According to a news release, Legal and Regulatory Considerations: Navigating the Transition to Independence as an RIA is part of the Schwab Market Knowledge Tools (MKT) white paper series.
Schwab Advisor Services also announced the launch of a Web site with content for advisers currently at independent broker-dealers (IBDs), providing information for evaluating a fully independent or hybrid practice model, which allows RIAs to conduct a combination of traditional brokerage business and fee-based advisory business. The site will host podcasts and Webcasts tailored for the needs of advisers at IBDs. Three video testimonials walk viewers through first-hand accounts of transitions told by advisers who worked previously at IBDs, offering insight into how they made the transition.
“Whether you are considering starting your own RIA, joining an existing one, or exploring a hybrid model, the transition process can seem daunting for many advisers,” said Nick Georgis, Schwab Advisor Services Vice President, in the news release. “These new resources offer insights into the process including how to plan and implement a transition and several time-tested procedures that have served many highly-successful advisers who have made the switch.”
The new white paper, developed in conjunction with MarketCounsel, suggests advisers weigh legal and regulatory considerations and requirements around independent RIA models by focusing on these areas:
• Assessing your employment situation and formulating an exit strategy. As a first and critical step, an adviser should engage legal counsel to conduct a review of various agreements in place.
• Evaluating your needs, goals, and objectives. An adviser should first chart their vision through the development of a strategic plan assessing their client base, as well as products and services they and their clients desire.
• Choosing your entity's legal structure. Once an adviser has decided to make the transition, it's important to decide upon a legal structure for the new company.
• Protecting your business from the unexpected. Prior to commencing operations, advisers should obtain insurance to protect against business risks, including errors and omissions insurance in particular.
• Determining the type of licensing and registration required. Assuming advisers will be required to register as an investment adviser, they will need to determine which regulatory authority, either state or SEC, with which they must register their firm.
• Preparing and filing appropriate disclosure documents and form filings. Advisers are held to a higher standard of disclosure than other professionals and must disclose all material facts regarding conflicts of interest.
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