Starting your own Registered Investment Advisor (RIA) firm is a rewarding venture that combines financial planning skills with business savvy. The industry manages trillions of dollars in assets, reflecting a steady demand for sound financial advice from retirees, families, and young professionals alike.
This guide will take you through the practical steps of defining your business concept, securing funding, obtaining the necessary licenses, and building your team to help you launch a successful RIA business in the U.S.
Step 1: Create your business plan and validate your idea
First, define your niche. Who will you serve? You might want to focus on a specific client profile, such as retirees, tech professionals, or small business owners. A clear focus guides your services and marketing efforts from the start.
Research the market and competition
To understand the landscape, use the SEC's Investment Adviser Public Disclosure (IAPD) database. It lets you see what services other RIAs offer and their fee structures. This research helps you find a gap in the market for your unique value proposition.
Many new firm owners make the mistake of entering a saturated market. Before you commit, use the IAPD database to confirm your chosen niche is not already overcrowded in your region. This simple check can save you considerable time and effort.
Project your startup costs
Once you have a clear picture of the market, you can map out your finances. Your budget should cover registration, software, and insurance. It is wise to have at least six months of operating capital set aside before you expect steady client revenue.
- State or SEC registration fees: $150 - $400
- Compliance software: $3,000 - $10,000+ annually
- Errors & Omissions (E&O) insurance: $1,500 - $3,500 annually
- CRM software: $500 - $2,000 annually
Here are 3 immediate steps to take:
- Draft a one-page summary of your ideal client and service offerings.
- Use the IAPD database to analyze five local competitors in your target niche.
- Build a preliminary budget that includes startup costs and a six-month cash reserve.
Step 2: Set up your legal structure and get licensed
Choose your business entity
Most new RIAs choose between a Limited Liability Company (LLC) or an S Corporation. An LLC is simpler to manage and offers pass-through taxation. An S-Corp can potentially save you money on self-employment taxes but involves more administrative upkeep.
Your choice has significant tax implications. You might want to consult a CPA or an attorney to determine the best fit for your personal financial situation and long-term business goals.
Register with the proper authorities
With your business entity decided, you can register your firm. You will register with either the SEC or your state's securities regulator. The choice depends on your Assets Under Management (AUM).
Firms managing over $100 million in AUM register with the SEC. If you start with less, you will register with your state. Both use the same application, Form ADV, which you file through the IARD system. A frequent misstep is submitting an incorrect Form ADV, which guarantees delays.
Once submitted, expect the approval process to take about 30 to 45 days. Filing fees are typically a few hundred dollars. Some states may also require you to pass the Series 65 exam or hold a designation like the CFP.
Here are 3 immediate steps to take:
- Consult a CPA or attorney to select your business structure.
- Determine if you will be a state-registered or SEC-registered firm.
- Download the official instructions for Form ADV to understand the required disclosures.
Step 3: Secure your insurance and manage risk
Protect your firm with the right coverage
Your most important policy is Errors & Omissions (E&O), also known as professional liability. It protects you if a client claims your advice caused financial harm. A $1 million policy is a standard start. Annual premiums typically run from $1,500 to $3,500.
With your client-facing risks addressed, turn your attention to data security. Cyber Liability insurance is a must-have. It covers costs from data breaches, a significant risk when you handle sensitive client information. This coverage might cost between $1,000 and $3,000 annually.
Some new owners try to save money with a general insurance agent. This can be a costly error. You want a broker who specializes in RIAs. They understand your unique risks and can find better policies. Consider specialists like Golsan Scruggs, Markel, and Chubb.
Finally, if you lease an office, you will need General Liability insurance. And if you hire employees, Workers' Compensation is mandatory in most states. These policies cover physical accidents and employee injuries, rounding out your risk management plan.
Here are 4 immediate steps to take:
- Request quotes for a $1 million Errors & Omissions policy.
- Contact an insurance broker who specializes in financial advisory firms.
- Assess your need for Cyber Liability insurance based on your technology stack.
- Determine if you need General Liability or Workers' Compensation coverage.
Step 4: Choose your location and tech stack
Decide on your workspace
You do not need a traditional office from day one. Many successful RIAs start from a home office or a co-working space to keep overhead low. This approach lets you invest capital into technology and marketing instead of rent.
If you prefer a dedicated space, look for a small office around 150-300 square feet. Ensure the location has commercial zoning. When you negotiate a lease, ask for a shorter term, like one or two years, to maintain flexibility as your firm grows.
Build your technology stack
Your technology is your firm’s engine. You will need a core set of software to manage clients and portfolios effectively. Some advisors make the mistake of choosing tools that do not work together, which creates extra work. Prioritize systems that integrate well.
- CRM: Redtail or Wealthbox ($500 - $2,000 annually)
- Financial Planning: eMoney or MoneyGuidePro ($2,000 - $4,000 annually)
- Portfolio Management: Orion or Black Diamond (starts around $5,000+ annually)
Here are 4 immediate steps to take:
- Decide if you will start from home, a co-working space, or a leased office.
- Research two local co-working spaces and their monthly fees.
- Schedule demos with two CRM providers like Redtail and Wealthbox.
- Ask financial planning software providers about their integration partners.
Step 5: Set up your payment processing
Most RIAs bill clients quarterly based on Assets Under Management (AUM). This fee is typically deducted directly from the client's investment account through your custodian. This automated process simplifies billing and ensures consistent cash flow for your firm.
You might also offer services for a flat fee, such as a one-time financial plan. For these, you need a direct payment method. Some new firm owners create friction here with slow, manual invoicing that clients find inconvenient.
Collect one-time fees easily
For RIAs that need to accept payments on-site or on-the-go, JIM offers a streamlined solution. With JIM, you can accept debit, credit, and digital wallets directly through your smartphone. Just tap and the transaction is done.
At just 1.99% per transaction with no hidden costs or extra hardware needed, it is a cost-effective choice. Other payment providers often have average commission rates well above 2.5%. It is particularly useful for collecting fees for initial financial plans or hourly consultations.
- Get Started: Download JIM app for iOS
- Make a Sale: Type the sales amount, hit sell, and ask your customer to tap their card or device on your phone
- Access Funds: Your money is available right on your JIM card as soon as the sale is done - no waiting for bank transfers
Here are 4 immediate steps to take:
- Finalize your fee structure: AUM, flat-fee, or hourly.
- Confirm the automated billing process with your chosen custodian.
- Decide if you will offer services that require one-time payments.
- Download the JIM app to see how it works for consultation fees.
Step 6: Fund your firm and manage your finances
Secure your startup capital
Most new RIAs are funded with personal savings or a small business loan. The SBA 7(a) loan program is a popular choice. Lenders like Live Oak Bank also specialize in financing for financial advisors, often with more favorable terms.
For an SBA loan, you might secure between $50,000 and $150,000. Expect interest rates around the Prime rate plus 2-3%. A strong business plan and good personal credit are necessary for approval. Many new owners underestimate their cash needs, so aim high.
You will need enough working capital to cover at least your first six months. A realistic budget is $25,000 to $75,000. This should cover all business expenses and your personal salary draw until client revenue becomes consistent.
Set up your financial systems
Once you have capital, open a dedicated business bank account immediately. Some advisors try to run the business from a personal account at first. This decision complicates tax filing and can put your personal assets at risk if the firm faces legal trouble.
Next, choose an accounting software like QuickBooks or Xero. This helps you track every dollar, monitor your firm’s financial health, and simplify your year-end tax preparation. It provides a clear view of your cash flow from day one.
Here are 4 immediate steps to take:
- Research the SBA 7(a) loan requirements on the official SBA website.
- Contact a lender that specializes in loans for financial advisory firms.
- Calculate a detailed six-month operating budget, including your salary.
- Open a dedicated business checking account for your new LLC or S-Corp.
Step 7: Hire your team and set up operations
You might want to make your first hire a Client Service Associate or Paraplanner. This person handles administrative tasks and client support, which frees you to focus on growth. A typical salary for this role ranges from $50,000 to $70,000 annually.
For a more skilled role, look for a candidate with the Financial Paraplanner Qualified Professional (FPQP) designation. Many new firm owners hire too soon. A good benchmark is to wait until you have consistent client work and are approaching $250,000 in recurring revenue.
Once you have a team member, you need a clear operational workflow. Use your CRM, like Redtail or Wealthbox, to create standard processes for client onboarding and meeting preparation. This ensures every client receives the same high level of service and simplifies future training.
Here are 4 immediate steps to take:
- Draft a job description for a Client Service Associate with key responsibilities.
- Research average salaries for financial paraplanners in your city.
- Set a revenue milestone that will trigger your first hire.
- Map out a five-step client onboarding process within your CRM.
Step 8: Market your firm and acquire clients
Focus on a few key marketing channels
Your marketing does not need to be everywhere at once. Focus your efforts. Referrals from CPAs and attorneys are a primary source of new business for many RIAs. You should build these professional relationships early.
Next, consider content. You can establish your expertise when you write a blog or a newsletter. Address the specific financial questions your niche audience has. This approach builds trust long before someone becomes a client.
For local clients, make sure your firm appears in local search results. A complete Google Business Profile is a great start. You might also host small, educational webinars on topics like "Tax-Efficient Retirement Withdrawals" for your target demographic.
Many new firm owners waste money on generic ads. This leads to a high Client Acquisition Cost (CAC), which can be $1,000 to $3,000 per client. A targeted approach, like a seminar for a specific professional group, yields better results.
Here are 4 immediate steps to take:
- Identify two professional partners, like a CPA or attorney, to approach for referrals.
- Outline three blog post topics tailored to your ideal client profile.
- Set up and complete your Google Business Profile for local visibility.
- Calculate a target Client Acquisition Cost (CAC) for your first year of business.
Step 9: Set your pricing strategy
Your fee structure directly impacts your firm’s profitability. The most common model is a percentage of Assets Under Management (AUM), often around 1% annually for the first $1 million. The fee typically scales down for larger accounts.
You can also offer services for a flat fee. For example, a comprehensive financial plan might cost between $2,000 and $5,000. Hourly consulting is another option, with rates usually from $250 to $450 per hour, depending on your expertise.
Analyze the competition and set your rates
Many new advisors are tempted to underprice their services to attract their first clients. This can make it difficult to raise fees later. Instead, price your services based on the value you provide and what the market will support.
To see what competitors charge, review their Form ADV Part 2 brochures on the IAPD database. This document details their fee schedule. Your goal is not to be the cheapest, but to offer clear value for your price point.
Established RIA firms often achieve profit margins of 25% or higher. In your first few years, focus on a pricing model that covers your operating expenses and provides a reasonable salary. Your profitability will grow with your client base.
Here are 4 immediate steps to take:
- Select your primary pricing model: AUM, flat-fee, or a hybrid approach.
- Use the IAPD database to research the fee schedules of three local competitors.
- Draft your fee schedule for your Form ADV Part 2 disclosure document.
- Calculate the annual revenue needed to cover your six-month operating budget.
Step 10: Maintain quality and scale your firm
Define your quality standards
To keep service quality high, track your client retention rate. An annual rate above 95% shows you are meeting expectations. You can also survey clients to calculate a Net Promoter Score (NPS), which measures their willingness to refer you.
While not required, professional designations like the Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA) demonstrate a commitment to excellence. They establish trust and can justify your fee structure as you grow.
Know when to grow
With your quality standards in place, you can plan for growth. Many firm owners hire reactively when they feel overwhelmed. A better approach is to set clear benchmarks. For example, plan your first administrative hire when you reach $250,000 in recurring revenue.
Consider hiring a second advisor once you manage 75 to 100 client households. At this point, your technology stack becomes even more important. Systems like Orion or Black Diamond are built to handle the operational complexity of a larger firm.
Here are 4 immediate steps to take:
- Calculate your client retention rate from the last 12 months.
- Research the requirements and costs for the CFP designation.
- Set a revenue and client household target for your first and second hires.
- Review your tech stack to confirm it can support future growth.
Conclusion
You have the steps to launch your RIA firm. The key is to build deep client relationships, not just manage assets. Your success depends on the trust you earn. With a clear plan and a focus on your niche, you are ready to start your journey.
As you begin, keep your operations lean. For one-time planning fees, JIM turns your smartphone into a card reader. You can accept payments easily with no extra hardware for a flat 1.99% transaction fee. Download JIM and simplify your billing from day one.
