In Minnesota, financial advisors are known as investment advisers (IAs) who, when registered at either the state or federal level, become registered investment advisers (RIAs). Minnesota is unique in that the state does not register representatives of IA firms, typically known as investment adviser representatives (IARs). The following information serves as a resource guide to becoming a financial advisor and effectively establishing an investment adviser (IA) firm in the state of Minnesota. In addition, it provides state and federal level registration information for state level registrants who work under the rules of the Minnesota Department of Commerce and federal level registrants registered with the Securities & Exchange Commission (SEC).
Step 1. Get Your Education
As an investment adviser, your educational background is stored in a national registry and can be accessed by potential clients who will use the information as they compare you to other IAR’s. Financial planning services are generally provided by professionals who hold a bachelor’s or master’s degree. It’s not uncommon to see advisers holding specialized degrees; in fact, it has become more common in recent years.
Here are some appropriate degrees:
- BA-Consumer and Family Financial Services
- BA or BS -Accounting
- MBA-Accounting and Finance or simply Finance
- MS-Accounting, Personal Financial Planning, or Finance
- PhD-Accounting or Finance
A strong educational background is the key to becoming an effective Investment Advisor. A degree provides the necessary background in order to advise clients wisely. Fundamental courses are:
- Accounting
- Statistics
- Ethics in business
- Economics
- Marketing
- Finance
- Business law
- Computer information systems
- Business communications
- Management
- Taxation
- Behavior of groups, persons, and organizations
- Quantitative applications applied to business
Numerous elective professional certifications are available to assist you in highlighting your advising knowledge and skills; however, they aren’t required for either state or federal IA registration. Eligibility requirements associated with specialty certifications typically include a minimum level of formal education (bachelor’s degree) or industry experience. Beneficial certifications are:
- Chartered Investment Counselor (CIC)
- Chartered Financial Consultant (ChFC)
- Certified Financial Planner (CFP)
- Chartered Financial Analyst (CFA)
- Personal Financial Specialist (PFS)
Step 2: Register Your Firm in Minnesota
(This step is only applicable if you are interested in establishing your own IA firm. If you will start your career by working with an established firm, skip to Step 3.)
The registration process for an investment adviser (IA) firm through the FINRA administered Investment Adviser Registration Depository (IARD) needs to be completed prior to opening an independent practice. Upon completion, your firm will be registered at the state level, with the Minnesota Department of Commerce if the total assets you’ll be managing are less than $100 million or with the federal SEC if total assets under management are more than $100 million.
- Begin the FINRA Entitlement Process and open an IARD User Account by completing Entitlement Forms specific to the New Investment Adviser Firm (Section 3). The entitlement process provides you with authorized access to FINRA’s Web-based systems. This entitlement process requires your firm to designate a Super Accountant Administrator (SAA). After the Entitlement is approved, your SAA can access the FINRA Firm Gateway and complete the following steps:
- The IARD User Account needs to be funded in order to cover all registration and state filing fees:
- $225 initial filing fee for SEC-registered advisors, which include firms with over $100 million in assets under management
- $100 initial state firm filing fee that is charged by the Minnesota Securities Division
- The Form ADV must be completed. This is a SEC form detailing the firm’s fee structure, investment philosophy, and other information that potential clients might need. Electronic versions of this form can be found in the IARD. To complete registration with the state of Minnesota you will select Minnesota as the state your firm will be doing business in.
- For federally registered firms, a U-4 Uniform Application for Securities Registration or Transfer form needs to be submitted for each investment adviser representative (IAR) in the firm. If you plan to operate as a sole proprietor or choose to set up the firm as an LLC in Minnesota, you will be considered a representative of the firm and will need to submit a Form U-4 for yourself. If you are establishing a state-registered firm in Minnesota, you will not need to register firm representatives in the state.
- Copies of client contracts and any advertising material must be included as attachments to the ADV. Unaudited financials, or an audited financial statement if you will hold client assets or charge fees in advance, will be required. A surety bond of $25,000 may also be required if you will hold client assets or have net capital of less than $100,000 in the firm.
Requirements to Transact Business in Other States
After you’re registered in Minnesota, the RIA (registered investment adviser) firm is permitted to transact a minimal amount of business in any other state without meeting additional registration requirements in that state. The stipulation on this is generally no more than four clients. If a fifth client is added in any other state, you are required to register in that state using the IARD system and pay all required registration fees.
RIAs that are properly registered in another state are permitted to transact a small amount of business in Minnesota and are only required to register when adding their sixth client in Minnesota. This is known as the De Minimis Exemption.
Step 3: Get Your Registered Investment Adviser License in Minnesota by Completing the Required Exam
Your investment advising firm is governed by the Minnesota Uniform Securities Act if it will be offering a majority of its services to local clients living in Minnesota and you will manage assets that are less than $100 million. In the event that your firm manages assets over $100 million, it will be regulated by the Securities and Exchange Commission (SEC). The SEC waives exam requirements for applicants who have been awarded any of the following certifications:
- Chartered Financial Consultant (ChFC)
- Personal Financial Specialist (PFS)
- Chartered Financial Analyst (CFA)
- Chartered Investment Counselor (CIC)
- Certified Financial Planner (CFP)
- Register for required exams. All Minnesota IA candidates are required to complete one of the following:
OR
Register using the following form:
- Form U-4 Uniform Application for Securities Industry Registration or Transfer, which can be prepared and submitted through the IARD. Form U-4 functions as both the registration application and exam application.
- Schedule any required exam(s) through one of the Prometric or Pearson Professional Center testing locations in Minnesota. You are required to schedule all exam(s) within 120 days of registration.
- Arrive at the testing center at least one hour prior to your scheduled exam time on the appropriate day.
- Your exam score will be given to you immediately upon completion of the exam.
Step 4: Ongoing Renewal and Update Requirements in Minnesota
Investment Advisor Firm:
- Minnesota’s renewal fees are $100
- Additional IARD renewal fees are $100
- License renewal actions must be completed by December 31st every year
- IA firm renewals will be completed through the IARD
- Renewal fees are paid for all states where the IAR is registered
- Annual updates to the ADV will always be required
IAR form U4 updates for representatives of federally registered firms:
Representatives of federally registered IAs are required to maintain current information on their Form U-4. Sole proprietors will need to make required updates themselves. Employees of a firm will notify their SAA of any required amendments; those updates will need to be made within 30 days. This list provides guidance on the items that require updates:
- Disciplinary action
- Civil judgments
- Certification
- Name change (marriage)
- Additional business activities
- Criminal record
- Customer complaints
- Education
- Residential address
- Jurisdictional changes