Financial advisor is a term used to describe a licensed individual known as an investment adviser representative (IAR) or the entity known as an investment adviser (IA) firm, for which these individuals work. This step-by-step guide on how to become a financial advisor in Pennsylvania will detail the individual IAR and IA firm licensing process for state-level registrants accountable to the Pennsylvania Securities Commission and federal level registrants accountable to the Securities & Exchange Commission (SEC).
Step 1. Get Your Education
Get the right degree. Getting a proper education is quite possibly the most important step you can take toward becoming an investment adviser. Potential clients will compare your background information to other advisors in the area through the Investment Adviser Public Disclosure (IAPD) registry.
Most financial planning and investment advisory services are provided by professionals with no less than a bachelor’s degree. Some degree paths to consider:
- MS-Accounting, Personal Financial Planning, or Finance
- MBA-Accounting and Finance or simply Finance
- BA or BS -Accounting
- BA-Consumer and Family Financial Services
- PhD-Accounting or Finance
Enroll in the right classes. As an aspiring IAR, you’ll give special attention to coursework in the following areas:
- Management
- Ethics in business
- Finance
- Behavior of groups, persons, and organizations
- Computer information systems
- Statistics
- Accounting
- Business law
- Taxation
- Business communications
- Economics
- Marketing
- Quantitative applications applied to business
Consider elective certification. Although these designations are purely voluntary, they will help denote your specialized expertise. Prior to qualifying for a professional certification, you must meet all eligibility requirements; often a bachelor’s degree or a minimum level of industry experience. You can choose from the following:
- Chartered Financial Consultant (ChFC)
- Chartered Investment Counselor (CIC)
- Certified Financial Planner (CFP)
- Personal Financial Specialist (PFS)
- Chartered Financial Analyst (CFA)
Step 2: Register Your Firm in Pennsylvania
(This step only applies if you’re interested in establishing an IA firm. If you plan to start your career by working with an established firm, skip to Step 3.)
Whether your investment adviser (IA) firm qualifies as a state or federal level registrant, you’ll use the Financial Industry Regulatory Authority (FINRA) administered Investment Adviser Registration Depository (IARD). State level registration with the Pennsylvania Securities Commission, is required for IA firms with less than $100 million in client assets under management. If your new firm manages assets greater than $100 million then it will be registered with the federal SEC. The following process covers both scenarios.
- Open an IARD User Account. Complete the Entitlement Forms unique to your New Investment Advisor Firm (Section 3). This is considered the first step in the FINRA Entitlement Process and is extremely important. The objective of this is to assist you in getting access to FINRA’s Web-based systems. Your new firm is responsible for assigning a Super Accountant Administrator (SAA) who will acquire access to the FINRA Firm Gateway and complete the remaining steps in the registration process.
- Fund the IARD User Account. The IARD User Account is used to pay all required fees. IAs in Pennsylvania will need to fund the account sufficient to cover:
- Exam fees for each IAR that will be in the firm
- $350 initial state firm filing fee that is charged by the Pennsylvania Securities Commission
- Initial IARD set up fees for state registered investment advisors are currently being waived
- $120 initial state IAR filing fee charged by the Pennsylvania Securities Commission for each IAR employed by the firm
- $225 initial filing fee for SEC-registered advisors (firms with over $100 million in client assets under management only)
- Submit Form ADV. The IARD is used to complete and submit the electronic version of Form ADV. This form is responsible for highlighting the firm’s investment philosophy, fee structure, and background of investment advisors, and is typically made available to potential clients.
- Submit form U-4 Uniform Application for Securities Registration or Transfer for each investment advisor representative (IAR) in the firm. If you’re operating your firm as a sole proprietorship, you’ll submit a Form U-4 for yourself. Review Step 3 for a more in depth explanation.
- The items listed below should be mailed to the Pennsylvania Securities Commission, ATTN: Division of Licensing, 1010 N. Seventh Street, Eastgate Bldg, 2nd Floor, Harrisburg, PA 17102-1410:
- A statement of financial condition if you will have custody of client assets or if you require payment of advisory fees more than six months in advance and in an amount greater than $1,200
- Sample copies of all disclosures and contracts that you will use with clients
Requirements to Transact Business in Other States
Your firm may conduct a minimal amount of business in another state once the registration process in Pennsylvania is complete. A minimal amount of business is considered to be no more than four clients. If your firm manages more than four clients in any one state, you’ll need to register in that state using the IARD system and pay the required registration fees.
Under Pennsylvania’s De Minimis Exemption, properly registered RIAs from another state are permitted to transact a minimal amount of business in Pennsylvania and are only required to register when their sixth client is added.
Step 3: Get Your Registered Investment Adviser License in Pennsylvania by Taking the Required Exam
The Pennsylvania Securities Act governs firms that offer a majority of their services to local clients and manage assets that total less than $100 million. In this situation registration is done at the state level through the Pennsylvania Securities Commission. The Securities and Exchange Commission (SEC) oversees all firms with more than $100 million in assets under management. Exam requirements at both the sate and federal level can be waived for individuals who have submitted a Pennsylvania Securities Commission exam waiver showing they have completed at least one of the professional designations listed here:
- Chartered Financial Analyst (CFA)
- Chartered Investment Counselor (CIC)
- Certified Financial Planner (CFP)
- Chartered Financial Consultant (ChFC)
- Personal Financial Specialist (PFS)
- Certified Public Accountant (CPA)
- Attorneys
- The state of Pennsylvania requires that IAR candidates complete at least one of the following exam scenarios:
OR
- The Series 7, General Securities Representative Examination, in combination with the Series 66, Uniform Combined State Law Examination
Register:
- Form U-4 Uniform Application for Securities Industry Registration or Transfer is both the individual IAR registration application and the exam application.
- Schedule the required exam(s) through one of the Prometric or Pearson Professional Center testing locations in Pennsylvania.
- Schedule the exam(s) within 120 days of registration.
- If taking multiple exams, they must be scheduled for different days
- Plan on arriving at least one hour early on your scheduled examination date.
- Your exam score will be provided to you immediately upon completion.
Step 4: Ongoing Renewal and Update Requirements in Pennsylvania
Investment Advisor Firm:
- IARD renewal fees are $100
- Pennsylvania’s renewal fees are $350 for the IA firm and $105 for each IAR in the firm’s employ
- Renewal fees are paid for all states where the IAR is registered
- License renewal actions must be completed by December 31st every year
- Annual updates to the ADV will always be required
Investment Adviser Representatives:
There are no continuing education requirements once the Series 65 exam has been completed.
As an IAR, it’s your job to ensure the accuracy of your form U-4. Sole proprietors will be in charge of maintaining the integrity of their own file. Employees of a firm will notify their SAA of any changes to the following:
- Jurisdictional changes
- Customer complaints
- Name change (marriage)
- Criminal record
- Disciplinary action
- Additional business activities
- Education
- Residential address
- Civil judgments
- Certification