Ready to Launch Your Own RIA? Avoid These Common Mistakes

Establishing your own practice can be lucrative and extremely rewarding. If you’re serious about taking the leap, protect what you’re building by doing things right the first time.

Decisions you make now can either pave the way for a smooth, successful operation or create vulnerabilities that may not surface for years, making it difficult to unravel errors and result in deficiencies, fines and reputational risk.

Based on our recent webinar at ComplianceAdvisor, here’s a practical roadmap to help you avoid the most common mistakes as you prepare to establish your own firm.

Make These Key Decisions Early

Starting your RIA begins with foundational choices that will shape your business model and long-term success.

• Define Your Services and Clients: Be crystal clear about what services you’ll offer and to whom. In your firm brochure (Form ADV Part 2A), do not disclose services you “may provide in the future”.  Clearly defining your offerings helps clients understand exactly what you do and creates a strong foundation for your firm.
• Determine Your Fee Structure: Determine your fee structure and stick to it for all clients. Avoid billing in arrears and in advance for the same service. Align your contracts with your disclosures and avoid ad hoc discounts.
• Identify Critical Roles, including your CCO: Select a Chief Compliance Officer (CCO) who is going to be dedicated to successfully administering your firm’s compliance program and will who have adequate time to fulfill to this function. Contract a professional compliance consulting firm to provide assistance and regulatory guidance.
• Choose Your Vendors Thoughtfully: IT, CRM, compliance tools, billing and portfolio management software, and payroll providers are not one-size-fits-all. Engage a cybersecurity expert to assist with your due diligence and identify trusted providers early.

Pro Tip: Consider specializing in a niche market to differentiate your practice and attract clients more easily.

Steps to Take Now for Registration Readiness

The registration process is document-heavy, nuanced, and highly procedural. A compliance consultant experienced in state and SEC registrations can help with all of the following: 

1. Determine Licensing Requirements
   The services you will provide and the types of clients you take on will determine your firm’s registration requirements as well as your licensing requirements. Whether you’re registering with the SEC or a state, it’s important to understand your regulator’s requirements regarding bonding, net capital, custody, and discretion so that you don’t run afoul of basic requirements. 
2. Develop Client Agreements and Offering Documents
   Consider having a securities attorney draft your legal documents, or at least review them. Avoid hedge clauses and make sure documents address discretionary authority, proxy voting, agreed-upon fees and termination clauses.
3. Draft Your Form ADV Registration Application
   There are numerous parts to Form ADV, including parts 1A, 1B, 2A, 2B, Appendix 1, and Form CRS (Part 3).  Work with a compliance consultant to understand which parts of the ADV apply to your registration.  Resist the urge to copy from peers. Your disclosures must reflect your unique business. Always use professional help to draft and review these forms.
4. Adopt a Tailored Compliance Program
   Your compliance program should be custom-built for your firm—not a generic template. Do not adopt policies that aren’t applicable to your business.  Work with a compliance consultant to draft custom policies, and don’t skip the step of understanding these policies and ensuring your firm is able to fully comply.  

Your Presence: Online and Offline

Many advisers overlook the strict limitations on which you can and cannot do prior to registration. 

• Until your firm and you (if applicable) are registered, you cannot solicit clients, give investment advice for compensation, or advertise online or through social media.
• If you’re departing from a firm, know your legal limitations. Do not inform clients that you plan to leave and solicit them to move their assets once you’ve established your RIA. Those clients belong to your current employer, so this would likely be a breach of your employment contract.  Determine whether your current employer is part of the Broker Protocol and understand the limitation of your employment contract and privacy laws.

Once registered, your digital presence can thrive!  Building your online presence is no longer optional - it’s expected. Clients, prospects, and even regulators are checking your digital footprint. 

What you post, especially online, is considered advertising, and that means it’s regulated.

• Retain all published content
• Do not make any unsubstantiated claims and AI hype
• If you plan to use testimonials, endorsements or third-party rankings, ensure they are fully compliant with the Marketing Rule.
• Engage a compliance consultant to review your content and ensure your social media, website and other advertising activities are in compliance with regulatory restrictions.

Build a Modern, Secure Tech Stack

Technology can be your greatest ally—or a serious vulnerability. As you consider your tech suite, take care to follow these guidelines:

• Don’t use your personal laptop to conduct business. This creates unnecessary vulnerability regarding your firm’s and clients’ data. Personal devices often aren’t set up well for security and may not have anti-virus software and encryption. Even a minor data breach in your personal life can be ascribed to your business and your clients, which can be costly to address.
• Don’t use personal email to conduct advisory business and don’t text clients unless you are capturing and maintaining all communications with clients and prospects.  Any content beyond a simple text confirming time and logistics of a meeting could trigger a books and records requirement, so it’s best to move any communications originating on a platform that is not being captured to a platform that allows full retention.
• Do not use the same (or similar) password to access different systems. As you start your business, and as your practice grows, you will subscribe to numerous platforms, and perhaps change some subscriptions over time.  Most will require you to set up a unique password for access. Using the same or a similar password across multiple platforms exponentially increased your risk in the event of a breach in which passwords were leaked. Create unique, strong passwords (system-generated are best) and use a password manager to keep track of them for you.
• Apply these best practices in technology:  use anti-virus software, employ encryption if it is necessary to send information electronically, and run system updates promptly. All data should be encrypted, password-protected, and backed by multi-factor authentication.

Separate your business and personal life from Day One.  Resist the temptation to use your personal laptop until your business “gets going”.  The longer you wait, the more exposure you will have and the more difficult it will be to separate. 

Don’t Skimp on Cybersecurity

Regulators are now laser-focused on cybersecurity practices. As a fiduciary, you have a responsibility to protect clients and their information. As the majority of cyber breaches originate from within, cybersecurity best practices include: 

• Conducting tabletop exercises to expose weaknesses and vulnerabilities
• Training staff regularly on phishing, device use, and data protection
• Appointing a security lead or outsource to professionals
• Maintaining a written incident response plan
• Vetting vendors for SOC 2 or ISO 27001 certification
• Conducting annual vendor and internal security reviews

Consider engaging a cybersecurity expert to help you assess your digital infrastructure, follow best practice to reduce your exposure and costs, and implement strategies to protect your firm against cyber threats.

Starting your own RIA is as much about vision and client service as it is about rigorous compliance and operational discipline. The decisions you make today will shape your firm’s credibility, efficiency, and regulatory resilience for years to come.

If you're committed to launching your own RIA, get professional help early to set a strong foundation and avoid costly missteps down the road.