How to Switch Broker Dealers to a Registered Investment Advisor

Switching from a broker-dealer to a registered investment advisor (RIA) can be a complex process, but it's a great opportunity to gain more control over your business and improve your services.

First, you'll need to decide on the type of RIA you want to become. According to Article Section 3, you can choose from a single-member RIA or a multi-member RIA, depending on your business needs.

Before making the switch, it's essential to understand the costs involved. As mentioned in Article Section 5, you can expect to pay between $500 to $5,000 for registration fees, depending on the state you operate in.

To get started, you'll need to register with the Securities and Exchange Commission (SEC) and your state's securities regulator. Article Section 6 explains that this process typically takes 30 to 60 days, but can vary depending on the complexity of your application.

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A thorough assessment of your current circumstances is essential when considering a switch from your current broker-dealer. This includes examining existing team dynamics and professional relationships.

Timing is also a crucial factor to consider. You should assess whether it's the right time for a move, taking into account any upcoming changes or milestones in your career or personal life.

You'll also want to address any outstanding financial obligations, such as outstanding notes or practice purchase agreements. This will help you understand the financial implications of your decision.

Non-portable products in your book of business may also need attention. These are products that can't be taken with you to a new firm, and you'll need to consider how to manage them or transition them to a new firm.

It's essential to discuss your current situation with an accountant or tax advisor to get professional advice.

You can transition to an RIA without leaving behind trailing income, which is a major concern for many financial advisors. This is especially true if you've built up a business over decades with transactional registered products, like commissionable variable annuities, or alternative investments.

There are several options available to advisors who want to maintain their trailing income. One option is to partner with a broker-dealer that manages an asset transition program. This allows advisors to shift all their broker-dealer business over without losing out on income and starting from scratch.

Some Registered Investment Advisors have a broker-dealer partner that manages the asset transition program, allowing advisors to shift all their broker-dealer business over without losing out on income. This is a simple way to migrate your business if you choose to move to an RIA.

Here are some examples of products that advisors may want to maintain trailing income on:

Advisors can also consider hiring a company like Prosperity Capital Advisors, which provides an asset transition program that allows advisors to move their business like 529s, mutual funds, or variable annuities over to the broker-dealer, who then puts a home office employee as the agent of record on that account.

Many independent broker-dealers are evolving to offer more RIA-like services, which can be a game-changer for advisors looking to make a move.

This shift is significant because it means that independent broker-dealers are now offering a more comprehensive suite of services that can help advisors grow their businesses.

Industry-owned broker-dealers, on the other hand, may face unique challenges in keeping pace with technology and regulatory changes.

This can put them at a disadvantage in terms of innovation and flexibility, which can be a major concern for advisors who want to stay ahead of the curve.

Understanding these trends can help you make a more informed decision about your future business model, so take the time to research and stay up-to-date on the latest developments in the industry.

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You can transition from a broker-dealer to an RIA, but it's not a simple process. Transitioning from a broker-dealer to an RIA means moving from earning a commission for buying and selling products to a fee-based professional advice model.

Consider reading: Difference between Ria and Broker Dealer

There are two ways to form a full-service RIA: registering under the Securities and Exchange Commission (SEC) or registering with your home state. This allows advisors to shift all their broker-dealer business over without losing out on income and starting from scratch.

A measured approach is often better, with transition timelines ranging from a few months to several years, depending on the complexity of your practice and the chosen RIA model. Some advisors may choose to maintain their broker-dealer licenses instead of alternative solutions for financial advisors like streamlining offers through the SEC.

Here are some common reasons why advisors choose to maintain their broker-dealer licenses:

Contractual Obligations are a crucial aspect of making the switch to a new firm. Adherence to one's employment agreement is essential, as those contracts contain clauses and restrictive covenants about the retainment of client information and client solicitation.

Typically, advisors are not permitted to bring any client data with them, nor may they solicit their clients. They must instead procure any client information from public sources.

You'll want to successfully communicate the benefits of changing firms and assure your clients that their current level of service will be maintained. This can be a delicate process, but with the right approach, it can be done safely and successfully.

A knowledgeable attorney can be a valuable asset in navigating this process, helping you devise a strategy for informing and retaining your clients. With their guidance, you can make informed decisions to protect yourself and your business.

It's not uncommon for firms to have measures in place to deter registered representatives from departing with their book of business intact. But, there are protections in place, and with the right expertise, you can benefit from them.

A unique perspective: Broker Dealer Consultants

Transitioning from a broker-dealer to an RIA can be a complex process, requiring significant changes in the way financial advisors work with clients.

There are two main ways to form a full-service RIA: registering under the SEC or registering with the home state.

The transition timeline can vary significantly, ranging from a few months to several years, depending on the complexity of the practice and the chosen RIA model.

The difficulty level of transitioning depends on the advisor's current situation and goals. For example, advisors with a large book of business may face more challenges than those with a smaller client base.

To give you a better idea, here's a rough estimate of the difficulty level of transitioning:

Keep in mind that every situation is unique, and the difficulty level may vary depending on the individual advisor's circumstances.

Finalis makes it easy to switch broker-dealers, offering a solution for all types of deals and scenarios. They're not just a broker-dealer, but a partner.

Their onboarding process is a breeze, making it much easier to transition to Finalis than other broker-dealers. One investment banker even called it "orders of magnitude easier".

Finalis leverages a compliance-first platform to drive scalable back-office solutions, allowing bankers to close deals faster and at a fraction of current costs. This can be a game-changer for those struggling with outdated systems.

Here are some benefits of switching to Finalis:

Finalis is built by seasoned lawyers, investment bankers, and compliance professionals, making them a reliable partner for your business.

Planning and Preparation is a crucial step in switching broker dealers. This process can be complex and time-consuming, so it's essential to start early.

Before making the switch, you should review your existing account agreements to understand the terms and conditions of your current broker dealer. This will help you identify any potential issues or fees associated with closing your accounts.

A thorough review of your account statements will also help you identify any outstanding positions or pending transactions that need to be settled before the switch. This includes any open trades, pending trades, or unsettled trades.

It's also important to consider the impact of the switch on your investment strategy and portfolio. You may need to adjust your asset allocation or rebalance your portfolio to ensure it remains aligned with your investment goals.

You should also research and select a new broker dealer that meets your needs and provides the services you require. Consider factors such as trading fees, account minimums, and customer support.

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