Frequently Asked Questions
Why should every advisor consider getting their Series 65 license?
In a few words…better advice/more revenue! Click here to learn more and to watch a video explaining why.
What is a Registered Investment Advisor (RIA)?—an RIA is a licensed professional that registers with the Securities and Exchange Commission (SEC) and any states in which he or she operates. RIAs are Fiduciaries acting in the best interest of the client. RIAs can have partnerships or corporations but individuals register with the state or Securities and Exchange Commissions.
RIAs give investment advice to clients but usually earn their revenue through a management fee comprised of a percentage of assets held for a client. RIAs do not make money from any securities commissions like a typical registered representative selling/clearing sales through a Broker Dealer (BD).
Pros and Cons of being an RIA—Pros: While RIAs have their own set of compliance rules to live by as a Fiduciary, they do not have the overbearing compliance issues a registered representative who works through a BD has. RIAs do not have restrictions on the type of advice they can give like they would if they worked with a BD. Cons: Expense. RIAs have many issues to deal with including but not limited to: compliance responsibilities and expenses, audits, performance reporting and billing by a third party, legal expenses for establishing the asset management platform, new business approval process and monitoring transfers, trading operations, custodian contracts and trading volume cost-reduction benchmarks, continuous due diligence for new managers. To quote from Financial Advisor Magazine: “To be a pure RIA, it’s pretty darn expensive. It’s ludicrous with under $25 million in assets under management and it’s pretty darn expensive under $50 million.”
Additionally, you have to deal with an extensive three month process audit every two to three years (state audits for under $100 million under management and SEC audits for over $100 million under management).
What is an Investment Advisor Representative (IAR)?—An IAR is an advisor who has passed the Series 65 exam who works with/under an RIA and is able earn compensation from clients for (1) making recommendations regarding securities; (2) manages accounts of clients; (3) determines which recommendation or advice regarding securities should be given; or (4) solicits or sells investment advisory services.
Pros and Cons of being an IAR—Pros: Expense of compliance. It is expensive to start up and maintain your own RIA (keeping an RIA compliant is quite expensive). For individual advisors who simply want to offer money management services to clients, it is most prudent to simply become an IAR and work under an RIA. Cons: When working under/through an RIA, some amount of the fees generated go to the RIA to pay for compliance, RIA operations, and to generate income for the RIA.
Does POM Planning help advisors sell FIAs and IUL policies? Absolutely. We at POM Planning believe in helping clients “grow wealth in the least risky manner possible to reach their financial planning goals.” In order to do that, many clients should use FIAs and/or IUL insurance as tools to grow their wealth. Our three-bucket system to manage risk and help determine a client’s investment risk tolerance helps clients understand the usefulness of FIAs and IUL insurance.
How long does it take to become an IAR? A minimum of four to six weeks and potentially up to four months for those who do not have time to focus their efforts on obtaining a license.
How much in Assets Under Management (AUM) does the average new advisor gather during the first 12-18 months after becoming licensed?
With a consistent effort, advisors should be at $2-$5 million (which generates an AUM fee of $50,000 annually at $5 million).
Why are you waiting to become an IAR?
Only you can answer why you have not chosen to become an IAR so you can provide better advice to clients, earn more income, and create a more financially stable and long lasting business model for yourself.
Sign up NOW to learn more—if you would like to learn more about how you can become an IAR under POM Planning’s unique, conservative money management platform, please click here to fill out a request-for-more-information form.