When starting an RIA, advisors must register in the state(s) where they provide financial services. While RIA registration requirements from state-to-state are generally similar, the details can vary.
In this article, you’ll learn about the state requirements for becoming an RIA in Massachusetts.
If you’re an investment advisor who meets one of the following criteria, then you must register with the state of Massachusetts:
- Manage less the $100 million in AUM,
- Are living in Massachusetts,
- Have more than 5 clients in the state,
- Or actively marketing your services in the state.
You may also have to register with the SEC if you manage more than $100 million in AUM.
Key Takeaways from this article:
- Massachusetts uses FINRA’s WebCRD/IARD system to process applications.
- It is highly recommended that you hire a compliance consultant to help with state and SEC registrations. However, if this is not possible, the following information will explain what you need to provide the state of Massachusetts.
Financial Statement Requirements
- Massachusetts requires RIAs with discretion to submit a security bond.
- Each IRA needs to submit form U-4 and ADV Part 2B.
Must pass Series 65, Series 66 & 7 combined or have the appropriate designation.
If you're registering in Massachusetts, it's required that any advisor providing financial advice must acquire one of these licenses or designations:
- Series 65
- Series 66 and 7 combined
- Or have CFP, CFA, CIC, ChFC, or PFS designation
Forms & Policies required by Massachusetts
- Filing fees are due to the state at the time of registration
- FINRA Entitlement paperwork
To file an RIA application, advisors must apply to FINRA for an account in their WebCRD/IARD online system. FINRA will not regulate or supervise RIAs; Massachusetts only uses the system to process the applications.
- Form ADV Part 1 (online portion)
This portion of the ADV is completed online for a firm's registration. Here, advisors will include information about the business and ownership structure, any affiliations related to business practices, clients, and additional information about employees.
Since this is the online portion, it's also used for uploading ADV part 2A and part 2B.
- Form ADV Part 2A (paper and online)
Form ADV Part 2A is the firm's brochure that details the RIA's services, fees, disciplinary disclosures, and other details. This brochure must be provided to all clients and prospects, and Massachusetts requires that it be written in a way that's easy to read and understand for clients.
- Form ADV Part 2B (paper and online)
This portion of the ADV is also given to clients. 2B is about the advisor and contains information about the advisor's employment, education, conflict of interest, and disciplinary information. Anyone else at the firm giving investment advice to clients, including Executive Officers, must also have a Form ADV 2B.
- Client Advisory Contract
This contract between an advisor and client, including an investment policy statement, must meet Massachusetts' appropriate regulatory authority standards for client advisory contracts.
- Policies and Procedures Manual
This policy helps advisors maintain and enforce the RIA's internal policies. It includes how the firm handles client complaints, training new IARs, Business Continuity Plan, Anti-Insider Trading Policy, Anti-Money Laundering Policy, and Information Security Policy.
Advisors must provide this to clients at the start of the relationship and every year after that. This statement explains how the client's information is stored, handled, and disclosed. The policy will vary from RIA to RIA, but it must meet Massachusetts' compliance requirements.
- Code of Ethics
Massachusetts wants to ensure advisors meet the standards set by the state, so this filing shows an RIA is compliant.
Starting an RIA in Massachusetts or figuring out where to register and when can be overwhelming, but you can do it successfully with the proper guidance and resources.Our team put together this helpful launch kit to help guide you through the process. Download it today and get everything you need to successfully launch your RIA.
At Altruist, we strive to make independent financial advice better, more accessible, and more affordable. Our platform gives back precious time and capital to RIAs, so you can focus on what matters most: your clients and business.
On one intuitive, integrated platform, advisors can open and fund accounts, trade and rebalance, report, and bill, at a fraction of today’s edging-ever-higher technology costs.
Our dedicated customer support team is here to help advisors that are planning to make the leap from their wirehouse. Our team will help ensure a smooth transition with exceptional ongoing service.
To see how we’re helping RIAs streamline operations, reduce overhead, and elevate the client experience, book a call with one of our transitional specialists now.
*Altruist and its affiliates do not provide legal advice, so it’s important to check with a qualified professional for each state’s registration requirements.