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May 23, 2007 7:09 pm

Hello colleagues. After a year of deliberation and investigation, I have decided to move about $30 million ( a good part of my current broker dealer booker) over to a solo RIA practice.

It has been an interesting research project, and I have a lot to learn about RIA, but my own personality, financial planning style, and apparent industry changes have made up my mind.

Your general insights, comments, opinions are valued.

Does anyone know of any general training (compliance and transition) that might be useful, or should I just start the process with the custodian (Fidelity) and local lawyers, and learn as I go along?

I'm wondering about things like cost basis on non-qualified funds, current A shares buy and hold from clients point of view, and so on, and wonder if anyone took a separate broker-dealer affiliation as an intermediate step.

Please don't feel compelled to respond if you have already posted on this topic and don't want to repeat yourself, I'm also looking through some older threads here.

Thanks for your help.

May 24, 2007 12:25 am

You’ve investigated and deliberated for a year and you can’t even answer these questions? What are you, some kind of retard?

May 24, 2007 2:22 am

Not to my knowledge. I like getting differnent points of view. Might even be able to share something I picked up. Guess that's why they call it a " forum ".

May 24, 2007 2:31 am

Guess that’s why they call it a " forum ".

God damn that never even dawned on me. I thought we were here to tell
racist jokes and make fun of the French.
May 24, 2007 3:56 am

… good luck with that.

May 24, 2007 4:03 am

[quote=Reggin] [quote=rialsoon]Guess that’s why they call it a " forum ".


God damn that never even dawned on me. I thought we were here to tell
racist jokes and make fun of the French.[/quote]

You mean those cheese eating surrender monkeys?

May 24, 2007 4:00 pm

[quote=Reggin] [quote=rialsoon]Guess that’s why they call it a " forum ".


God damn that never even dawned on me. I thought we were here to tell
racist jokes and make fun of the French.[/quote]

If you wish to use the Lord's name in vain, please do not subject the rest of us to this sin.

May 24, 2007 4:16 pm

[quote=vbrainy][quote=Reggin] [quote=rialsoon]Guess that’s why they call it a " forum ".


God damn that never even dawned on me. I thought we were here to tell
racist jokes and make fun of the French.[/quote]

If you wish to use the Lord's name in vain, please do not subject the rest of us to this sin.


Golly damn! I was thinking the same thing.

May 24, 2007 5:10 pm

There are compliance consultants out there you can get training from or just have them walk you through the process. I just called a number of other RIA firms and spoke with the owner. I said I'm starting my own firm and would like to run a few things by them. I called people who weren't right in my town, then meet them for lunch or coffee and talk. You'll get various perspectives and I've found them to be very open to discuss their setup and philosophies.

You can see how they present themselves and market. Kind of a mentoring relationship...

PM me if you want details.

May 24, 2007 7:56 pm

Have you found out the licensing requirements for an RIA?  I am thinking it is at least a series 7 and 66.

May 24, 2007 8:25 pm

Thanks, EDJ. I have a lunch planned with a really bright b/d to RIA fellow in another town, and thanks for the PM question offer.

vbrainy, you get to drop your series7 and insurance licenses when you go RIA. The main requirement is registration, and of course proactive compliance.

I am enthusiastic about the move, please, anyone who can relate, share some thoughts here if you like.

I guess I'm looking here for a general sense of how you valued the overall transition experience, more than details,  - and, any regrets in having moved from a broker dealer?

May 25, 2007 10:45 pm

Do a search on this forum on a poster  “Captain” who went the RIA route.  Good stuff frim a helpful person…Good luck.

May 26, 2007 2:40 am

Still here -

As for the original question, here is my take -

The RIA format is excellent for those who would like to manage individual

portfolios on a discretionary basis. That’s where the real leverage is

found within your time management and skills as an investment advisor.

The lack of… ‘call client #1, explain the rationale for making a change, do

the trade for client #1’, repeat for client #‘s 2 through 100’ really allows

you to leverage your time and efforts toward your research and

management skills. This also frees up your time to prospect for new

business rather than focusing on the tedious task of the mechanics of

executing re-allocation trades, or trades in general for a large group of

clients. Again, the discretionary tools of a full RIA practice really make

sense to me.

As a solo practitioner, you’ll find that the need to be ALL things; The

CEO, the portfolio manager, the business manager and the compliance

officer will be somewhat difficult. It’s not impossible, and it’s not a

serious barrier to entry… but, understand that you’ll have to run a much

more efficient shop than the multi-professional shops that will leverage

on the work of many individuals. The compliance piece isn’t as daunting

out of the gates, since your books and processes will be refined to

include the most recent in regulations, etc. The compliance piece as a

solo practice, however, would be BEST if outsourced to a compliance

consultant. It’s a myth that a compliance consultant is terribly expensive.

When leveraged properly, you’ll have more time to devote to your practice

growth and managment. Outsource and delegate this piece of the

puzzle. It’s still YOUR responsibility to make sure it’s handled properly,

since ignorance is no excuse.

Here’s an interesting piece of information for you to consider (this is NOT

legal advice, and I’d highly advise you to consult legal counsel before

doing any change from your independent BD to your newly-created RIA).

The whole Reg S-P is really being challenged right now for independent

and small BD’s who have yet to create a privacy policy which premits the

sharing of customer information compiled from their respective reps.

They are challenging the idea that clients weren’t given the right to ‘opt

out’ of having a rep take client information with them to their new entity.

It’s a new issue, and has yet to be ruled upon.

A-shares, cost basis - the cost basis from most BD’s (you might check

with yours…), can be eligible for electronic transfer via the ACAT system.

That makes your job much easier in terms of your transition. If you are

looking for your RIA custodian to keep cost basis data, that’s no problem.    

If you plan on using a discretionary model portfolio as your primary

method of management, then the buy and hold investor is still served.

Buy and hold clients are long-term investors. A semi-active strategy that

combines money management, financial planning and performance

reporting is a great combination. You don’t have to trade or re-balance

allllll the time, but changes DO need to be made. But, discretionary

account services allow you to facilitate changes within minutes across

hundreds of accounts, easily.

For starters - Fidelity is an excellent firm for a startup RIA with $30

million. I’d start by calling their RIA group and asking to set up a meeting

with their representative. I’d also engage an attorney for the creation of

your legal documents, application to the SEC and the transition process.

Check out Hamburger Law Firm (Brian Hamburger) on the web. They do

good work.

That’s all for now. Good luck - I don’t regret the decision at all.


May 26, 2007 3:44 pm

Thanks, Captain, for your time and thoughtful post! I have indeed identified Fidelity as custodian, and am retaining specialized local attornies for start up.

The lawyers have a customized start up package, and can be retained to do an annual office inspection, and so on. Are you suggesting to consider using a compliance consultant beyond the attornies? I have a part time assistant now who handles broker dealer compliance, and am hoping the lawyers will just tell us what to do.

I need to read up on Reg S -P, thanks for pointing that out. I had looked into going independent b/d before deciding to just go RIA, would you say that the transition rules are a little tighter if you change b/ds? ( In terms of prepopulating forms, and so on). Of course, I need to start getting into the details and run this by Fidelity and the attorneys, I'm just asking about your impression of the broader regulatory difference between changing to RIA vs. changing b/ds. And it seems if you change b/ds, client data needs to be freshly reconstituted from public information and collected again from the client, after the transition.

I'm relying on the attorney's experience, with a little coaching from Fidelity.

What about E & O? Some small RIAs have it, some say it is too expensive or even makes them a target. Do you think custodians like Fidelity will eventually require it? What is your opinion.

Great point about discretionary and leverage. The implications are just starting to become clear. I have so much support for my decision, but most of all it feels like coming home.

Thanks again, friends here.

May 26, 2007 8:08 pm


If the attorneys will also provide ongoing regulatory and compliance

assistance, then great. Most attorneys who offer a turnkey RIA setup

package also offer a compliance consultation service also. So, if you are

retaining them as your compliance consultants, that’s great. No

additional consultant (if they are doing their job properly) would be

needed. They should be the ones to give you an annual ‘mock’ audit, and

provide you with the necessary laundry list of what needs to be done in

order to keep your practice in compliance.

On Reg SP - Again, I’m not providing you with legal advice. I would check

with your existing BD to see what their policy is concerning the use of

client information as you transition to another platform (in your case, the

RIA). If they have a privacy policy that has informed customers that you

have access to their information if you leave (but they CAN opt out of this

provision), then fine. Again, talk to your legal counsel about this. It’s just

coming into light…

E/O - First, it’s not too expensive. Generally, you could expect less than

$2,000 per year. That’s small change, really. Do you need it? Depends

on the types of clients you have, and the type of business you will

conduct. I think the more indvidual equity trades you execute, coupled

with a largely NON discretionary book of business (i.e. lots of one-off

client portfolios), you might consider EO insurance a good thing. I don’t

see a custodian requiring you to maintain this insurance. They just hold

the assets, you conduct the business. Running that business is your

responsibility, and if you make an error, it is clearly your responsibility.

Good times.


May 26, 2007 8:57 pm

You are very generous in sharing your view.

For anyone who is interested, consider loading this podcast overview ( Maybe Schwab or TD have one, too) to your ipod - or just listen to it on your computer: