Financial advisor is a term often used to describe licensed professionals known as investment adviser representatives (IARs) or sole proprietors of investment adviser (IA) firms. The following details the process for becoming a registered investment adviser (IAR) or establishing an investment adviser (IA) firm in Arkansas for both state registrants who will register with the Arkansas Securities Department and federal registrants who will register with the Securities & Exchange Commission (SEC).
Step 1. Get Your Education
Your educational background will be disclosed in a national database listing of all financial advisers and it will be readily available for review by potential clients. As a financial advisor, you will be asking clients to trust you to manage their investments, and they may be more comfortable with advisors that have earned a degree. A degree in any subject will help you succeed, as a financial adviser, but highly specialized degrees are now available and are more commonly pursued by new advisers.
These degrees include:
- BS-Accounting
- BA -Accounting
- BA-Consumer and Family Financial Services
- MS-Finance
- MS-Personal Financial Planning
- MS-Accounting
- MBA-Finance
- MBA-Accounting and Finance
- PhD- Accounting or Finance
Even if you decide to pursue a degree in a different field, there are a few courses that will be especially helpful in preparing you to succeed as a financial adviser. Some of these courses include:
- Taxation
- Finance
- Economics
- Business communications
- Quantitative applications in business
- Marketing
- Behavior of organizations, persons and groups
- Business ethics
- Computer information systems
- Management
- Accounting
- Business law
- Statistics
Professional designations and additional certifications will also be helpful in increasing your chance of success as a financial advisor. Each of these elective designations have their own eligibility requirements including formal education standards:
- Chartered Investment Counselor (CIC)
- Chartered Financial Analyst (CFA)
- Chartered Financial Consultant (ChFC)
- Personal Financial Specialist (PFS)
- Certified Financial Planner (CFP)
Step 2: Register Your Firm in Arkansas
(If you are not establishing your own IA firm, skip to Step 3.)
Complete the registration process for your Investment Adviser (IA) firm through the Investment Adviser Registration Depository (IARD), a national database listing all firms and individual advisers that is administered by FINRA. It contains information on both SEC-registered investment advisers and investment advisers that are regulated by the different states.
- Initiate the FINRA Entitlement Process and establish an IARD User Account. Part of this process includes designating a Super Accountant Administrator (SAA) for your New Investment Adviser by completing section 3 of the Entitlement Forms. After approval of Entitlement, you, as the SSA, will be able to access the Gateway to complete the remaining steps.
- Fund your IARD User Account. This account will be used to pay all required registration fees. For each investment adviser representative in your firm, the fees will typically total less than $500 to cover the cost of testing and other administrative costs:
- Initial IARD set up fees for state registrants are currently being waived
- $225 initial filing fee for SEC registrants with more than $100 million in assets under management
- Arkansas Securities Department charges an initial registration fee of $300 for the firm
- Arkansas Securities Department charges an additional $75 for each IAR within the firm
- Prepare and submit Form ADV. This will provide information about the education and experience of the investment adviser representatives in the firm, the firm’s fee structure and investment philosophy, along with other information that clients and potential clients will want to have available to them. The electronic version of this form you will use is located in the IARD.
- Submit Form U-4 Uniform Application for Securities Industry Registration or Transfer for each investment adviser representative (IAR) that will be working in your firm. If you will be the only IAR in your firm when establishing a sole proprietorship or LLC, you will need to complete a Form U-4 for yourself.
- Send the following directly to the Arkansas Securities Department at Heritage West Building – Third Floor, 201 East Markham, Little Rock, AR 72201:
- Statement of Resolution. This document authorizes the application to be completed by the person who signed Form ADV.
- Surety Bond of $50,000.
- Organizational information about your firm including Articles of Incorporation for firms organized as corporations, a Certificate of Partnership for partnerships, or the Articles of Organization specific to other business structures.
- If your firm will hold custody of clients’ securities, you will need to send an audited balance sheet, otherwise an unaudited statement will do.
Requirements to Transact Business in Other States
After you register in Arkansas, you will be allowed to conduct a small amount of advisory business in any other state without having to register in that state. A small amount is generally defined as less than 5 clients in another state. When you add a fifth client in another state, you will have to register in that state, which will be done through the IARD system, and will always include the payment of additional fees required by that state.
RIAs that are registered in a different state are also allowed to conduct minimal business in Arkansas without any additional registration. This is known as the De Minimis Exemption, but advisers will have to register in Arkansas when they add their fifth Arkansas client.
Step 3: Get Your Registered Investment Adviser Representative License in Arkansas by Taking the Required Exams
The Arkansas Securities Department will waive the examination requirement for individuals who have earned at least one of the following professional designations:
- Chartered Investment Counselor (CIC)
- Chartered Financial Analyst (CFA)
- Chartered Financial Consultant (ChFC)
- Personal Financial Specialist (PFS)
- Certified Financial Planner (CFP)
- Register for the required exams if exemptions don’t apply. Specific information on how to complete your registration for the exams will be provided after your application is approved. You will need to schedule the exam within 120 days of registration. Alabama requires IAR candidates to take the following:
OR
- The Series 7, General Securities Representative Examination, which requires sponsorship through a FINRA-member firm, in combination with the Series 66, Uniform Combined State Law Examination
Register:
- Form U-4 Uniform Application for Securities Industry Registration or Transfer can be prepared and submitted through the Financial Industry Regulatory Authority (FINRA) web site. Form U-4 functions as both the exam application and registration application.
- You can locate Pearson and Prometric testing sites located in Arkansas and register to take the exam through your chosen location.
- Plan on getting to the testing center at least one hour before your scheduled exam time.
- You will receive your tests results immediately after finishing the exam.
Step 4: Ongoing Renewal and Update Requirements in Arkansas
Investment Advisor Firm:
- IA firm and IAR license renewals are done completely through the IARD
- License renewal must be completed by December 31st each year
- Renewal fees owed to the IARD are $100 total each year
- Arkansas’s renewal fees are $300 for the firm and $75 for each IAR within the firm
- Annual updates to the ADV are required
- Renewal fees need to be paid for all states in which the IAR is registered
Investment Adviser Representatives:
There are no ongoing continuing education requirements for IARs once they have passed the Series 65 Exam. IARs are expected to keep their Form U-4 current throughout the year. As a sole proprietor or firm owner you will make these updates yourself. As an employee you must alert your Super Account Administrator or compliance department of amendments, which must be done within 30 days of a change that affects the following:
- Residential address
- Education
- Certification
- Name change (marriage)
- Additional business activities
- Criminal record
- Disciplinary action
- Customer complaints
- Jurisdiction changes
- Civil judgments