Frequently Asked Questions

RIA Consults provides compliance consulting services for: Registered Investment Advisors | Financial Planners | Private Fund Advisors | Robo-Advisors | Fund Managers | FinTech Entrepreneurs

Overview:

• RIA Registration: Registering new firms/updating jurisdictions. (SEC/State, FINRA)
• RIA Compliance Consulting: Assistance with ongoing reviews, policy & procedures, and filings.
• Mergers/Transitions: Business Succession/Partnership/Deal Flow Matchmaking Services.
• FinTech Compliance Framework: Crowdfunding | Enterprise | More

As a part of Rule 206(4)-7, SEC-registered investment advisers (under the Investment Advisers Act of 1940) must:

1. Develop Policies and procedures: Adopt and implement written policies and procedures reasonably designed to detect, identify, or prevent violations of the investment advisors act.
2. Conduct an Annual review: Review, no less than annually, the adequacy of the firm’s policies and procedures. (i.e. updates, forensic testing, risk assessment, etc.).
3. Designate a Chief compliance officer. Designate an individual (who is a supervised person) responsible for administering the firm’s policies and procedures.

1. Some states, such as Washington and Florida, require firms to conduct an annual review of their firm’s policies and procedures.
2. Other states may recommend (but not require) firms to conduct a formal annual review, along with maintaining a compliance manual of firm policies and procedures. Refer to state securities websites for more information.

Note:  State advisors may refer to the SEC’s annual review guidelines as mentioned above.

1. Annual Offer Letter – firms should send clients a: (1) Summary of Material Changes, (2) Offer for complete ADV brochure, and (3) a copy of firm privacy policy notice.
2. ADV Annual Updating Amendment – Most firms must file an: (1) Annual Updating Amendment within 90 days after the firm’s fiscal year end (each year).
3. Financial Statements – State-registrants with: (1) Discretionary authority and/or (2) Custody of assets may be required to file annual/quarterly/monthly statements with state regulators.
4. 13F Filing – Institutional firms with more than $100 million in 13F reportable securities must make an Edgar filing within 45 days after calendar quarter end.

Below, is an example of common regulatory rules (not an exhaustive list)

• RIA - SEC and/or State Securities Uniform Securities Act
• Private Fund – SEC and State of activities
• IAR (Advisor Rep) – State of Activities and SEC
• Broker-Dealer – FINRA
• RIA & Broker Dealer – SEC Advisors Act & FINRA
• Payments Firm – FACTA, Patriot Act, NACHA, SSAE II (SAS 70 equivalent), PCI-DSS Level 1, and other.
• Congress (all firms) – Reg S-P, Reg S-ID, Safe Senior Act

All firms:

1. Who are advisors (or sub-advisors) to private funds (e.g. pooled investments vehicles) with authority to transfer assets/funds.
2. Who are trustees or have power of attorney (e.g. check writing authority or authorization to move money from a client’s bank/brokerage to a third party outside of role of discretionary trading authority).

SEC Firms:

• Who accepts a prepayment of $1200 or more for (six months or more) of advisory services.

States firms (most states*):

• Who accepts a prepayment of $500 or more for (six months or more) of advisory services. *Pennsylvania firms are deemed to have custody if they accept a prepayment of $1200 or more for (six months or more) of advisory services.

Business Continuity Planning:

According to “books and records” Rule 204-2 (books/records) of the investment advisors act, and similar state rules: (1) Firms should test and regularly update their business continuity plan at least once a year. 

Succession Planning:

While drafting a plan to satisfy the SEC’s latest amendment to Rule 204-2 (and similar state rules), advisors should consider the firm’s operational/legal components.  

In the event of the death/incapacitation of a advisor/owner: (1) who immediately takes over to safeguard assets (operational duties during an emergency), and (2) what legal agreement is in place if the death/incapacitation of an advisor/owner prompts an estate issue* with any heirs of business, regulators, and/or other employees.  

Advisory/Portfolio Management Fees:

Assets Under Management based fee - Can range from anywhere between .50% - 2.5% (50 to 225 basis points)

Financial Planning Fees:

Flat Fee: Typically range from $500-5000 or more depending on complexity of client.

Hourly rate: $200 and up

*Note: The following is a general estimate based on research from our compliance consulting partner: RIA Consults – Roberson Consults Group.

According to Rule 205-3 of the investment advisors act (also applies to state-registrants),

Clients must have:

• $1 million in investable assets or $2.1 million* in net worth
• Pre-2011 clients: Will be grandfather into the "pre-2011" thresholds ($750,000 in assets with firm or $1,500,000 in net worth). Firms can continue to rely on grandfather clauses for these types of clients.
• *Effective 8/15/2016, threshold limits were increased from $2 million to 2.1 million to factor in inflation.

Generally, there are four types of agreements to enter into an advisory relationship with client and/or solicitor arrangement with a prospect.

Advisors Contracts:

• 1. Advisory Contract (aka “Investment Management Agreement)
• 2. Consulting Agreement
• 3. Financial Planning Agreement
• 4. Solicitor Agreement

According to Rule 204-2 (books/records) of the investment advisors act (and similar state rules).




Firms should keep client records at least five years from the fiscal year-end date of last client transaction/activity. Records may be kept in print or electronic format.

Contact us for consulting support.

Contact us for consulting support.