Becoming a Financial Advisor in California

Becoming a financial advisor in California will require you to either register an independent investment adviser (IA) firm, or to become registered as an investment adviser representative (IAR) with one of the many existing firms already serving the residents of California. This simple guide will provide step-by-step instructions on state level registration with the Securities Regulation Division of the California Department of Corporations, as well as federal level registration with the Securities and Exchange Commission (SEC).

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As an IA firm principal or IAR working with residents of California, you’ll be expected to conduct business in strict accordance with California’s laws and rules as detailed in the California Corporations Code, and the California Code of Regulations (CCR).

Step 1. Get Your Education

Your degree will be the foundation upon which you build your career in personal finance. Potential clients will always consider education when deciding on an advisor to trust with their financial assets.

They will have easy access to details about your education through the Investment Adviser Public Disclosure (IAPD) national database listing. Given the complexity of the work you’ll perform, a highly specialized degree would be appropriate:

• BS or BA-Accounting
• BA-Consumer and Family Financial Services
• MS or MBA-Finance
• MS-Personal Financial Planning
• MBA-Accounting and Finance
• MS-Accounting
• PhD- Accounting or Finance

While pursuing your degree you’ll encounter courses that will be essential in preparing you for success as a financial advisor:

• Behavior of organizations, persons and groups
• Business ethics
• Taxation
• Business communications
• Quantitative applications in business
• Accounting
• Business law
• Statistics
• Marketing
• Computer information systems
• Finance
• Economics
• Management

Voluntary certification and professional designation programs also offer valuable training and help increase your mastery of personal finance. Most require a bachelor’s degree at minimum, or a specific number of years of industry experience. The Securities and Exchange Commission (SEC) and the Securities Regulation Division of the California Department of Corporations will waive your exam requirements as an IA firm principal or IAR registrant if you hold one of the following:

• Certified Financial Planner (CFP) awarded by Certified Planner Board of Standards, Inc.
• Personal Financial Specialist (PFS) awarded by American Institute of CPAs.
• Chartered Financial Consultant (ChFC) awarded by The American College
• Chartered Financial Analyst (CFA) awarded by CFA Institute requires a bachelor’s degree at minimum but can be pursued by students in their last year of undergraduate studies
• Certified Investment Management Consultant (CIMC) previously awarded by Investment Management Consultants Association, this program is no longer available to new enrollees as the Association is no longer in existence.
• Certified Investment Management Analyst (CIMA) awarded by Investment Management Consultants Association.
• Chartered Investment Counselor (CIC) was previously awarded by Investment Council Association, this program is no longer available to new enrollees.

Step 2: Register Your Firm in California

(This step only applies if you’re establishing a new independent investment adviser firm. Skip to Step 3 if you plan to work as an investment adviser representative with an existing firm.)

State level registrants are defined as those investment adviser (IA) firms that manage less than $100 million in client assets, while federal level registrants are defined as those that manage more than $100 million in client assets.

The Investment Adviser Registration Depository (IARD) is the electronic system used by both state level IA firms registering with the Securities Regulation Division of the California Department of Corporations, and federal level firms registering with the Securities and Exchange Commission. The following steps will detail the process for both state and federal level IA firm registration.

1. Gain access to FINRA’s Web-based systems by submitting Entitlement Forms. Approval is obtained by sending a written request to:FINRA
   Attn: Registration and Disclosure Department
   9509 Key West Avenue
   Rockville, MD 20850When the Entitlement Forms are approved, you will be emailed with a user ID and password that will grant you access to the Gateway. This will allow you to complete the remaining steps.
2. Set up and fund a general account through which you will pay the required registration fees. Administrative registration fees paid to the IARD system are as follows:
   • Initial registration fee of $40 if the firm will manage less than $25 million in assets
   • Initial registration fee of $150 for firms that manage between $25 million and $100 million
   • Initial registration fee of $225 if the firm will manage more than $100 million in assets under management
   • Exam fees for all new IAR examinees

   Fees distributed to the state of California:

   • Initial registration fee of $125 for the IA firm
   • Initial registration fee of $25 for each IAR within the firm
3. Register all of the firm’s IARs. Submit Form U-4 Uniform Application for Securities Registration or Transfer through the Central Registration Depository (CRD). This serves as an exam application for firm representatives, as well as California state and SEC registration.
4. Complete and submit Form ADV through the IARD. This provides detailed information on the education and experience of the investment advisers at your firm, the firm’s investment philosophy and fee structure, and other useful information for clients and potential clients.
5. Mail the following documents to the Department of Corporations, 1515 K Street, Suite 200, Sacramento, CA, 95814-4052:
   • Statement of citizenship
   • Samples of contracts that will be used with clients
   • Include a balance sheet if your firm will hold custody of client funds

Requirements to Transact Business in Other States through the De Minimis Exemption

After registering in California, you are permitted to conduct some advisory business in other states without having to register in those states. This is restricted to just four clients or fewer in any other single state. After adding a fifth client in another state, you will have to register in that state, a process that is completed through the IARD system, and that involves payment of additional fees as required by that additional state.

Step 3: Take the Required Exams

The Securities Regulation Division of the California Department of Corporations and the Securities and Exchange Commission (SEC) both waive exam requirements if you hold at least one of the following professional designations:

• Personal Financial Specialist (PFS)
• Chartered Investment Counselor (CIC)
• Chartered Financial Consultant (ChFC)
• Chartered Financial Analyst (CFA)
• Certified Financial Planner (CFP)

1. If you don’t qualify for a waiver, you will need to complete the test application form. Prepare and submit Form U-4, Uniform Application for Securities Registration or Transfer through the CRD. As a firm representative your employer will submit this on your behalf. This application effectively registers you with the SEC and the California Securities Regulation Division, in addition to serving as an exam application. You will receive specific details related to registering for the required exam(s) after your application is approved.
2. Register to take the Series 65, Uniform Investment Adviser Law ExaminationOR
3. The Series 7, General Securities Representative Examination in combination with the Series 66, Uniform Combined State Law Examination
4. You need to schedule the exam within 120 days of registration through one of the authorized California exam locations (Alameda, Anaheim, Camarillo, Casa Grande).
5. You should plan on arriving at the testing center at least an hour before your scheduled exam time.
6. You will be presented with results immediately upon finishing the exam.

Step 4: Ongoing Renewal and Update Requirements in California

Investment Advisor Firm:
California requires the completion of an annual update to your Form ADV and the payment of an annual renewal fee. The annual renewal fee in California is $125 for the firm. No annual renewal fee is required for individuals licensed as investment advisor representatives. Registration renewals must be completed by December 31st each year, and renewal fees need to be paid for all states in which the firm is registered. Additional IARD administrative renewal fees are $100 total.

Investment Adviser Representatives:
Investment Adviser Representatives are expected to keep their Form U-4 current. As a sole proprietor you will make these updates yourself. As an employee you must alert your employing firm’s compliance department of amendments, which must be made within 30 days of any changes to the following:

• Residential address
• Education
• Certification
• Disciplinary action
• Customer complaints
• Jurisdiction changes
• Name change (marriage)
• Additional business activities
• Criminal record
• Civil judgments