Answers To Common Questions On Establishing an RIA

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Section 202 of the Investment Advisers Act of 1940 defines an Investment Adviser as any person or firm that, for compensation, (1) engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities or (2) that, for compensation and as part of a regular business, provides analysis concerning securities. There are certain exclusions from the definition, which mostly exclude individuals and firms that provide only incidental advice.

Generally, advisors are eligible (and required) to file with the SEC in lieu of filings with the state(s) if their assets under management exceed $30 million or they serve as an advisor to investment company assets (i.e., mutual fund advisor). An advisor with greater than $25 million but less than $30 million has the option to register with the SEC.

If a firm currently has less than $25 million, but expects to have assets exceeding that level within 120 days, the advisor may register with the SEC instead of the state(s). However, if the advisor fails to meet the $25 million threshold, the advisor must file a withdrawal from SEC registration and re-register separately with the state(s).

There are some exemptions that enable advisors with less than $25 million to file with the SEC, including:

  • Firms serving as advisor to registered investment companies (“RICS” or commonly “mutual funds”)
  • Firms with clients in 30 or more states
  • Firms serving as a pension consultant providing only advice to plans with assets greater than $50million (not managing assets)
  • Firms providing investment advice solely via the Internet

The registration process, including entitlement and Form ADV filing, generally will take between six and eight weeks, depending on the complexity of your firm and the backlog on the IARD system for the various regulatory agencies. The agencies typically take 45 days to approve or decline and application.

Form ADV is the official form for advisor registration with the SEC or the state regulators. Form ADV serves two primary functions. ADV Part 1 is the the investment advisor registration document and ADV Part II, also know as the “brochure” is the disclosure document that must be provided to clients prior to entering into an advisory agreement.

Form ADV Part 1 is filed electronically through the IARD system. Firms registering with the SEC must complete Part 1A and firms registering with the state(s) must file Part 1A and Part 1B.

Form ADV Part II, along with Schedule F serves as the disclosure document provided to clients and filed with the regulators. Form ADV Part II and Schedule F must also be offered to existing clients on an annual basis. A firm may opt to develop a formatted marketing brochure instead of Form ADV Part II. This approach is acceptable, provided that the marketing brochure contains all of the required information in Form ADV Part II an supporting schedules.

Common Questions Regarding Examinations

To establish an RIA Firm, all individuals involved with the investment, sales and clients services processes (all referred to as “Investment Advisor Representatives” or “IARs”) must pass a Uniform Advisor Exam or qualify for an exemption. The exam options include the Series 65 (“Uniform Investment Advisor Exam”) and the Series 66 (Uniform Combined State Law Exam). Advisor applicants who have an active Series 7 exam (no longer than 2 years unaffiliated with a broker-dealer), may opt for the Series 66 exam instead of the Series 65 exam. The Series 66 is narrower in scope and therefore less difficult.

No. You do not need to be sponsored to take the Series 65 or Series 66 exams. These exams were developed by the North American Securities Administrators Association (“NASAA”) to test competency. The exams are only administered through FINRA.

Yes. Certain professionals designations in good standing, such as Certified Financial Planner (“CFP”), Chartered Financial Analyst (“CFA”), Personal Financial Specialist (“PFS”), Chartered Financial Consultant (“ChFC”) or Chartered Investment Counselor (“CIC”) will typically enable an advisor to request an exemption from the exam requirements in many states. The applicant is still required to apply for registration as an investment advisor representative (“IAR”) by filing a Form U4 and paying the associated registration fees to the applicable state securities regulators. To discuss your unique situation, please complete the adjacent form or call us at 866.513.4042.

If your exam was initiated by filing a Form U-10, your current employer will not be immediately notified of the examination. If your examination is prompted by a U-4 filing, your existing firm would be notified to request a transfer out of the old firm via a U-5. AdvisorAssist professionals will help you to manage the timing and sequence of events to avoid premature interruption of your employment and to enable you to inform your employer before the FINRA system notifies them. AdvisorAssist also offers an RIA Transitions Incubation Service, in which we can establish your firm for you, to your specifications, while you continue employment or handle other business affairs.

To register for the Series 65 or Series 66 exam, you must complete a Form U-10 and submit to FINRA. Submission can completed online here.

You may schedule your examination immediately following the opening of your examination window (“enrollment period”). The enrollment period is 120 days (4 months). Upon receipt of your enrollment confirmation from FINRA, you may contact a testing center in your area to schedule the exam. You may only take an examination once per enrollment. If you do not pass the exam, you may re-submit a Form U-10 along with the fee for re-testing.

The Series 65 exam costs $135 and the Series 66 exam costs $128. Fees are non-refundable by FINRA (FINRA administers the testing process on behalf of NASAA).

There are testing facilities near all major cities and through the United States (and some international as well). Testing Centers are sub-contracted through Pearson Professional Centers or Prometric Testing Centers.

The exam can typically be taken Monday through Saturday. Contact the appropriate testing center for exact availability.

The Series 65 exam consists of 130 questions (plus 10 pre-test questions) covering relevant topics around providing investment advice to clients, such as Economics, Investment Vehicles, Investment Recommendations and Strategies, and Legal and Regulatory Practices. Applicants are allowed 180 minutes to complete the examination. Click here for the NASAA Series 65 Exam Outline.

The Series 66 exam consists of 100 questions (plus 10 pre-test questions) covering relevant topics around providing investment advice to clients, such as Economics, Investment Vehicles, Investment Recommendations and Strategies, and Legal and Regulatory Practices. Applicants are allowed 150 minutes to complete the examination. Click here for the NASAA Series 66 Exam Outline.

There are several providers of training materials and classroom studies, including reference books, practice tests, and other materials. For information, please contact us using the form at the right of this page.

For the Series 65 exam, a score of 72% or greater (94 of 130 questions correct) is required to pass. For the Series 66 exam, a score of 75% or greater (75 of 100 questions correct) is required to pass. However, some states do require certain scores of up to 85% to be eligible for registration as an IAR. Note that the Series 65 exam and the Series 66 exam have 140 and 110 questions, respectively, but 10 of the questions do not count towards your scoring. Updated as of January 1, 2010.

No. You have the full allotted time for each exam to complete and review the questions. You may change any answer prior to submitting your exam for completion.

At the completion of the exam, the computer will display your score. Make sure you obtain a copy of your score from the testing center administrator before leaving.

If you do not receive a passing score, you must file a new U-10 form and pay the exam fee to reopen the exam window. You must schedule the new exam at least 30 days from the date of the failed exam. If you do not pass on the 3rd attempt, you must wait 180 days for re-testing.

AdvisorAssist completes all Form U-10 requirements as part of its Registration & Transitions Services.