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Starting out as an RIA

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Mar 24, 2009 1:38 am

[quote=BiLo] I was not aware of the b/d requirement of 25mil AUM. How do the mechanics work on putting clients in stocks and bonds if you are an RIA? Do you execute the trade for them and can you pick up the phone and sell WMT stock or some other bond as long as you are not paid a commission on it?

Are you requiring a minimum account size and then charging a percent for up to so many trades per year?[/quote]

I don’t think there is a BD requirement of $25 million. There is a requirement to be registered with the SEC that you have $25 million AUM… if you don’t meet that requirement, you’ll have to register with the state.

As to the ‘mechanics’ question - you can do everything much as you did while working at a BD. You can buy blocks of stock and allocate among a group of accounts, or execute stock and bond trades on an individual account basis… it’s your call. The trading systems permit you to do it either way. It’s all through an online system, or a separate trading system… no need to pick up the phone to do anything unless you are having a problem. The real beauty is trading hundreds of accounts at one time by a few clicks of the mouse… it saves LOADS of time.

On the WMT stock question - if your client has granted you with discretionary trading authority, yes… you can sell the WMT stock and buy something else as long as you are confident that your decision is within the risk parameters of your client’s intentions.

While we don’t have a hard and fast account minimum, we generally require a minimum of $100k in taxable assets, or $50,000 in retirement assets. The funds we use have minimums that need to be met… and according to our asset allocations, you’ll need to meet either of our required minimums in order to be allocated among our models.

We charge based on the account size, and it has nothing to do with the number of trades executed for the client.

Mar 24, 2009 3:27 am

You need to figure out if you want to be a B/D or an RIA first.  It is much easier to be an RIA vs. BD.  From a compliance perspective RIA is also easier.  B/D there is  also a minimum capital requirement.

Hope this helps.


Nov 21, 2009 2:53 am

PManager -   how have you progressed in your efforts?  I am looking at the same type of situation for myself in SC. Can you share some of your learning experiences?

Nov 21, 2009 7:17 pm

tcman, many others have gone indy/RIA from the time the original post was written. Heck, I was one of them. hehe.

Dec 4, 2009 4:04 pm

Can I become a RIA and still be registered with my indy? I have my series 7, 66, life & health with them. Would I continue to place my transactions through my B-D’s clearing firm?

Dec 4, 2009 4:31 pm

Until compliance wants to look at it. Then they say it falls under their jurisdiction as an outside activity. If you are mostly fee, you may want to look at firms like tradepmr where you can do some comish biz as you convert to all fee.

In the current regulatory environment, I don’t know if I would want to have an RIA and a b/d.

The other option, is some indies will let you use them as the RIA and you become an IAR.

Dec 4, 2009 4:52 pm

Well I posted this question before but now I have a little better understanding;

  If I want to charge my clients a fee for advice whether it be trading stocks, bonds, MF, options, etc based on AUM and complexity then I am a RIA rep?   I've seen how some firms have outside fund managers who take 80bps to manage and the rep gets 80bps to maintain the FA/client relationship. I would want to wear both manager and rep cap so I don't have to split the fee in half. This is called being a RIA, correct?   Are you saying I can't run the trades through my B-D's clearing agent and their back office?
Dec 4, 2009 5:14 pm

The firm I work for his a RIA.  We have both wrap clients and direct clients.

  With the wrap clients, we are the money manager and split the fee paid with the Rep / firm.  For our direct clients, we bill them and keep 100% of the fee.