Series 65 and Starting an RIA

An exam is one part of a launch

Passing the Series 65 does not register an advisory business or authorize it to begin operating. The exam concerns an individual’s competency. A registered investment adviser is a person or firm within the legal definition that must register with the SEC or state, or qualify for an applicable exception or reporting status. Firm authorization and individual registration are separate tasks.

Before soliciting clients or giving advice, a founder must determine what registration applies to the entity and its representatives. The route depends on the business model, client base, office locations, assets, adviser type, and statutory exceptions. Use current Form ADV instructions and regulator guidance rather than relying on an exam result.

A legal entity, brand, website, or business bank account does not prove that the advisory firm is registered. A submitted application may also be pending. Confirm required registration status and state conditions before providing services that require registration.

Describe the business before choosing a route

An RIA is an advisory business, not a particular company type. Describe the services first: ongoing portfolio management, financial planning, model portfolios, hourly advice, pension consulting, or advice limited to a particular class of assets. Services affect the firm definition, disclosures, contracts, custody analysis, fees, and state or federal filings.

Next identify who will receive advice, where the work occurs, and how the business will be paid. An asset-based fee, hourly rate, planning retainer, and performance fee raise different billing and disclosure questions. Compensation alone does not decide every regulatory issue, but it is part of the adviser definition and influences conflicts.

Write a short operating description: services, client types, decision makers, locations, fee methods, affiliated activities, and who handles client assets. This description gives the founder a consistent basis for regulatory filings, client documents, website language, and compliance procedures.

Choose the firm registration route

Investment advisers generally register with the SEC or state securities authorities, or report under a specific status if eligible. Federal law allocates registration authority using factors such as adviser type, assets under management, and exceptions. Those rules can change, so verify current eligibility instead of relying on a memorized threshold.

Form ADV is the central registration and disclosure form. The SEC describes Part 1 as information about the adviser’s business, owners, affiliates, and disciplinary history. Part 2 is a narrative disclosure about practices, fees, and conflicts. States may ask for additional materials or fees.

A filing is not always the same as approval. The SEC provides a process for checking registration status in IARD; state review can differ. A founder should confirm whether the relevant filing is effective or accepted before describing the firm as registered or starting a regulated service.

Organize the entity and ownership

Founders often choose a corporation or limited liability company, but the decision involves liability, tax, ownership, governance, and succession. The exam tests characteristics of entities; choosing one for an operating advisory firm calls for legal and tax advice based on the founders’ facts and state law.

Form ADV asks about names, organizational form, owners, control persons, employees, and affiliations. The entity documents should match those disclosures. If a parent company, spouse, holding company, or outside investor controls the adviser, determine how the relationship is reported and who has decision authority.

An ownership chart can list the operating adviser, owners, parent companies, affiliated broker-dealers or insurance businesses, and people who provide advice. It helps with disclosure and conflict review. The chart does not itself determine whether a firm qualifies for a particular regulatory status.

Prepare Form ADV as a disclosure control

Form ADV describes the firm to regulators and clients. Its answers should match actual services, fees, investment methods, client types, affiliations, conflicts, custody practices, and disciplinary history. Inaccurate or stale responses can create problems when the brochure, agreement, website, and daily operations tell different stories.

Part 2A is the firm brochure. It describes services, fees, methods of analysis, strategies, risks, conflicts, and other required information. Part 2B can describe supervised persons who provide advice. Use plain language and check that the brochure reflects how the firm actually operates.

Compare the brochure with the client contract, fee schedule, website, invoice, and onboarding materials. If the brochure says a 1% annual fee is billed quarterly on managed assets but the contract uses a flat monthly planning fee, clarify the real arrangement and correct the documents before onboarding.

Build procedures around the client workflow

Compliance procedures should show who reviews onboarding, recommendations, trading authority, billing, advertising, complaints, personal securities activity, records, and regulatory updates. A small firm may have one principal doing several jobs, but each procedure still needs an owner, a review schedule, and evidence that it operated.

Map a client from inquiry to termination: gather profile and identity information, document advice and conflicts, sign the agreement, open the account, verify authority, deliver disclosures, bill according to the contract, review the portfolio, retain communications, and close or transfer the account. Each handoff can be a control point.

A compliance manual should match the firm. A firm that does not take physical possession of assets still needs to assess whether fee deduction or another arrangement creates custody under the applicable rule. A discretionary account needs a process for authorization, trade implementation, and review.

Analyze custody and trading authority

Custody and discretion are related but distinct. Custody concerns possession of client funds or securities or certain authority over them under the applicable rule. Discretion concerns permission to choose transactions without obtaining client approval for each trade. Analyze how funds enter the firm, who can move assets, how fees are deducted, and who can direct the custodian.

Using an independent qualified custodian can address some risks but does not automatically resolve every custody question. Fee deductions, related-person access, trustee authority, pooled vehicles, and account control can affect the analysis. Use current rule text and state requirements rather than relying on a general label such as “third-party custodian.”

A control map can list each account, custodian, authorized persons, trading authority, withdrawal authority, fee method, statement delivery, and reconciliation responsibility. Permission to trade differs from permission to withdraw. The legal result still depends on the rule’s definitions and the actual arrangement.

Set fees and billing controls

An advisory fee should be understandable and consistent across the contract, brochure, invoice, and client conversation. A firm might charge a percentage of managed assets, a flat planning fee, or an hourly rate. The method affects when the fee is charged, how it is calculated, and what records should support it.

Suppose a firm charges 1% annually on a $400,000 account, billed quarterly in arrears using quarter-end value. A simplified quarter’s fee is 1% divided by four, multiplied by $400,000, or $1,000. If the agreement instead uses average daily assets or bills in advance, the result and timing differ.

Billing controls should reconcile the fee schedule, account value, period, deductions, credits, and invoice. Review exceptions such as a new account opened mid-quarter, a withdrawal, a terminated relationship, a household discount, or a negotiated minimum. An accurate annual rate does not guarantee an accurate invoice.

Identify conflicts before serving clients

A new firm can have conflicts from compensation, proprietary products, referral arrangements, outside business interests, personal trading, affiliated services, or discretionary authority. List who benefits from each arrangement and how it could affect advice. Disclosure matters, but it does not make every conflict acceptable or every recommendation sound.

Suppose a founder receives compensation from a third-party manager for placing clients in that strategy. The firm should check whether the arrangement is permitted, what the client must be told, whether alternatives are available, and whether recommendations remain in clients’ interests under applicable duties and rules.

Conflicts can arise from several roles. If the founder acts as adviser, trustee, planner, and insurance agent, clients may need to understand how those roles interact and how each is paid. Avoid describing a service as independent if affiliations or incentives affect it.

Plan records, privacy, and technology

Advisory records can include contracts, client profiles, advice, orders, invoices, disclosures, advertisements, email, text messages, performance data, and compliance reviews. Retention rules depend on the adviser’s regulator and applicable law. A recordkeeping plan should identify official systems, access controls, backups, retention settings, and who approves deletion.

Before selecting a CRM, portfolio platform, e-signature tool, or cloud storage vendor, decide what data it receives, who can access it, how incidents are reported, and how records can be retrieved if the relationship ends. Vendor assurances do not replace adviser oversight.

A response plan should say whom to contact, how to contain an incident, how to preserve evidence, and how to determine whether clients or regulators must be notified. State privacy and breach-notification laws can differ. The firm should know who owns each step before an incident occurs.

Choose a model the firm can supervise

A founder may start alone, hire employees, use outside solicitors, or share operations with an affiliated business. Each choice affects supervision, conflicts, records, and registration. A contractor who solicits clients or gives advice may raise registration and oversight issues; a service agreement should define access, duties, confidentiality, and termination.

Compare two launch designs. One firm provides financial planning, manages accounts through an independent custodian, and charges quarterly. Another also sells insurance through an affiliate and receives referral payments. The second model adds disclosure, supervision, data-sharing, and conflict work even if each service is otherwise permitted.

Keep the initial scope within the founder’s capacity. Adding a private fund, model portfolio, performance advertising, or outside manager can change filings and controls. Review the new activity before launching it, not after the first client depends on it.

Work through a two-founder launch

Jordan and Priya plan a state-based planning firm. Jordan passed the Series 65; Priya has not. Both expect to provide personalized securities advice. They identify the relevant states, determine the firm’s registration route, and ask whether Priya needs the exam or qualifies for an accepted designation. Jordan’s result does not register either cofounder or the entity.

They organize the entity, identify owners and control persons, prepare Form ADV and U4 filings, write the brochure and agreement, select a custodian, set fees, and document supervision. They wait for the applicable registration status before offering regulated services.

Before accepting a client, they test onboarding, recommendation documentation, billing, statement review, complaint handling, and record retention. The exercise reveals that the draft brochure promises monthly reports while their system supports quarterly reports. They correct the service and disclosures before relying on the claim.

A final launch review

Confirm the firm’s registration or reporting status, individual registrations, required disclosures, signed agreements, fee calculations, custody analysis, privacy controls, complaint handling, business continuity, and record retention. Identify any state-specific conditions and assign a person to monitor them.

A solo founder can move quickly, but the same person may be the only one who knows a control. Calendars, checklists, secure systems, and outside review can help keep filing and client duties from depending on memory. A checklist is a control aid, not proof that every requirement has been met.

Use qualified legal, tax, and compliance support for the firm’s facts. This overview cannot determine whether a founder’s activity requires registration, which states’ forms apply, or how a particular custody arrangement should be treated.