When starting an RIA, one of your surest paths to success is to understand compliance. Familiarizing yourself with the ins and outs of SEC and state RIA compliance will help to establish your business as a knowledgeable and conscientious partner in wealth management. And it has the further benefit of placing you in a better position for firm-wide preparedness when you undergo an audit.
Even if you’re experienced in the complexities of RIA compliance, chances are your support staff, colleagues, and clients aren’t. You’ll need to catch up as quickly and efficiently as you can. Here are a few startup tasks to get your new firm up to speed on compliance.
Starting an RIA: Compliance Is Key
The U.S. Securities Exchange Commission and all 50 states have requirements for those who handle investments, particularly retirement accounts. These rules are intended to safeguard investors from predatory and self-serving practices, and to make sure that RIAs are acting in the best interest of their clients.
RIAs have what is called a fiduciary duty to their clients, meaning that the client comes first. RIAs are not allowed to give investment advice solely to get themselves a bigger commission, for example.
Compliance rules cast a wide net and can cover everything from your advertising materials to your personal investments, so do your research. RIAs are also subject to a yearly filing requirement called Form ADV, which you can read more about here.
Establish a Culture of Compliance
A culture of compliance should be at the heart of every firm. It’s even part of what auditors look for when they come knocking. Having a culture of compliance means that everyone in your firm is aware of their compliance obligations and integrates them into their workday. You should take compliance seriously and be proactive about it, seeing it not as a burden, but as your duty to your clients. When starting a RIA, you’ll find that this is a vital part of operating a reputable business.
Investment in a feature-rich, intuitive, and user friendly compliance software package like SmartRIA can make creating that culture easier by streamlining compliance tasks while managing your clients’ investments.
Empower Your Chief Compliance Officer (CCO)
Under SEC regulations, every RIA firm needs a designated person who oversees compliance, called the chief compliance officer. When just starting an RIA, you may not have a dedicated CCO, but rather someone who fills the role in addition to their other duties. This is not uncommon. However, it’s important to establish the CCO’s responsibilities and ensure that they can perform their role effectively.
Your CCO will need to oversee compliance each day and stay up to date on any changes from the SEC, Department of Labor, and state authorities. Make sure they have adequate time to further their education on RIA compliance. They also need enough clout within your organization to follow through on upholding a culture of compliance.
Use the Right Tools
These topics are by no means all you need to cover all your compliance obligations in your new RIA firm, but they are a good place to start. All the compliance knowledge in the world won’t help, however, if you don’t have the right tools to act on it. An application that puts control at your fingertips—minimizing the stress of overseeing document tracking, role management, and compliance task deadlines—can be just the solution you need to optimize your compliance process.
With automatic alerts and integrated compliance tasks, SmartRIA can take the guesswork out of compliance. Click the button below to schedule a no-risk demonstration at your convenience.