Question re: RIA

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Aug 19, 2008 9:19 pm

If you don't plan on selling securities as a financial planner (fee-only tax/FP charging by the hour) do you have to register as a RIA?  I can't seem to get a straight answer on this.  Anybody know or can link to specific state requirements? 

Thanks
Aug 19, 2008 9:32 pm

No. You can be a fee-only financial planner and just give financial advice. However, you cannot manage money for a fee without being an RIA or IAR. But I would suggest, at minimum, that you have a CFP or ChFC (CFP is better). Otherwise, what can you claim yuo have done to qualify you??

Aug 19, 2008 9:40 pm

By the time I'm up and running, I intend to pass the CFP, however, I won't be able to use the credential until I have 3-years FT work experience.  The NYS site is vague on this matter.

Aug 19, 2008 10:22 pm

I have no idea why I am helping you.  You very likely will end up hurting someone because you have not only no idea what you are doing, but also believe studying for the CFP will make you qualified for what you seek to do – it will not.  It will give you just enough book learning to make you dangerous and you will have no one mentoring or supervising you who could teach you and provide you, but more importantly, your clients a safety net of knowledge and experience.


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I’m not an attorney, but my reading of the New York State Investment Advisor Regulations leads me to believe you would need to register with them if you wish to charge by the hour for financial advising:



http://www.oag.state.ny.us/investors/investmentadvisor_regulations_2003.pdf


From the bottom of page 23 and top of 24:


 


(f) Investment adviser shall mean any person who, for compensation, engages in the business of advising members of the public, either directly or through publications or writings within or from the State of New York, as to the value of securities or as to the advisability of investing in, purchasing, or selling or holding securities, or who, for compensation and as a part of a regular business issues or promulgates analyses or reports concerning securities to members of the public within or from the State of New York.


 


(g) Investment supervisory service shall mean any person giving continuous advice as to the investment of funds on the basis of individual needs of each client.


 


Some FAQs regarding New York Requirements are here: http://www.oag.state.ny.us/faqs/faq.html#25


 


If you had clients in other states, then you would need to meet that state's requirements.  This is one of the reasons why RIAs may choose to register with the SEC instead of their state.

Aug 19, 2008 10:32 pm
FrankNYC:

If you don't plan on selling securities as a financial planner (fee-only tax/FP charging by the hour) do you have to register as a RIA?  I can't seem to get a straight answer on this.  Anybody know or can link to specific state requirements? 

Thanks



Frank,

While regulations vary a bit from state to state (and you will be subject to state registration rather than SEC unless you have at least $25 MM under management), if you hold yourself out to the public as a financial planner and charge for your service you will need to register as an RIA or as an IAR.

But first things first, Frank.  You need to take the time to do your homework.  Search old posts here, especially in the RIA & Independent sub forum.  I know I've written at length on the topic as have others if you take the time to search.  Then go to one or both of these websites and spend some time.  These are the two leading custodians for RIAs.

http://www.fiws.fidelity.com/index.shtml

http://www.schwabinstitutional.com/public/

Once you do more research you may want to revisit the business model you mention involving only hourly planning fees, at least if one of your objectives is to make a decent living while helping people.  For some reason hoards of people outside the business seem to buy into the naive notion that there is something inherently evil or unpure about charging a fee to manage portfolios, and something special about planning fees, hourly or otherwise.  Rubbish.

I would add getting actual work experience is much more important than getting a CFP.  People care about experience and expertise more than credentials they really don't understand. 

Aug 19, 2008 10:53 pm

I have been doing financial planning and reading about financial planning for over 20-years.  I was in the military and therefore was exempt from state regulation (although I've never actually charged a fee for my service, I have given lectures and published articles on financial planning basics for military personel)  Anyway, I plan on providing my services for a nominal-fee for military personel.  I fully understand our pension and benefits system better than a CFP.  My area of expertise (military benefits, taxes, promotion, etc) are not covered by your regular CFP course, however, in fairness to my future clients, I will have my EA designation, series 65 and have completed and tested for the CFP before I start charging for my services. 

Aug 19, 2008 10:58 pm

btw, I have invested with Vanguard for over 15 years (I have 80% of my money invested with them) and my research and due-dilligence have allowed me to beat the market (s&p 500) for 12 out of those 15 years.   I plan to disclose my work experience (or lack thereof) to my future clients and they can decide whether they want to invest with me or not. 

Aug 19, 2008 11:50 pm

Although I have a fairly good understanding of how financial planning works, I refuse to start charging until I get my basic training--that being:  complete the CFP course and pass the test, pass the series 65 and EA exams.  Will I be completely prepared?  No, but, I can always tell them "I'll research that and get back to you."  I have entered Ameriprise and similar outfits and have spoken to "financial advisors" who have no idea what's going on.  If 3-hours of my advice for $300 will save someone from dumping their money in Primerica, et al, I'll be happy. 
Aug 20, 2008 12:03 am

I would love to join a firm but they all require full-time commitment.  I can only devote to PT right now and I rather not work for the Primerica.

Aug 20, 2008 12:08 am
FrankNYC:

I fully understand our pension and benefits system better than a CFP.


That's not saying much.
Aug 20, 2008 12:10 am
FrankNYC:

 I have entered Ameriprise and similar outfits and have spoken to "financial advisors" who have no idea what's going on.  If 3-hours of my advice for $300 will save someone from dumping their money in Primerica, et al, I'll be happy. 
 
Many people who choose to work with crap places can not be saved.  That's why they do business there.
Aug 20, 2008 12:13 am
FrankNYC:

I can only devote to PT right now and I rather not work for the Primerica.

 
Don't you think if you are trying to save people, that you are doing them an injustice by only working for them part time?
Aug 20, 2008 12:23 am

Eventually I will go full-time, but I can't make that jump now.  I want to transition in 2-3 years. 

Aug 20, 2008 12:33 am
Rodee:

Eventually I will go full-time, but I can't make that jump now.  I want to transition in 2-3 years. 

 
Who are you?  Is this FrankNYC? 
 
This business is tough enough full time, you're better off doing something else for several years until you can make the jump to go full time.  Rookies are more likely to blow their clients up than vets.  Rookies that start part time is A LOT worse than that.
Aug 20, 2008 8:07 am
Rodee:

Eventually I will go full-time, but I can't make that jump now.  I want to transition in 2-3 years. 

 
Rodee, if you have any sites or info on PT opportunities, pls. post them.  This is a 2nd career for me, so doing it full time is out of the question.
Aug 20, 2008 9:30 am

Frank - you sound like a straight shooter who values honesty.  Two points for your consideration.

I'm sure you realize that reading about, writing about and lecturing about something does not constitute doing that thing, much less preparing one adequately to be considered a professional.  If it did, I would be on the PGA Tour instead of the hopeless hack I am.  The only way to get proficient at anything is to DO it repeatedly and have a coach or mentor who will help you correct your mistakes - mistakes we all make while achieving proficiency. 

If I want to become a proficient golfer I would need to dedicate the time necessary to  be out on the driving range, actually golfing, with an instructor.  If you want to become a proficient advisor you will need to dedicate the time necessary to actually start PRACTICING with a mentor.  Getting a CFP can never replace the need to DO, any more than reading more golf magazines will ever replace my need to DO. 

And neither of us are likely to accomplish our goals if we are only willing or able to dedicate part of our efforts to the task.  If you aren't able to dedicate the time necessary to attack your goal full time, adjust your plan or adjust your goal.  This isn't a part time gig.  Clients don't CARE if this is a second career or if it is hard or impractical for someone to transition to this field.  They only care about their worries and dreams ... not ours. 

Second, if and when you truly learn to be a professional advisor, planning skills alone are not sufficient to make a living on an ongoing basis.  You must have a practical business model which will, if implemented, allow you to make a reasonable profit.  Otherwise you will not be around to help anyone.

I know this is obvious to you in theory, but your comments about only doing hourly work, while focusing on military personnel, and charging only a "nominal" fee, are a big red flag.  How many billable hours - exactly - will it take for you to survive?  How many clients is that?  Where are you going to get them, and how - exactly? 

I'm not saying you can't do this, Frank, but you will dramatically increase your odds for success if you reconsider your approach.  Before you begin building make sure you know the cost and are able to see the job through to the end.