Starting my own RIA

Hello Analyst forum,

I’m hoping someone can shed some color on a confusing situation my friend and I are in. My friend and I both work for the same bulge bracket bank in different functions. He is an Investment Banker and registered under the series 79. I am a Trade Assistant on the Options desk and am registered under the series 7. We both have an immense passion for investing and personal finance and have started advising our friends who do not work in Finance on where to put there money.

My question is, we would both very much like to start an RIA and take the series 65. Would we be able to operate a small Advising company on the side of our bank jobs or would this be a violation? Any response would be greatly appreciated. I’ve been combing the internet for a few days but am unsuccseful and finding an answer. Surely I can’t be the only one with this questons as the popularity of RIA’s grow!.


You want to run client money on the side while working at a bank? Where does a half decent investment banker find the time to $hit let alone spend hours a week advising and running money?

Tough, but fair.

Because this is our dream. He works around 70-80 hours a week and I do about 60 on the desk. We have about 23 people that have have signed letters of intent. We just don’t know if its legal…I’ve reached out to a legal firm although was thinking maybe someone on the board would know…I know advising isn’t the “sexiest” career on these boards but were both looking for something more fullfilling and less corporate.

However, we would like to get the business started, custodian set up, pass 65, and submit application to our appropriate State…just not sure if were in a gray area due to us both being covered by FINRA.

Ever hear of self dealing!?

I would just listen to a real lawyer on this, not AF members. But I’m nearly certain your companies definitely had squeezed in somewhere in your offer or in company policy about must disclosing outside business interests. It’s pretty standard language.

^ And I could see a financial firm maybe agreeing to look the other way on a hot dog stand or car wash or a real estate project. But I’m pretty skeptical they’d be cool with you running an RIA in your spare time. But hey, correct me if I’m wrong.

Itera you are absoutley right about the outside business activivites. However, the head of my desk or my top boss and I are pretty good friends and he wouldn’t care about an outside business as long as it didn’t give him any extra work. My desk head basically runs a boutique real estate company in addition to his job for the firm.

I’ll await feedback from the law firm and can post what they say if anyone is interested. I appreciate everyones feedback.

The other issue is you have to sincerely ask yourself if managing these peoples money part time, after working 80 hour weeks, is really fair to them. Honestly you’ll struggle to provide decent service. You can’t possibly be as attentive as someone doing this for a career. What happens when you get a big market crash day, you’re busy as hell on the desk and you’ve got 15 voicemails from clients demanding answers ASAP. If you have 23 clients ready to go, man up, quit your jobs and start your business. Don’t treat the clients unfairly by doing this half assed. Its not even as much a compliance problem (which it is) as an ethical duty if responsibility to your clients. 23 clients. Average portfolio of say $500k. 1% fee. $115k revenue already. Start pounding the pavement and you’ll be doing fine. But not part time after 60-80 hour jobs.

I agree with this.

Your absolutely right, we just want the infrastructure in place before walking away from our jobs. Thank you for your post as you made some excellent points. This forum is great!

I agree that in order to do this successfully, you are going to have to take some risk and just pull the trigger and quit your jobs and get started once you have a more clear idea of what your process is.

You should sit down with your partner and figure out your ideal client profile (this is really important), your investment philosophy, business model (service matrix and fee structure) and compliance. This is just the start. Then you need to develop client facing materials that you can use to explain this to …clients. This material should be high level and simple to understand.

I cannot stress enough how important it is to work with nice clients who trust you (bc you are doing the right things for them and put their interest ahead of your own), follow advice and participate. Be clear on fees, be transparent on fees. Clients won’t balk at fees if they feel they are getting good value for what theyare paying.

if you met any of those 23 people while performing your job at the bank, they’re the bank’s clients, not yours. this is a legal minefield. even if you quit your job and do this, if some of these clients are bank clients elsewhere, your bank may prevent you from doing business with them. if you don’t quit your job, this is sure to end badly. if you do quit your job, this still may not work out depending on who these clients are…

Both my partner and I deal exclusively on the institutional side for our perspectice Bank. These 23 clients are relationships we’ve nurtured outside of work and people that we have been giving investing advice since we graduated college together. So, it is hard for me to see a conflict of interest from a compliance stand point since we both work for institutional clients for our Bank.

However, still waiting on a response from the law firm I contacted. Thanks for the input.

I suspect you need to quit your job to pull this off.

Also do not underestimate the amount of compliance headaches faced by RIAs. Easily a full time job.

As a person who’s gone the opposite (from independent RIA to corporate job) route, I would have to echo other people here:

If you try to do both at the same time, it will be half-assed. To do this right, you have to be in neck-deep.

I also think you’re making a mistake, but that’s just me.

One of you is going to have to quit your job. This will not work without 100% focus because if I’m a potential client willing to hand you $100,000 I want you to be focused on managing my cash and not your operations role at your current bank. What were to happen if the market tanks and clients start power-dialing you and you’re no where to be found because your dealing with your day-job.

My advice save up as much as you can so you can quit your day job and live income-free for a year or two and put your focus on getting this business up and running. I hope you do start your RIA because like you and most of here it would be incrediably rewarding starting a business from scratch and be in charge of your future.

How long were you an independent advisor for? Did you register your own company or work for an RIA? Why did you end up leaving the industry? Were just looking to have the infrastructure in place and not exceed 25 clients until we work through all the kinks and quit our jobs. We both live in the same apartment and we literally live right across the street fomr our firm. We will still have a combined 80+ hours a week to handle any client requests…plus all our clients know our situation and are good friends.

I belong to a few traders groups that welcomes people from all across the financial world in my city. The few RIA’s i’ve ran into at the meet ups usually love the asset management business.

Also, why do you think its a mistake? Curious as your someone who worked in that field?

I would want to have a well thought out process in place prior to quitting your current jobs and doing this full time. You don’t want your existing relationships (professional and personal) to go sideways becasue you were using them as your “practice girl” on resolving your kinks. These relationships are going to be your base for growth for the future; hopefully if you do a good job for them (and markets behave), you provide good service they will refer you to others (likely already happened).

I’m an IA in Canada and while I can’t comment on US compliance requirements, in general compliance is a real pain the a$$.

You may benefit from talking to a CFA RIA in your area and ask them about the industry etc.

Before I shut down, I had about 5 years of experience as the 100% shareholder of a small RIA. Prior to that, I spent 4 years at 2 F500s. So you could say I had 9 years of field experience plus 1 year dedicated to an MS in taxation/financial planning.

It wasn’t that hard to set up the RIA and go through the necessary compliance. I suspect you have severely underestimated the difference between dealing with individual investors and the B2B communication you have in your current role.

I left the industry to avoid the inherent conflicts of interest that come from being a shareholder and being a practioner. It’s amazing how so many people are willing to pay thousands/year for you to tell them what they want to hear instead of what they need to hear.

Another thing…the people that you are close to are MORE likely than strangers to be unfair towards you when the market turns. The most resistance I ever came across was from idiot family members or former classmates who thought they knew everything.

If you want more details, PM me.