Whether you wish to establish an independent investment adviser (IA) firm in Washington, or become an investment adviser representative (IAR) for an existing firm, your goal is within reach. In this step-by-step guide you will find detailed information explaining requirements for licensure in the state. This guide applies to both state-level registration with the Washington Department of Financial Institutions, Securities Division, as well as federal level registration through the Securities and Exchange Commission (SEC).
As an investment adviser firm owner, principal, or representative working with residents of Washington, you’ll be required to operate in accordance with rules described in the Securities Act of Washington.
Step 1. Get Your Education
Whether you plan to establish an independent IA firm, or work as an IAR for an existing Washington-state registered IA, consider the importance of a degree path that will prepare you for your career. Potential clients tend to feel most comfortable with an advisor with a four-year degree at minimum, and your education background can always be verified by the investing public through the Investment Adviser Public Disclosure (IAPD) database.
The following degrees have proven to be a good fit for independent investment advisers as well as investment adviser representatives:
- BS-Accounting
- BA-Consumer and Family Financial Services
- BA-Accounting
- MS-Accounting or MS-Finance
- MBA-Accounting and Finance
- MBA –Finance
- PhD-Accounting
- PhD-Finance
The field of investment advising requires comprehensive knowledge of markets and investment vehicles. Your degree program is likely to include some or all of the courses listed below:
- Finance
- Behavior of persons, groups, and organizations
- Taxation
- Economics
- Statistics
- Ethics in business
- Management
- Marketing
- Business law
- Business communications
- Computer information systems
- Quantitative applications in business
- Accounting
To better prepare yourself to be a successful financial advisor, consider pursuing an elective professional designation. Clients are looking for the most qualified professionals to manage their assets and often show preference to financial professionals who have demonstrated competency through the completion of a certification program. Exam requirements for IA and IAR licensure in Washington are waived for candidates that hold one of the following:
- Chartered Investment Counselor (CIC)
- Chartered Financial Consultant (ChFC)
- Certified Financial Planner (CFP)
- Personal Financial Specialist (PFS)
- Chartered Financial Analyst (CFA)
Step 2: Register Your Firm in Washington
(This step is required when establishing a new IA firm. If your career will begin with an existing firm, skip to Step 3.)
Both federal and state level IA firm registration is done through the Investment Adviser Registration Depository. If the new firm has more than $100 million in client assets under management it will operate under federal laws and register with the Securities and Exchange Commission. Firms managing less than $100 million in client assets will register at the state level with the Washington Department of Financial Institutions, Securities Division. The following steps cover both scenarios.
- The principal of a new firm will be responsible for completing the proper Entitlement Forms. In doing so a Super Accountant Administrator (SAA) will be assigned (usually the founding principal). The SAA will hold the key to the firm’s online access via the FINRA (financial institution regulatory authority) firm Gateway and FINRAs Web-based systems.
- Pay exam and registration fees through the IARD User Account. Fund the account to cover the following fees:
- SEC-registered advisors will pay a $225 filing fee – this includes firms with greater than $100 million in assets under management
- IAR firm employees will be charged a $40 initial state IAR filing fee
- Exam fees for each IAR that will be in the firm
- Washington charges a $150 initial IA firm filing fee for
- Initial IARD set up fees for state registered investment advisors are currently being waived
- Complete Form ADV. This will outline the firm’s investment philosophy, fee structure, and employee background information.
- Submit the U-4 Uniform Application for Securities Registration or Transfer for each IAR within the firm.
- Submit additional information listed below by email to ialicensing@dfi.wa.gov or by postal mail to Department of Financial Institutions, Division of Securities, PO Box 9033, Olympia WA 98507-9033:
- Financial statements, which do not need to be audited
- Bonding form for $10,000 for firms that have discretion over accounts and $35,000 for those firms with custody of client assets
- Client contracts
- Proof that you as the firm principal, and any IARs with your employ, have passed the required exam or qualify for a waiver
Requirements to Transact Business in Other States
Washington state based RIAs may conduct business in a state other than Washington, with the understanding that certain requirements must be met. Any given IAR within the firm may not have more than five clients in any one state. An IAR that works with more than five clients in any one state is required to complete registration in that state. This applies broadly to most states under the De Minimis Exemption, but individual state regulators should be consulted.
The De Minimis Exemption also allows an IAR form a state other than Washington to conduct business with as many as five clients before state registration is required.
Step 3: Get Your Registered Investment Adviser License in Washington by Completing the Required Exam(s)
If you are an IAR candidate or sole proprietor of an RIA firm, you will have exam requirements waived if you hold one of the following professional designations:
- Chartered Financial Analyst (CFA)
- Personal Financial Specialist (PFS)
- Chartered Financial Consultant (ChFC)
- Chartered Investment Counselor (CIC)
- Certified Financial Planner (CFP)
- IAR candidates may choose from one of the options listed below:
OR
- The Series 66, Uniform Combined State Law Examination in combination with the Series 7, General Securities Representative Examination. The latter requires sponsorship by a FINRA-member firm.
Apply for the exams with the following form:
- Submit a Form U-4 Uniform Application for Securities Industry Registration or Transfer to meet the requirements for both the IAR exam application as well as state or federal registration. This is considered the standard process.
- Schedule to take exams through the Prometric or Pearson Professional Center testing locations in Washington. You will have a 120-day window from the initial registration date to complete the required exam(s).
- Arrive at the testing center early, preferably one hour before the scheduled exam.
- Exam results are provided immediately upon completing the exam(s).
Step 4: Ongoing Renewal and Update Requirements in Washington
Investment Advisor Firm:
- Renewal fees will be paid for each state in which firm employed IARs are currently registered
- The IARD must be used for completing renewals for both IARs and firms registered as IAs
- License renewals are required by the December 31st deadline each year
- Form ADV updates are required once every twelve months
- Washington’s renewal fees are $150 for firms and $40 for individual IARs that work in the firm
- Additional IARD renewal fees are $100
Investment Adviser Representatives:
Form U-4 must be kept updated at all times. Sole proprietors will complete and submit their own personal documents. IARs are expected to contact their firm’s compliance department within 30 days of changes to the following:
- Disciplinary action
- Civil judgments
- Client complaints
- Additional professional certifications
- Additional business activities
- Name change (marriage)
- Educational background
- Criminal record
- Residential address