Q5 – How long does it take to register an RIA?

Also available as podcast (Episode #5)

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How long does it take to register an RIA?

The Registered Investment Advisor (“RIA”) registration process generally takes between 45-90 days from the time you initially engage a consulting firm to begin the process to when the filing has been officially confirmed by the applicable regulator.  There are a number of variables involved that could cause your experience to be on the lower end of this range, vs the higher end.  Further, though rare, certain extenuating circumstances can at times cause the process to even exceed the 90 day range.

? See also my updated/expanded answer (#49) where I address how long the entire process of transitioning to the RIA model generally takes.

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Want to learn even more by better understanding what a transition to the RIA model might look like for your own practice?  I encourage you to schedule a Discovery call, and I’d be happy to begin that conversation with you.

Full Transcript:

Welcome. Today’s question is, how long does it take to register your RIA? That is question #5 on the Transition to RIA video series.

Hi, I’m Brad Wales with Transition To RIA, where I help advisors just like you learn the RIA model, and discover why and how you might want to transition to it.

Today’s question is how long does it take to register an RIA? Now in a separate video, I went over the logistics of how to technically set up the RIA and I encourage you to take a look at that video as well. A short answer on that is you work with what are commonly referred to as compliance consultant firms. These are firms that this is their specialty.  This is what they do is help you with, among other things, set up the RIA on the front end.

With this video we want to talk about how long does the setup process take to be completed?  Basically, there are two steps involved in answering that question.

Step one is you working with the compliance consulting firm. It’s not one person, usually dozens of people in these sorts of firms. And the idea is they don’t just pull an ADV file off the shelf and submit that to the regulators. Every ADV, and I’ll do a whole separate video on the ADV process, but every ADV has multiple parts to it and is customized specifically to your firm. So yes, there is some boilerplate language in there. But otherwise, it’s very customized to your practice, the size of your practice, the kind of clients you work with, the services you offer, etc. All sorts of things have to be customized for your specific ADV. Again, they will help you with that.

That process, though does take a little time, because there is a lot of back and forth. The compliance consulting firm needs to fully understand your practice and then go back and work through the draft, the documentation, and then there’s some collaboration kind of back and forth to get it finalized. So that process, you can kind of factor 15 to 45 days for that.

So from the first time you reach out to a compliance consultant and you’re usually…and this is something I help advisors with is understand who are these consultants, why you might want to work with one versus another……usually your first reach out to them is more exploratory.  You’re understanding their model, their offering, those sorts of things. But when you actually say, “Okay, let’s go ahead and begin the process,” at that point it’s usually 15 to 45 days for completion.

I’ll give you in a moment some of the things that might slow things down and cause it to be more towards the 45 days versus the 15 days. And surely the complexity of the situation will add to time as well. If you’re a $50 million state-registered RIA, that has a very plain vanilla service offering, that is quite a bit different than a $1 billion RIA that has a whole depth of services that they offer to high net worth clients, as an example.

So step one in the process is working with a compliance consultant to get the actual ADV drafted, prepared and ready to go.

Step two is the submission and regulator approval. So working with your compliance consultant, all on a choreographed timeline for your whole transition process. Again, something I help advisors with, if you’re moving from your current situation to wanting to move into the RIA model, you map all this out, it’s a choreographed process. So that next step in the creation of the RIA process is the compliance consultant submitting it to the regulators for their review.

So it depends on your size, again, I did a video on this, you can look into that, whether you are SEC or state is who that will be submitted to for review. And technically they don’t “approve” of it as in endorsing you as an RIA or anything like that. They approve and say…okay, you’ve met the criteria and our comfort level that we can proceed here.

That process typically by itself takes 30 to 45 days. Again, some states are quicker than others if you’re state level, SEC is obviously kind of one in the same. But there could be a whole host of variables of why even the SEC might take a little longer on that scale than normal. But again, typically expect from the time you get it filed it could be another 30 to 45 days before you actually hear back from the regulators, of course, hopefully with an approval on that.

I did want to give a couple examples of what could slow that down. I’ve given you ranges on each of these.  I want to give you examples of why something might go quicker or longer.

The first one is if you’re not responsive with your compliance consultant. When you engage that compliance consultant, again, they’re going to have to do a lot of due diligence on you and your practice to understand the services you offer, the kind of clients you have, all kinds of things they need to understand.  Not because they’re quizzing you on it, but because it needs to be documented appropriately in the ADV. So when they come to you and ask you for all this information, if you sit on it and wait a full week before you get back to them, and there could be a couple rounds here of back and forth, so not just one, obviously that’s going to slow things down. So the more responsive you are when your compliance consultant comes to you with questions, that’s going to speed the process up. Likewise, it will also slow it down if you’re not responsive.

Number two, if the actual…the ADV filing itself is incomplete or insufficient, and what I mean by that is when you send it to the regulators, you certainly don’t want them rejecting it because a certain box wasn’t checked that needed to be checked, or some kind of more mechanical or technical rejection. That’s another reason why you would by no means want to do your ADV filing by yourself. And I should have noted that technically, you can do all of this yourself without a compliance consultant. There’s no regulation that says you have to engage compliance consultants to help you with this. I’ve never heard though of an RIA doing it themselves. Clearly, you want to rely on the experts for this sort of thing.

As an example, and not that experts can’t make mistakes as well…..but trying to do it yourself, almost guarantees it’s going to get rejected because you didn’t realize there were three boxes you should have checked, because back on page two you did check one box and then didn’t see the follow up boxes. And so again, if it’s incomplete or insufficient, another reason it might get delayed, gets rejected, has to be reworked, resubmitted, again, you wanna try to avoid that wherever you can.

Number three of what might cause a delay, if you have, for lack of a better word, dings on your regulatory record.  So generally your CRD, the regulators are going to look at that.  They are going to look at the principals, the owners of the firm, and they’re going to say, “Okay, what’s the backstory of these individuals?”

Clearly, if you have a lot of challenging things on your CRD, a lot of prior complaints, a lot of prior maybe separations from particular firms under less than ideal circumstances, that is going to slow the process down and in a worst case scenario might even result in a rejection outright of the RIA filing.

I’ve been looking at CRDs for 10+ years now. So usually working with someone like me, working with a compliance consultant, you’ll know going in ahead of time whether you should maybe be kind of nervous that it’s going to be rejected.

Again, most advisors have very few, if any, kind of marks on their CRD. So this is usually a moot point. But to the degree, you’re more in that gray area, I certainly can have a conversation with you and give you my perspective of what I’ve seen that was or was not problematic in the past.

Keep in mind that this issue is not just important with respect to the ADV filing itself, it’s also with some of the vendors you’re going need to work with.  They’re going to look at this as well. So for instance, you’ll need a custodian. The custodian is going to look at these things as well, and if they can’t reach a comfort level with perhaps what’s on that record, they might choose not to do business with you as a result. So it’s a variable to be aware of. Again, most advisors, it’s a completely moot point because they have little to no marks. But for advisors that there is a little more for whatever the backstory might be, it is a variable that cannot only slow things down, but could even cause a rejection.

And then the final factor is things completely out of your control.  An example is an unexpected delay due to a government shutdown due to budgetary constraints or budget challenges in Congress. And that sort of thing has happened where the government was shut down. And there were a whole bunch of services out there that were all impacted. In one of those and when those scenarios have happened is, is that actual review process of these filings. So thankfully, this issue is few and far between. But technically, there are some things that could throw a little wrench in there and add a delay and unfortunately, there’s absolutely nothing you can do about these things that are causing those delays.

So all in when you kind of do all this math from very start when you say to the compliance consultant, “Okay, let’s engage, let’s start this process to approval,” you’re generally looking at 45 to 90 days.

I always point out to people because, you think, “Oh, I have plenty of time to get things done as I want to make this transition to the RIA model.” And yes, there are a lot of steps that need to occur as you work to transition to the model. But if you are going to have your own RIA, you need to mentally think, wow, just the filing process alone to get approval could maybe, I mean, in theory, it could be more than 90 days, but let’s say it’s even on the high end around that 90 days. And again, a lot of that…some of it’s in your control, some of it’s not in your control. So just mentally be prepared for, again, that timeline 45 to 90 days from the time you start it to the time it’s approved to go live.

So with that, like I said, I’m Brad Wales with Transition To RIA. This is the sort of thing I help advisors with. I want advisors to understand everything there is to know about what it takes to transition to the RIA model. And so this is the sort of questions I go over, the resources I provide.

Head on over to TransitionToRIA.com. You can see everything I have to offer. I would love to chat with you. There’s an easy contact link at the top, you can instantly schedule a Zoom call with me, where we can begin a dialogue. And again, I try to make it as easy as possible to get information to answer any questions you may have and kind of help you think through why and how you might want to make that transition.

So with that, I hope you found this video helpful and I’ll see you on the next one.

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