percentage of assets under management | Commissions on transactions |
Best Practices for Becoming an RIA
While there are many benefits, there are also many considerations associated with becoming an RIA. Making the move towards independence usually means an increased burden as you take on the numerous details of your business. That’s why it’s essential to have a solid plan in place before making the leap. To set yourself up for success, consider these best practices to guide you through the transition.
Business Model
Finding the right business model has its own set of advantages and trade-offs, so it’s important to implement one that aligns best with your goals. If going independent seems like a bit more than you can handle, then perhaps joining an existing RIA as an Investment Adviser Representative (IAR) or operating as a hybrid adviser offering both fee-based services and commission-based products may be more doable.
If you’re planning to break away and build your own independent RIA, start by defining your vision for the practice. Establish a strong value proposition (i.e., a clear, concise statement summarizing who you serve, what you do for them, and why they need you), determine your pricing model, and lay out clear goals. A well-thought-out business plan is essential —it keeps you focused, helps anticipate challenges, and provides a roadmap to track your progress and success.
Registration
Investment advisory firms with $110 million or more in assets under management (AUM) are generally required to register with the U.S. Securities Exchange Commission (SEC) as an RIA. This threshold is the primary determinant of whether an RIA firm registers with the SEC or state securities regulators. Firms with less than $100 million in AUM typically register with the state(s) where they conduct business. To register you must first create an online account with the Investment Adviser Registration Depository (IARD). Doing so allows you to file Form ADV which is your registration and disclosure document.
Licensing
- Testing: The Uniform Investment Adviser Law Examination, called the Series 65 exam, was developed by North American Securities Administrators Association (NASAA) to test the competency of individuals who wish to provide fee-based investment advisory services. It has 130 questions, with a time limit of 180 minutes, including queries on the subjects of basic economic concepts, different investment vehicles, financial reporting, wealth management strategies, data analysis, and industry ethics. Today’s clients are often looking for financial advisers who offer a broad range of financial services, everything from wealth management and financial planning to succession planning and tax planning. To meet this demand and expand your client base, consider pursuing professional designations, such as the Certified Financial Planner® (CFP®) or Chartered Financial Analyst (CFA) designation. These credentials can enhance your expertise and set you apart in a competitive market.
- Form U4: Form U4 is a required document for representatives of broker-dealers, investment advisers and issuers of securities. This form, which is filed electronically with FINRA, establishes registration for those individuals. IARs in certain jurisdictions are required to meet annual continuing education requirements.
Other Key Requirements for RIA Registration
Please note the below is not all inclusive. There are many regulations applicable to both state and SEC registered investment advisers and it is extremely important that someone looking to start an advisory firm understands the rules before beginning the registration process.
- Form ADV: SEC-registered investment adviser firms must comply with Form ADV requirements, including filing, initially and annually, Part 1A, Part 2A, Part 2B[1], and Part 3 (Form CRS). Part 1 details the firm’s legal entity and business operations, Part 2A outlines the firm’s advisory practices and disclosures in a brochure format, Part 2B is a summary of business and educational background of each IAR, and Form CRS, the Client Relationship Summary, is a concise summary of the firm’s services, fees, and conflicts of interest. These documents are commonly referred to as disclosure brochures.
- Disclosure Brochure Delivery Requirement: Registered Investment Advisers are required under both federal and state regulations to deliver a Form ADV Part 2A and Part 2B(s) to each new client before or at the time of entering into an advisory agreement. In addition, Form CRS must be delivered to new retail clients at the same time. Notably, there are additional requirements for delivery to current clients during their term of engagement.
- Written Policies and Procedures: Investment advisers must have written compliance policies and procedures, which serve as the guiding document that the firm will use to enforce adherence to applicable federal and state regulations and to help prevent violations. The policies and procedures must be customized to the firm’s business and address all aspects of your advisory business.
- Books and Records: Accurate and current business records must be maintained as specified by federal and state regulations.
- Examinations and Inspections: SEC or State staff, as applicable, conduct periodic inspections and examinations of registered firms.
- State Registration/Notice Filings: SEC-registered firms must make notice filings (i.e., file a notice on Form ADV Part 1 and pay an annual fee) in the states where they conduct business. State registered advisers may need to register in more than one state, depending on location of firm offices, IARs, and/or clients.
- Payment of all Registration Filing Fees: The SEC and most states require advisory firms to pay initial and annual registration fees. In addition, the states require an initial and annual fee for IARs registering in the states.
- Financial Preparation. Starting an RIA—like any new business—can come with significant startup costs. One of the most common reasons businesses fail is poor cash flow management. In fact, about 82% of failed businesses cite cash flow issues as a key factor.[2] Even if a firm is profitable on paper, without sufficient cash on hand, it won’t be able to cover expenses like vendor payments, technology subscriptions, payroll, or other operational costs.
Conclusion
Fortunately, today’s RIAs have access to a wide range of resources to support your advisory business. [3] Core Compliance can assist with all compliance related needs, including applying for registration, creating your Form ADVs, drafting written policies and procedures, and performing ongoing monitoring and reviews to help ensure adherence to regulatory requirements. We can take care of compliance, which gives you the time to focus on providing clients with the best level of service possible while also positioning your business for long-term growth.
Author: Maggie Tavares, Sr. Compliance Consultant; Editor: Tina Mitchell, Managing Director, Consultation Services; Core Compliance & Legal Services (“Core Compliance”). Core Compliance works extensively with investment advisers, broker-dealers, investment companies, and private fund managers on regulatory compliance issues.
This article is for information purposes and does not contain or convey legal or tax advice. The information herein should not be relied upon regarding any particular facts or circumstances without first consulting with a lawyer and/or tax professional.
[1] Only state registered investment advisers are required to file their Form ADV Part 2B(s).
[2] See https://www.score.org/resource/blog-post/1-reason-small-businesses-fail-and-how-avoid-it
[3] See Vendor Roundup: Tools & Services for Success in 2025 – Core Compliance