11 steps to becoming an RIA without upsetting Merrill Lynch, the SEC or your clients

Great article Brooke. My experience at TradePMR confirms Mr. Giachetti is a good source of knowledge. I echo his view. My biggest question is whether he advocates leaving the wirefirm first before starting the RIA Registration Process or does he advocate staying with the firm while starting the RIA registration process? I’ve always told the Wirehouse Advisors I work with to leave first, register later because if they start the process while still employed, they could be found liable for establishing an unauthorized business activity and the firm might have a good reason to terminate for cause. I know some firms setup the RIA for the sole benefit to the Advisor and sell it back to him/her for $1 but I’m not sure how ethical that is and how the Regulators view that type of transaction.

Which states allow you to pracice with just a CFP? I’m looking to start a RIA and charge by the hour only. I donot plan to custody assets.

Fred and John,

Let me see if I can get definitive answers. I put my opinion then deleted it. I wouldn’t want to misguide in the legal realm.

Brooke

One item that was left out was getting health insurance for your biz – that was probably the hardest thing we had to do. Everything else was easy by comparison.

Hi Erick,

That’s interesting.

It sounds from your tone that there’s enough to the story to be worthy of an RIABiz column?

cheers,

Brooke

If I get my series 65 and start an RIA firm can I pick stocks for investors.

Thank You,
Nelson

Hi Nelson:

Money managers are RIAs who build portfolios of securities, mutual funds, hedge funds, and other investments for their clients. You determine what is bought and sold. The transactions are handled by your custodian’s clearing relationship. You do not process the trades yourself because you will not have a B/D relationship.

Jack

Ok, so tell me if this would be wrong/illegal:

If i my clients were to setup their own accounts and i make trades by accessing their accounts and then charging a fee??

I’m in the process of getting my series 65 study guide to begin the process.

My understanding from members of the Paladin Registry is your client opens an account at one of the custodians (Schwab, Fidelity, Pershing, TD Ameritrade). The investor does or does not give you discretionary authority to make trades without his approval in advance. If you are given discretion you have what is called a Limited Trading Authority. You contact the custodian and tell the trader what to buy or sell for the investor’s account. You receive copies of confirms so you can update your records.

I cannot make trades on my own even though I would have “limited trading authority”??

That is my understanding. If you have discretion you are acting as a portfolio manager. You determine what is bought and sold in the portfolio. You contact the custodian’s trading desk to execute transactions. There are no transaction commissions. If you don’t have discretion the investor has to approve buys and sells before there are any transactions. Then the process is the same.

You may be crossing RIA and stockbroker. If you want to trade accounts and receive commissions you would need a Series 7 that is held by a B/D.