A guide to taking control of your business

Transcription

Going
Independent
A guide to taking control of your business
Table of Contents
Introduction 4
The Road to Becoming an Independent Advisor 5
Considerations Before Committing 6
RIA Legal & Regulatory Information 7
Risk Management for Your RIA Business 12
Choosing the Right Technology Solutions for Your Firm
13
Marketing Your Firm 15
Opening Your Office 17
Building Your Staff 19
Conclusion 22
Appendix 23
Contact Us
Give us a call today at 866.306.7135 to discuss your goals and challenges
with our business development team.
advisor.scottrade.com
Going Independent Guide 2
Going Independent with
Scottrade® Advisor Services
Congratulations on choosing independence!
You are on your way to becoming an independent advisor
where you set the goals, make the decisions and truly run
your own business.
Of course, you’ll have questions as you begin this exciting new
endeavor. We’ve prepared this guide to help you find answers.
The following sections contain key information you may want
to consider as you go independent.
We invite you to discover why so many financial advisors
choose Scottrade® Advisor Services and to contact us if you
have any questions or concerns about your big move.
advisor.scottrade.com Going Independent Guide 3
Introduction
Considerations Before Committing
Marketing & Advertising Your Firm
Before leaving your current firm, you must understand
the challenges that you may face. These include
separating from your firm, building your business,
assisting with setting staffing priorities and assessing
the necessary insurance options.
An important part of your success depends on
establishing a pipeline of prospective clients. It is
difficult to find time to market and create awareness
of your firm while building your business. Scottrade®
Advisor Services’ Strategic Resource Center can help
by connecting you with industry professionals in a
variety of areas who can assist you in growing your
business.
Legal & Regulatory Information
While rules and legal speak can be complicated,
as a business owner you should be aware of how
your decisions can affect your business. Once you
are registered as a Registered Investment Advisor
(“RIA”), Scottrade® Advisor Services provides access
to a basic compliance hotline service at no charge1
to assist you with answering the day-to-day compliance
and regulatory questions that come with operating a
registered investment advisory firm. This service can
be a benefit to you as you transition and build your
business.
Risk Management
With any new business venture, there are many risks
involved. Do you have the skills and determination
to make the right moves and minimize risk? Of course
with experience your choices become more informed,
but any successful business owner must naturally have
a good sense of how to assess and manage risk.
Technology & Tools
Success depends on how well equipped you are to
support your strategies and clients. Scottrade can
help support the growth of your business by offering
a powerful, easy-to-use custodial platform. Our
Strategic Resource Center gives you access to a host
of tools, technology and consulting services — many
with exclusive discounts.
advisor.scottrade.com Opening Your Office
As you begin your search for new workspace, it is
important that you determine how much office space
you will need. Before you commit to a contract,
understand the leasing arrangements so that in the
near future you can remain focused on running your
business without worrying about lease or contract
details. Keep in mind that advances in technology
have lessened the need for larger offices as market
data, trading, electronic records storage and remote
access to almost everything has become more
mainstream.
Building Your Staff
Evaluating talent and choosing the right people to
join your team is part of building any business. Before
you begin interviewing candidates, you should have a
business strategy and a complete idea of the type of
talent you need to build your business. Be careful not
to overstaff. Overstaffing invariably leads to wasted
resources.
The Road to Becoming
an Independent Advisor
The needs of each advisory
firm have varying levels of
complexity. While many of the
steps we have outlined below
can be handled within your firm,
Scottrade suggests you seek
legal counsel along with a thirdparty compliance consulting firm
to assist you with many of the
processes described below.
⃞⃞ Select Scottrade® Advisor
Services as your partner
to handle customer needs.
⃞⃞ Seek out your office location.
⃞⃞ Work with an accountant to
develop a 5-year financial plan
for your expected revenue
and expenses.
⃞⃞ Obtain registration approval
from the proper jurisdiction
such as the SEC or a state
securities division (assisted
by your compliance consulting
firm or attorney).
Business Checklist
⃞⃞ Develop a legal exit strategy
prior to separating from your
current firm.
⃞⃞ Investigate any non-compete
clauses you may have with
a current or former employer
or firm.
⃞⃞ Develop your firm’s mission
and value statements.
⃞⃞ Choose the type of business
entity you wish to structure
(LLC, S-Corp, Sole Prop, etc.)
and organize this entity in the
jurisdiction of your choice.
⃞⃞ Hire a compliance consulting
firm and/or securities
attorney to review noncompete clauses and
prepare appropriate advisor
registration documents and
processes (FINRA Entitlement
Docs, ADV Parts 1 & 2, Form
U-4, etc.).
⃞⃞ Complete the Scottrade®
Advisor Services enrollment kit.
⃞⃞ Structure your technology,
including your CRM system,
portfolio management,
internal accounting, billing
and vendor programs.
⃞⃞ Recruit the right people who
fit your business model.
⃞⃞ Create your brand, including
necessary marketing materials
(such as logo, business cards
and office stationary).
⃞⃞ Develop and launch your
company website.
⃞⃞ Develop your compliance
policies and procedures
(assisted by your consulting
firm or attorney).
⃞⃞ Train your staff to ensure they
understand the programs,
technology and processes
you have selected and
implemented.
⃞⃞ Ensure you have proper error
and omissions insurance to
handle the level of assets you
anticipate managing.
⃞⃞ Set up your financial
management systems and
communicate those goals
to employees.
⃞⃞ Select risk management and
insurance programs (property
& casualty, liability, etc.).
⃞⃞ Network and promote your
firm through influential
channels (CPAs, attorneys,
insurance agents, Realtors,
bankers, etc.).
⃞⃞ Create privacy statements,
client agreements and a
policy and procedures manual
(assisted by your compliance
consulting firm or attorney).
⃞⃞ Begin meeting and working
with your clients.
Considerations Before Committing
Starting your own business is exciting. But take some
time to review the points below — they may help you
better assess whether independence is for you.
What to Consider Before Going Independent
Business Management Skills
Once a firm goes independent, many peripheral
issues may arise, which can slow growth. These issues
include increased overhead, the potential for a drop
in business and lower profits. Because of these pressures, it is important that you have what it takes to lead
your business, whether that’s through sales, marketing
and IT skills or building a talented, professional team
available for cross-training. Resourcefulness is an
important quality for independent advisors to have in
knowing where to find reliable help when necessary.
Business Expenses & Taking Risks
Technology & Staff Management
First, decide on the technology your business needs
to operate. Then decide how many people you’ll need
to employ to cover the business’ daily tasks. People
can be your biggest asset in building your business,
but can be your biggest drain on capital at the same
time. Establishing a training program can provide
associates with a sound understanding of how you
want your business to run and may save you time
and expense.
Success Factors
While financial performance is often considered
the most common measurement of success, there
are many more factors to consider. For example,
improving the lives of your clients and community
support can be among the most rewarding perks
of going independent.
Independence can be expensive since you are now
responsible for all expenses associated with running
a business. These expenses include rent, payroll,
maintenance, insurance, legal counsel, marketing
and more. As you begin, you should consider utilizing
revenue projections and setting periodic goals.
Standard practice management suggests saving at
least one year’s worth of working capital (salary, legal,
marketing, technology and additional office
expenses) before launching a small business.
Provided by Lexington Compliance
RIA Legal & Regulatory Information
It’s imperative that as an independent advisor,
you fully understand the regulatory framework
that applies to your business. The following
information, provided by Lexington Compliance,
a division of RIA in a Box, discusses some of the
federal Investment Advisors Act of 1940
(“Advisors Act”), SEC rules and other regulatory
factors. The Advisors Act governs SEC-registered
advisors while state-registered advisors each
follow their applicable state’s statutes, rules
and regulations. Review this section carefully
and be sure to review the comprehensive list
of compliance professionals. This information
is meant only to provide you with an overview
of the key concepts. It should not be construed
as legal or compliance advice and you should
consult with an appropriate legal or compliance
professional if you have specific questions
about your business.
Definition of an Investment Advisor
The Advisors Act defines an investment advisor
as any individual or entity that provides advice
by making recommendations regarding securities or securities markets for compensation and
who regularly engages in the business of providing advice regarding securities.
As an investment advisor, you must meet
three criteria:
1. Compensation.
You receive any type of income from your
business activity including advisory fees,
commission or some combination of the two.
2. Engaged in the business.
You provide investment advice to your
clients. The SEC defines this more
specifically as:
advisor.scottrade.com a. You hold yourself out as an investment
advisor.
b. Y
ou are compensated for providing
investment advice.
c. You provide specific investment advice
frequently.
3. Advice about securities.
You provide advice about specific investment
strategies and products like stocks, bonds
and mutual funds.
Become SEC or State Registered?
For the most part, advisors who don’t meet
the SEC asset requirements (those with less than
$100 million of regulatory assets under management (“AUM”)) are subject to state regulation and
prohibited from registering with the SEC unless
they are registered in 15 or more states or meet
another exemption.* Large Advisor businesses
(those with more than $100 million of AUM) are
subject to federal regulation of advisers and
register with the SEC.
Once registered, an advisor may rely on a
registration “buffer” that ranges from $90 million
to $110 million*.
—— The advisor may register with SEC when it
acquires $100 million of AUM.
—— The advisor must register with the SEC once
it reaches $110 million of AUM.
—— Once registered with SEC, the advisor is not
required to withdraw, unless it has less than
$90 million of AUM.
* Special note: Firms located in the state of New
York are required to register with the SEC at $25
million AUM or above and all firms in Wyoming
are required to register with the SEC regardless
of AUM until July 1, 2017 at which time the state
of Wyoming will administer its own RIA
registration program.
For the purpose of determining whether you
must register with the SEC or your applicable
state, “assets under management” is defined
as the “securities portfolios” where, as an RIA,
you provide “continuous and regular supervisory
or management services.”
If you are an advisor who provides continuous
and regular supervisory or management services
and you meet the criteria shown above, then
you must register with the SEC. Determining
your assets under management is the total
value of your clients’ account(s).
What Assets Are Considered AUM
and Which Are Not?
As stated above, client assets can be
considered AUM if you provide continuous
and regular supervision or management services
for these account(s). In addition to providing this
“continuous” level of service, according to the
SEC, you must also generally be able to actually
“affect the transaction.” This means you must
generally “execute” on the end transaction in
order for the assets to be counted as AUM.
What is a Securities Portfolio?
A securities portfolio is an account or accounts
where at least 50% of the total value is securities.
This definition includes cash. When determining
your assets under management, the entire value
of the account(s), and not only securities, is
included. Accounts you have authority over and
for which you provide ongoing supervisory or
management services are defined as accounts
that receive continuous and regular supervisory
or management services.
advisor.scottrade.com Hire a Compliance or Registration
Service?
To ensure your firm is compliant with applicable
rules and regulations, you may want to consider
using an outside firm with comprehensive
securities regulation knowledge to prepare
your registration applications, firm documents
and compliance training. If you choose to hire
a service, review Scottrade’s strategic resource
partner directory for a list of compliance and
regulatory assistance providers or ask colleagues
for a recommendation.
Prohibited Practices and Fiduciary
Obligations
he Advisors Act and state laws make it unlawful
T
for you to engage in practices defined as fraud or
deceit. The antifraud provisions of the Advisors
Act apply to all RIAs. The most substantial provision
in the Advisors Act states that an RIA may not:
—— Employ any scheme to defraud clients
or prospective clients
—— Engage in a practice that operates as
a fraud upon any client or prospective client
—— While acting as a principal for its own
account, knowingly sell any security to,
or purchase any security from, a client
without disclosing to the client the capacity
in which the advisor is acting
—— Engage in any practice that is fraudulent,
deceptive or manipulative
s a fiduciary, an RIA owes its client an
A
affirmative duty of utmost good faith to act
solely in the client’s best interest and to make
full and balanced disclosure of all material facts,
especially with respect to actual or potential
conflicts of interest.
The SEC and the states have articulated a
number of requirements that flow from an
RIA’s status as a fiduciary, including a duty to:
—— Place the interests of clients ahead of the
advisor’s business interests
—— Refrain from trading on the basis of material,
non-public information
iations with other securities professionals,
employees’ education and business background, and other information relevant to
a client’s decision to hire you.
Disclosure Obligations
—— Use soft dollars only for the benefit of clients
and make full disclosure of the use of soft
dollar arrangements
he Advisors Act generally requires every
T
RIA to deliver Part 2 of Form ADV (or a brochure
containing all the same information) to each
client and each prospective client. Part 2 must
be provided to clients at the time of entering into
an advisory agreement as long as the client has
a right to terminate the contract without penalty
within five business days.
—— Obtain best execution for client transactions
where the advisor directs brokerage
transactions
An RIA firm also must generally deliver a current
copy of its Form ADV Part 2 on an annual basis
and without charge and can send it via email.
—— Resolve trade errors in the client’s favor
and bear the cost of correcting any errors
An RIA firm must completely disclose potential
conflicts of interest with its clients on Form ADV
Part 2 and ensure it is in plain English for its
clients to understand.
—— Allocate investment opportunities fairly and
not favor client accounts that may benefit the
RIA financially (such as proprietary accounts
or accounts paying performance fees)
—— Ensure that investment advice is suitable
in light of the client’s objectives, needs
and circumstances
Filing Your Form ADV
fter your firm files its FINRA Entitlement
A
documents package and receives its user name
and password to access the IARD (Investment
Advisers Records Depository) system, the RIA
will be required to register with the SEC and/or
applicable states by completing the Uniform
Application for Investment Advisor Registration
(or Form ADV). Form ADV includes two parts:
—— Part 1 is an online-only form and requires
information about your business location,
ownership structure, basic operations and
past disciplinary events.
—— Part 2 is a document that is created locally
and then uploaded to the IARD system. It is
designed to be a “plain English” document
and provide various information about your
firm’s fees, investment style, potential conflicts of interest, brokerage practices, affil-
advisor.scottrade.com Books & Recordkeeping
The SEC and states require RIAs to maintain and
preserve specified books and records, making
sure they are available for inspection at any time.
The rules of each state or the SEC delineate
an extensive list of these books and records,
as well as the place and length of time they
must be maintained. Also, electronic documents,
including emails, must be maintained if they
fall into any required record category described
further in the Appendix.
It is a general rule that all books and records
be properly maintained and preserved in an
easily accessible place for five years from the
end of the fiscal year during which the record(s)
was created. Records less than three years old
must generally be readily accessible (often
maintained in the firm’s physical office). Articles
of incorporation, partnership documents, minute
books, stock certificates and other corporate or
organizational documents must be maintained
continuously in your office in an easily accessible
place while your business is in existence. All
books and records must be maintained for
a period of three years following the date the
SEC receives notification that the business is
terminated. Books and records are required
to be maintained on a “current” basis.
Insider Trading Policies, Procedures
and Code of Ethics
As an RIA, you are required to establish,
maintain and enforce written policies and
procedures reasonably designed to prevent
the misuse of material, nonpublic information
by you or any person associated with your
business. RIAs often add to these policies and
procedures with proactive programs to review
and place restrictions on personal trading by
employees and other potential conflicts of
interest. Common ways RIAs work to protect
themselves are with educational programs
and the adoption of blackout periods and
restricted lists.
Custody
According to the Custody Rule put forth by the
SEC and adopted in various forms by each state,
an RIA has custody of client assets when it holds,
“directly or indirectly, client funds or securities or
[has] any authority to obtain possession of them.”
Along with providing a definition of custody,
the rule also provides three examples of
circumstances where you would have custody
of client funds or securities:
1. P
ossession of a client’s funds or securities:
An advisor that holds a client’s certificates
or cash has custody. The rule, however,
expressly excludes inadvertent receipt of
such assets by the advisor, provided the
advisor returns the asset(s) to the sender
within three business days of receiving
them. Additionally, an advisor who receives
advisor.scottrade.com a check drawn by a client and made payable
to a third party is not deemed to have
custody. The rule further explains that while
an advisor can assist a client to forward
funds and/or securities, the advisor cannot
directly forward them. Some RIAs regularly
accept checks made payable to the client’s
broker or custodian and forward them for
deposit as a service to their clients. For those
RIAs, a check log of all checks received and
forwarded must be kept by the advisor.
Advisors are prohibited from taking direct
possession of a security and sending it to
the client’s broker or custodian on behalf
of the client without being deemed to have
custody; this includes stock certificates.
2. A
uthority to withdraw funds or securities
from a client’s account: An advisor with any
ability to withdraw funds or securities from
a client’s custodial account (check-signing
authority, general power of attorney, direct
debiting of advisory fees) is deemed to have
custody. However, direct debiting of advisory
fees is a common practice in the RIA world
and custody by direct fee deduction is
generally granted relief from many custody
provisions as long as specific “safe-keeping”
provisions are followed.
3. A
cting in any capacity that gives an RIA or
its supervised persons legal ownership of,
or access to, a client’s funds or securities:
Two common examples are an RIA acting as
(i) both the general partner and investment
advisor to a limited partnership, or (ii) trustee
of a trust in which an advisory client is a
grantor or beneficiary of the trust.
Understanding Compliance Policies
The Advisors Act and similar state regulations
make it unlawful for an RIA firm to provide
investment advice unless the firm has adopted
and implemented formal written policies and
procedures designed to: (i) prevent violations
of the Advisors Act or similar rules by the firm
or its supervised persons; (ii) detect violations
that have occurred; and (iii) promptly correct any
violations that have occurred.
Fundamentally, the rule requires that each RIA:
—— Establish and implement written policies and
procedures reasonably designed to prevent
violation of federal securities laws
—— Review the firm’s policies and procedures on
at least an annual basis
—— Designate a chief compliance officer to be
responsible for the administration of those
policies and procedures
Contractual Requirements
Section 205(a)(1) of the Advisors Act limits the
ability of an RIA to charge performance-based
fees unless specific client qualifications and
disclosure rules are met. This includes advisory
contracts that compensate based on a share
of capital gains of a client’s funds.
advisor.scottrade.com Written contracts between an advisor and clients
are not expressly required by the Advisors Act.
However, as a matter of good business practice
and for the purpose of enhancing internal controls and mitigating risk, you should require that
all of your contracts are in writing.
Ongoing Questions
As your practice grows, so will your compliance
concerns. Once you are registered, Scottrade®
Advisor Services offers access to a free basic
compliance hotline service,1 provided by Lexington Compliance, a division of RIA in a Box. The
service gives you a place to ask industry industry
professionals those day-to-day compliance and
regulatory questions that come with operating a
registered investment advisory firm. Talk to your
Scottrade® Advisor Services representative to
take advantage of this service.
Risk Management for Your RIA Business
As an RIA, you are responsible for every major
decision. Owning your business can offer advantages,
but there are also risks that need to be managed.
Securing compliance and/or legal counsel can be an
essential step in preventing roadblocks and financial
loss as you try to build your business.
Commercial Property & Liability Insurance
This insurance is also known as P&C (property and
casualty). It protects against risks to property caused
by fire, flood and earthquakes. The casualty policy
covers losses caused by unforeseen events like
hurricanes and other natural disasters.
—— Fidelity Bonds
Protects your firm from dishonest and fraudulent
losses caused by employees.
—— Employment Practices Liability Insurance
Protects you and your firm from charges of
discrimination in hiring practices, wrongful
termination and other liabilities.
—— Directors and Officers Liability Insurance
Protects you and your firm’s directors and
officers from liability resulting from a breach
of fiduciary duty.
—— State Surety Bonds
Certain states require surety bonds to register
your business or meet minimum financial
requirements.
—— ERISA Bonds
An ERISA bond may be required if you
plan to provide advice or make investment
recommendations for ERISA Plans.
Checklist
⃞⃞ Make a comprehensive list of the types
of insurance your business and employees
may need.
⃞⃞ Create a timeline and allowable budget
to implement insurance policies selected.
⃞⃞ Ask for assistance and insight from third
parties and insurance companies.
⃞⃞ Plan to have your coverage in place
by the time you open your business.
⃞⃞ Professional Liability Insurance:
This insurance is also known as E&O
(errors & omissions). It helps protect
your business and personal assets from
legal liability resulting from any errors and
omissions when dealing with clients. Visit
our Strategic Resource Center for the latest
offers and information from E&O insurance
providers.
Choosing the Right Technology
Solutions for Your Firm
With so many choices, selecting the technology
solutions that best fit your needs can be an
overwhelming task for even the most experienced
RIA. Here are some tips to consider before you make
your decisions:
1. Plan for Today & Tomorrow
a. Anticipate the future of your business and
be prepared.
b. T
hink of your potential client-base and what
they will need.
c. B
e sure the technology solutions you select
help answer your potential clients’ needs.
2. Be Mindful of How Much You Use
Technology
a. Create a list of the technology you use today.
b. C
ompile a list of tasks your new firm will need
to complete, and add the technology you will
need to complete those tasks.
3. Utilize Scottrade Transition Support
a. Never underestimate how time-consuming it
can be to train yourself and your staff on new
technology.
b. Y
our transition team is available through every
step of the process to answer your questions
and offer insight as you build your business.
We understand that transitioning to a custodian
can be a long and tedious process. Scottrade
is committed to helping make your transition
as smooth as possible. We offer customized
transition services to help seamlessly move
50 or more accounts to Scottrade.
When you move your clients’ accounts with
a qualifying deposit, you will be reimbursed
transfer fees charged by another broker. Contact
our business development team for information
about the latest terms.2
4.Get Yourself Trained & Involved
a. Many software partners offer training;
take advantage of it and become familiar
with the tools.
b. J oin any support groups associated with the
software, as these can be invaluable sources
of insight and assistance.
5. Ask Questions
a. When working with technology partners, don’t
be afraid to ask how much support you will need
to effectively run the software, especially in the
early stages of implementation.
b. A
sk if the software is associated with a service
bureau or Application Service Provider (ASP)
that can assist your business to keep things
running smoothly.
c. If
you are transitioning a book of business,
Scottrade will populate your new account forms,
leaving you more time to contact clients about
making the move with you.
Software Solutions
To enhance your production and provide a high
level of service, Scottrade® Advisor Services offers
access to a wide array of technological solutions
and resources to help meet the specific needs of
independent advisors. Visit our Strategic Resource
Center for the latest offers and information.
Reviewing Tools & Technology
Developing a technology plan can be essential in
helping your business attract and retain clients. Visit
our Strategic Resource Center for the latest offers
from hardware and software providers.
Getting Started
—— Customer relationship management system (CRM)
—— Portfolio management software
—— Financial planning software
Streamlining Operations
—— Data aggregation providers
—— Client portal services
—— Workflow process automation
Evaluating Your Needs
As you make technology decisions, there are many
questions to be answered and situations to anticipate.
To help, consider the following:
1. W
hat technology best supports my firm and its
daily operations?
2. A
re your technology needs centered around
client communications or compliance?
3. K
eep in mind that as an RIA with Scottrade,
you have a dedicated relationship team available
to help.
—— Data storage and redundancy systems
—— Accounting/billing software (some CRM systems
offer this feature)
Marketing Your Firm
Marketing your business is a practice you may need
to grow your firm. If you are transitioning from another
firm, keep in mind any agreements pertaining to
former clients as part of your approach.
Below are the elements of a marketing plan.
Core Marketing Strategy
Create a Situational Analysis
Look at your market, the competition and opportunities to differentiate or improve the level of service
offered to current and prospective clients.
Define Your Market
Take a step back and analyze where you see existing
and potential business. In other words, create the
target market for your business.
Segment Your Targets
Once you have defined your target market, it will be
easier for you to develop specific campaigns based
on each group’s demographics. Tailor your firm’s
marketing materials to address each group’s needs.
Watch Your Competition
Keep in mind that the competition is most likely
targeting the same or similar prospects in your area.
Look for ways to differentiate your messaging and
develop unique value propositions to help gain a
greater share of the market.
Create Your Own S.W.O.T. Analysis
Marketing Strategies for Your Growing
Business
Develop a Marketing Plan
Your marketing plan can be a blueprint for success
and can assist you in keeping your efforts focused.
Brand Position
Highlight specific areas of expertise (e.g., financial,
tax or estate planning) and convey the related services
through the communication channels you choose to use.
Objectives & Strategy
Define your objectives before developing marketing
materials. Doing so can help you to better measure
your results and determine whether the materials
deliver on your objective.
Plan & Budget
Create a separate budget specifically for your
marketing efforts and have a plan in place that allows
you to stay focused on your efforts. Consider planning
a year ahead with quarterly campaigns that you would
like to execute. It may be a good idea to coordinate
messaging with the seasons.
Results
Measuring the effectiveness of your marketing
efforts can help ensure your firm’s success in the
future. Pinpoint where your marketing dollars are
most and least effective and measure how well your
messaging resonates with your target audience.
S.W.O.T. = Strengths, Weaknesses, Opportunities and
Threats. Once the S.W.O.T. is complete, it may help
you determine a unique marketing strategy.
Marketing Materials
The first item you may consider creating is a logo
to identify your brand and create awareness of your
firm. A logo is all your own. (It may be best to have
a professional designer assist in creating this for you,
as it will be the identifying factor for your business.)
The following collateral may also be considered:
Print Media
—— Business cards and stationary
—— Direct mail
—— Brochures and pamphlets
—— Presentation materials for client events
Digital Media
—— Website
—— Email newsletters
—— Social media
—— Online video and/or webinars
The Power of Networking
You may want to think about joining professional
organizations with fellow advisors, investment
professionals and organizations in your community,
such as charities and business councils. Get involved
with athletic teams and country clubs. Get to know
attorneys, CPAs and other potential professionals
to develop referrals.
advisor.scottrade.com Consider hosting live events featuring a guest speaker
or educational seminars. By providing educational
opportunities, you’re doing more than potentially
earning their business; you may also be making steps
toward earning their trust. In addition to live events,
also consider hosting online presentations, making it
more convenient for clients and prospects to engage
with your firm.
Premiums and giveaways with your name and logo
are an easy way to spread the name of your business
and may help create goodwill with potential and
existing clients.
Utilize Free Social Networking Tools
There are several free tools available to help you
network online. Twitter, Facebook and LinkedIn are
examples of social networking websites that are used
by advisors to network and help build their clientele.
Once your presence is established, it may be helpful
to provide fresh content on a regular basis.
Before you begin, it is important that you fully
understand FINRA’s Regulatory Notice 10-06 and
consider the time commitment of maintaining these
social networking sites. While FINRA does not
regulate advisors, it is helpful to review the Regulatory
Notice 10-06 as the principles of the notice are
applicable to all RIA firms. Check with your regulator
to be certain.
Marketing Resources
The Strategic Resource Center gives access to
a variety of consulting services that specialize in
marketing for financial advisors. Visit our website
to review the latest information and offers.
Opening Your Office
As you begin your search for your business’s location,
you may want to first determine how much office
space you will need. Consider logistics, your business
model, the type and size of technology you’ll be using
and how you see your business growing in the future.
Be sure you fully understand the terms and conditions
of the leasing arrangements before signing the
contract.
Getting Your Office Up & Running
Choosing Your Workplace
As you evaluate potential spaces for your business,
remember you may need more than just an office
and front desk. You may also need to consider supply
rooms, a kitchen, meeting rooms and an area for
growth. Be mindful of the workflow in a typical day
and the location of client meetings to provide the
least interruption to employees.
Carefully review the pros and cons of each venue, as
your workplace represents one of the largest capital
outlays you may make as a business owner.
You have several options to consider, including the
following:
Home Office
Section Checklist
⃞⃞ Decide what is important to you in regard
to location and space.
⃞⃞ Consider how long you plan to stay at the
location before a possible expansion.
⃞⃞ Create a budget and timeline for your
move.
⃞⃞ Consider any enhancements or necessary
changes your space will need.
⃞⃞ Consider consulting an attorney to help
you fully understand your lease or contract.
This can be a convenient option, especially if you are
starting out by yourself or with a very small staff. If you
favor a home office, consider where you will meet with
clients to ensure there is an appropriate and adequate
amount of space. Also consider any technological and
compliance requirements that your home may need to
support your business.
Executive Suite
An executive suite offering standardized services
and office support may be an ideal choice for advisors
who want to gauge how their business expands over
a short period before committing to a long-term
lease. This may be most appealing to advisors who
prefer to keep their lease and budget commitments
to a minimum.
Work from Home and the Office
One option is to establish a home office, while renting
a space to meet with clients. An office space can also
provide a location for your employees to work. It
may be an ideal combination and choice should you
prefer to spend more time at home while helping to
grow and expand your business. Consider compliance
requirements that your home may need to support
your business.
Subletting
Although similar to an executive suite, subleasing has
one major difference in that the leasing agreement
is customized, so you may be able to better tailor the
lease terms to meet your needs.
Because you are sharing an office, you may have some
unique conveniences. For example, you can customize
your space while being cost-efficient. You can also
advisor.scottrade.com learn by observing other businesses and perhaps
position yourself alongside them. Additionally, you
may have access to peripheral benefits like conference
rooms, a kitchen and administrative support.
Commercial Office Space
This option potentially offers the most freedom in
how you want to establish and manage your business.
It is also often the most expensive option. Lease terms
typically range from 3 to 5 years, but there may be
significant advantages included.
The lease can be customized to fit your needs so
you can remain focused on building your business.
Contracting directly with a property owner can give
you confirmation that your space is secure; however,
because it is a longer-term contract, it is especially
important to fully understand every part of your lease
agreement (e.g. are any building improvements and
repairs covered by the property owner). Consider
consulting an attorney to help you fully understand
your lease or contract.
Review Your Lease
Have an attorney review your lease agreement before
you sign it. This will require a fee but it could save you
money in the future.
Building Your Staff
Building a successful team is crucial to the success
of your firm. Don’t let this task become overwhelming
as you work toward creating a strong and dedicated
foundation; instead keep the following checklist in
mind to help guide you through this process. (This
information assumes that your practice has more
than 1 or 2 people on staff.)
As you start your business, you may need to hire
a variety of employees to help you reach your goals.
Here are the some of the most common positions
advisors hire:
Professionals
This includes anyone with direct client contact tasked
with helping them understand your strategies and
services. These employees may be responsible for
meeting revenue targets, finding new clients and ways
to improve business. Keep in mind that they should
have the necessary FINRA registrations.
Support Staff
These employees may not meet with clients directly,
but they play an important role in servicing your firm’s
needs behind the scenes. This group can include sales
assistants, technical analysts, traders and administrative staff who perform daily office functions.
advisor.scottrade.com Staffing Checklist
⃞⃞ Make a list of your office goals and values.
⃞⃞ Create your client service model and
business flow chart.
⃞⃞ Define the positions and roles that you
need to fill.
⃞⃞ Consider your budget and timeline for
making hiring decisions.
⃞⃞ Have your employment agreements,
including non-compete and nonsolicitations provisions and any other
necessary contracts, reviewed by an
attorney.
⃞⃞ Begin searching for and contacting the
right people to fit your staffing needs.
Office Staff & Roles
Financial Professionals
—— Principals
—— Financial Advisors/Consultants
—— Chief Compliance Officer
—— Portfolio Manager
—— Director of Business Development & Marketing
Office Staff
—— Office Manager
—— Client Services Coordinator
—— Financial Analyst
—— IT Support
—— Junior Portfolio Manager
—— Administrative Assistant
Effective Staffing Strategies
The service model you develop for your business
plays an important role in how your office will be
staffed. You may want to consider the combination
of skills, personalities and intangibles brought to the
business with each person you add to the team. As
you build your team, consider asking these questions
to help make the best possible decisions for your firm.
1. Is your preference to regularly meet your clients
in person, or will most meetings take place over
the phone?
2. W
hat type of client-to-staff ratio is most efficient
for your business model?
3. H
ow many clients do you foresee your business
having?
4. What part of your job do you enjoy most, and how
can you continue to be able to perform that role?
advisor.scottrade.com 5. W
hat parts of your job would you like to hire
others to do?
6. Would you rather work alone or in a team setting?
7. What services will your business provide at no cost?
8. What type of office culture do you want to cultivate?
Creating a Budget for Your Staff
Each staff position can carry unique costs,
compensation and benefits. Here is a summary
of some of the things to consider as you budget:
—— Compensation
This includes salary and bonuses.
—— Retirement & Benefits
Retirement plans and health insurance for your staff
can be an essential part of attracting the best talent.
—— Equipment Costs
For each position, you will have to consider
infrastructure costs, such as a computer, phone
and office supplies.
—— Training
Because your business needs are always evolving,
you’ll want to make sure your staff stays current
with the latest operational and regulatory
knowledge.
Hiring Rules & Regulations
Under SEC Rule 206(4)-7 of the Investment Advisers
Act, every RIA firm must designate a Chief Compliance
Officer (CCO). While there are independent resources
offering compliance packages, this does not fulfill
your need for a designated and dedicated CCO.
The CCO is responsible for ensuring the safety
of client data, enforcing adherence to federal, state
and self-regulatory organization securities regulations,
and creating and updating the firm’s code of ethics,
policies and procedures. You can designate yourself
in this role, but as your business grows, you may need
to hire another advisor who can take charge of these
responsibilities.
Creating the Right Culture & Values
at Your Office
Keep the Following in Mind
While creating your own office can be a liberating
experience, it is also critical that you hire associates
who fit the type of culture you want to develop.
Every person you bring on board will impact your
workplace along with your firm’s and your clients’
success. All associated persons should be required,
upon hiring and annually thereafter, to sign an
attestation statement acknowledging that, at a
minimum, they have read, understand, and agree
to the principles, rules, and policies and procedures
found in your firm’s Privacy Policy Statement, Code
of Ethics, Policies and Procedures Manual, and AntiMoney Laundering Policies.3
e sure to visit the U.S. Equal Employment
B
Opportunity website (www.eeoc.gov) to find out more
about equal employment opportunity laws and how
they can affect your business.
You should refer back to your mission and make sure
each potential hire fits it. Evaluate candidates by more
than their resume; choose them based on how they
can help your business reach its goals.
Tips to Recruiting Your Team
Include Unique Features of Your Business
If there are distinctive ways you plan on running your
business, include them in job postings. It could help
to attract appropriate candidates.
Be Clear & To the Point
Make sure you describe the role and responsibilities
of the position in as much detail as possible. Also
include any requirements regarding education,
professional certifications, years of experience
and types of skills.
Follow the Law
Also review the U.S. Department of Labor website
(www.dol.gov), which houses information for new
businesses interested in finding out how certain
laws pertain to them.
What Will Your Business Focus On?
Will you be performing customized portfolios? Will
you be offering financial planning? Consider hiring
individuals who can help you with those specific tasks.
Examine Your Assets Under Management (AUM)
The average revenue derived from AUM may help
determine your staffing requirements.
For example, if your office’s revenue is below a certain
threshold, you might not need to hire a junior advisor.
However, if your revenue is above a certain threshold
set by you, you may want to consider hiring a junior
advisor (or advisors) and administrative staff to stay
in contact with and serve your clients.
Determine Your Capacity
Manage your workload by determining how many
hours each advisor will spend working with clients.
List Compensation
Candidates may appreciate the convenience
of knowing a salary range and benefits package.
Conclusion
Build a Strong Foundation for a Bright Future
While your new title is an “independent” advisor, remember
that you have support. The many resources and tools within
your reach can help you build a successful advisory business
today and position you for growth tomorrow.
For additional information on “Going Independent,”
refer to the Appendix attached to this guide.
This guide is not meant to be a replacement for regulatory, legal or tax advice. Please consult a specialist with questions specific to your business or financial
situation.
The material provided is for informational purposes only and its use does not guarantee a profit. None of the information provided should be considered
a recommendation. Scottrade is not responsible for errors or omissions. Individuals should fully research any product or tool before making an investment
decision.
Scottrade® Advisor Services is a business unit of Scottrade, Inc. All products and services are offered by Scottrade, Inc. — Member FINRA/SIPC.
Appendix
Overview of Investment Advisor Regulation
Introduction
This section, provided by Lexington Compliance,
a division of RIA in a Box, discusses the basic
precepts of the regulation of investment advisors
under the federal Investment Advisors Act of
1940 (“Advisors Act”).3
Many of the subject areas examined, however, are
also relevant to the regulation of state-registered
RIAs. While state-registered RIAs are primarily
subject to regulation under state law, several
key provisions of the Advisors Act and SEC rules
apply to such advisors. Moreover, significant
elements of the state regulatory framework
mirror, in varying degrees, the federal model.
This overview does not purport to exhaustively
analyze each requirement of the Advisors Act
in depth; rather, it is intended only to highlight
those mission-critical areas and hopefully prompt
further inquiry when specific issues arise that may
apply to an advisor’s situation and circumstances.
The laws and regulations governing investment
advisors are complex. An advisor is subject to
federal law and the law of each state in which
its offices are located, and may be subject to the
laws of other states where its clients are located.
The primary federal statute governing the
regulation of investment advisors by the SEC is
the Advisors Act, but advisors must also comply
with certain provisions of other federal laws as
may be applicable to their activities, such as the
Employee Retirement Income Security Act of
1974 and the Investment Company Act of 1940.
In addition, the SEC and its Division of Investment
Management provide interpretative guidance
in the form of instructions to forms under the
Advisors Act, “no-action” letters, interpretive
letters and releases.
advisor.scottrade.com Definition of an Investment Advisor
and Exclusions/Exemptions
Section 202(a)(11) of the Advisors Act generally defines an investment advisor (“IA”) as any
individual or entity that: (1) provides advice by
making recommendations regarding securities
or securities markets; (2) for compensation; and
(3) who regularly engages in the business of
providing advice regarding securities. The states
similarly define an IA under their respective statutory framework as generally structured under the
Uniform Securities Act.
A person must satisfy all three elements to
fall within the definition of “investment advisor,”
which the SEC staff has addressed in an extensive
interpretive release explaining how the Advisors
Act applies to financial planners, pension
consultants and other persons who, as a part of
some other financially related services, provide
investment advice. Published in 1987, Investment
Advisors Act Release 1092 represents the views
of the Division of Investment Management, which
is primarily responsible for administering the Act.
The release addressed the three definitions as
follows:
1.Compensation.
The term “compensation” has been broadly
construed. Generally, the receipt of any
economic benefit, whether in the form of
an advisory fee, some other fee relating
to the total services rendered, or some
combination, satisfies this element. The
person receiving the advice or another
person may pay the compensation.
2. Engaged in the Business.
A person must be engaged in the business
of providing advice. This does not have to be
the sole or even the primary activity of the
person. Factors used to evaluate whether a
person is engaged are: (i) whether the person
holds herself or himself out as an investment
advisor; (ii) whether the person receives
compensation for providing investment
advice; and (iii) the frequency and specificity
of the advice provided. Generally, a person
providing advice about specific securities
will be considered “engaged in the business”
unless specific advice is rendered only on a
rare or isolated occasion.
3. Advice About Securities.
A person clearly meets the third element of
the statutory test if he provides advice about
specific securities, such as stocks, bonds,
mutual funds, limited partnerships, and
commodity pools. Advice about real estate,
coins, precious metals, or commodities is not
advice about securities. The more difficult
questions arise with less specific advice or
advice that is only indirectly about securities.
The SEC staff has stated in this regard:
a. Advice about market trends is advice
about securities;
b. A
dvice about the selection and retention
of other advisors is advice about
securities;
c. A
dvice about the advantages of investing
in securities versus other types of
investments (e.g., coins or real estate) is
advice about securities;
d. Providing a selective list of securities is
advice about securities even if no advice
is provided as to any one security; and
e. Asset allocation advice is advice about
securities.
Clearly, the definition of an IA casts a wide net.
However, there are broad exceptions from the
registration requirements under the Advisors
Act. The most common exemptions are the
Private Advisor Exemption and the Professional
Exclusion.
advisor.scottrade.com The Private Advisor Exemption is available to
an IA that, during the previous twelve months,
(i) has not held itself out generally to the public
as an investment advisor and (ii) has not been
an advisor to a registered investment company.
This definition provides that regardless of how
many clients an IA has, if it otherwise holds itself
out to the public as providing advisory services,
the Private Advisor Exemption is unavailable.
Regulators interpret “holding out” very broadly,
including using the term “investment advisor”
or similar terminology on a website, in marketing
materials or in any communications to the public.
If an IA makes others aware it is available to
provide investment advice, advisory services, or
that it is accepting new clients, the IA is “holding
out” and cannot rely on the Private Advisor
Exemption. The SEC staff views an individual
person as holding herself or himself out as an
IA if she or he advertises as an investment advisor
or financial planner, uses letterhead indicating
activity as an investment advisor, or maintains
a telephone listing or otherwise lets it be known
that she or he will accept new advisory clients,
or hires a person to solicit clients on her or his
behalf.
The Professional Exclusion for Lawyers,
Accountants, Engineers, and Teachers is available
only to those professionals listed, and only if the
advice given is incidental to the practice of her or
his profession. Factors used to evaluate whether
advice is incidental to a profession are: (i)
whether the professional holds herself or himself
out as an investment advisor; (ii) whether the
advice is reasonably related to the professional
services provided; and (iii) whether the charge
for advisory services is based on the same factors
that determine the professional’s usual charge.
The Exclusion for Brokers and Dealers who are
registered with the SEC under the Securities and
Exchange Act of 1934 is available if the advice
given is (i) solely incidental to the conduct of
their business as brokers or dealers, and (ii)
they do not receive any “special compensation.”
Generally, to avoid receiving “special
compensation,” a broker relying on this exclusion
must receive only commissions, markups, and
markdowns.
SEC or State Registration
The Advisors Act determines whether the SEC,
on the one hand, or the applicable state(s), on the
other hand, will have jurisdiction over regulating
a given investment advisory firm; this distinction
is primarily based on the IA’s AUM. A state may
not require registration of an IA that is registered
or required to be registered with the SEC. Most
“large” advisors (generally those with more than
$100 million of assets under management) are
subject solely to federal regulation of advisors
and must register with the SEC. While there
are some exceptions, most “small” to “midsized” advisors (generally those with less than
$100 million of assets under management) are
subject to state regulation, together with certain
applicable federal laws, and are prohibited from
registering with the SEC.
For the purpose of determining whether an IA
must register with the SEC or under state law,
“assets under management” is defined as the
“securities portfolios” with respect to which an IA
provides “continuous and regular supervisory or
management services.” A “securities portfolio” is
any account of which at least fifty percent (50%)
of the total value is comprised by securities. Cash
and cash equivalents may be treated as securities
for this purpose. The entire value of the account,
not only the value of the securities portion, is
included in determining the amount of the IA’s
assets under management.
Accounts over which an IA has discretionary
authority and for which it provides ongoing
supervisory or management services qualify
as accounts that receive continuous and
regular supervisory or management services.
Nondiscretionary advisory arrangements
may also qualify, but only if the IA (a) has
ongoing responsibility to select or make
recommendations, based on the needs of the
client, and (b) is responsible for arranging or
advisor.scottrade.com effecting the purchase or sale with respect to
any such recommendations that are accepted
by the client. If the IA provides continuous and
regular supervisory or management services for
only a portion of a securities portfolio, then the
IA should include as assets under management
only the portion of the securities portfolio that
receives such services. Even if, for some reason,
a client of the IA is not being charged a fee, the
client’s accounts are still included as “assets
under management” if the criteria discussed
above are satisfied.
With respect to SEC registration, once an advisor
has AUM equal to $110 million it must register
with the SEC; however, registering with the SEC
is permissible once the IA reaches $100 million
of AUM. After registering with the SEC, an
advisor must withdraw only when its AUM falls
below $90 million. Thus, there is a band ranging
from $90 million to $110 million AUM where an
IA could conceivably be registered with the SEC,
but is not required to be SEC-registered.
An SEC-registered RIA does not have to register
with state securities regulators. However, state
laws almost uniformly require all RIAs, including
those registered with the SEC, to:
a. Comply with state anti-fraud prohibitions;
b. P
rovide the applicable state regulator(s) with
a copy of its SEC registration, “Notice file”
and submit payment of initial and renewal
filing fees for the applicable jurisdictions,
which are based on where the RIA maintains
a place of business, actively solicits clients,
or has enough clients to exceed the
jurisdiction’s de minimis exemption; and
c. Register as investment adviser representatives
those individuals providing investment
advisory services on behalf of the advisor.
An IA that is either not eligible for SEC
registration or does not opt for SEC registration
must generally register in any state where it
meets one of the following criteria:
—— The IA maintains a place of business;
—— The IA has more than five (5) investment
advisory clients; or
—— The IA actively solicits clients.
A very small number of states do not recognize
the Advisors Act’s National De Minimis Exemption
and require registration if the IA has only one
client in the state. State-registered IAs that do
not meet the de minimis exception in a given
state must obtain full registration in such state.
Investment Advisor Representatives (IARs)
All IAR registration is done at the state level,
regardless of whether the investment advisory
firm is registered with the SEC or the applicable
state(s). Each state has its own definition of which
individuals affiliated with the IA must register as
an IAR. However, under the Advisors Act, states
may only require the registration of a “supervised
person” of an SEC-registered RIA who meets
the SEC definition of “investment advisor
representative” and who has a “place of business”
in that state or services clients who reside in that
state once the firm is “notice filed.”
A “supervised person” is a partner, officer,
director or employee of the IA, or other person
who provides investment advice on behalf of the
IA and is subject to the supervision and control of
the IA. A supervised person is not an IAR under
the SEC’s definition if the supervised person:
a. Does not on a regular basis solicit, meet with,
or otherwise communicate with clients of the
investment advisor; or
b. Provides only impersonal investment advice.
“Place of business” is defined in SEC Rule
203A-3(b) as:
a. An office at which the IAR regularly provides
investment advisory services to, meets with,
solicits, or otherwise communicates with
clients; and
advisor.scottrade.com b. A
ny other location that is held out to the
general public as a location at which the
IAR provides investment advisory services
to, meets with, solicits, or otherwise
communicates with clients.
This definition encompasses temporary and
permanent locations.
As noted above, state laws typically contain a
different definition of IAR for representatives of
state-registered RIAs. State securities regulators
may require a firm registering as an IA to also
include at least one individual to serve as an IAR.
In either case, most state securities regulators
require that the designated IAR(s) pass either
(i) the Series 65 examination or (ii) the Series
66 examination in combination with the Series
7 examination. However, if an individual holds
and maintains in good standing one of the
professional designations below, then most
states will waive the examination requirement:
—— Certified Financial Planner (CFP);
—— Chartered Financial Analyst (CFA);
—— Personal Financial Specialist (PFS);
—— Chartered Investment Counselor (CIC); or
—— Charter Financial Consultant (ChFC).
Prohibited Practices and Fiduciary Obligations
The Advisors Act and state laws that regulate IAs
make it unlawful for IAs to engage in practices
that constitute fraud or deceit. The Advisors Act
is fundamentally a disclosure and antifraud
statute. The antifraud provisions of the Advisors
Act apply to all IAs, whether registered with the
SEC, state registered or exempt from registration. Under Section 206, the most all-encompassing, substantive and frequently cited provision in
the Advisors Act, an IA may not, among other
things: (a) employ any scheme to defraud clients
or prospective clients; (b) engage in any practice
which operates as a fraud upon any client or
prospective client; (c) while acting as a principal
for its own account, knowingly sell any security
to or purchase any security from a client without
disclosing to the client the capacity in which the
advisor is acting; or (d) engage in any practice
that is fraudulent, deceptive or manipulative. In
certain instances, intent or recklessness may not
be required to find a violation of Section 206.
In addition to practices that have been deemed
prohibited under Section 206 through SEC
enforcement precedent and jurisprudence, the
Supreme Court, in SEC v. Capital Gains Research
Bureau, Inc., held that Section 206 imposes a
fiduciary duty on all IAs. As a fiduciary, an IA owes
its client an affirmative duty of utmost good faith
to act solely in the client’s best interests and to
make full and balanced disclosure of all material
facts, especially with respect to actual or potential
conflicts of interest that may be materially adverse
to a client’s interests. The SEC and the states have
articulated a number of requirements that flow
from an IA’s status as a fiduciary, including:
—— A general duty to place the interests of
clients ahead of the interests of the advisor
and its personnel;
—— A duty to refrain from trading on the basis
of material, non-public information (i.e.,
inside information);
—— A duty to allocate investment opportunities
fairly and not favor client accounts that
may benefit the advisor financially, such as
proprietary accounts or accounts paying
performance fees, absent adequate
disclosure;
—— A duty to use soft dollars only for the benefit
of clients and make full disclosure of this
practice;
—— A duty to obtain best execution for client
transactions where the advisor directs
brokerage transactions;
—— A duty to resolve trade errors in the client’s
favor and bear the cost of correcting any
errors; and
advisor.scottrade.com —— A duty to ensure that investment advice is
suitable in light of the client’s objectives,
needs and circumstances.
Form ADV Filing Requirements
Investment advisors that are required to register
with the SEC or the states must complete the
Uniform Application for Investment Advisor
Registration (or Form ADV). The Form ADV
consists of two sections:
Part 1 calls for information about the IA’s
business location, ownership structure, basic
operations and past disciplinary events; Part
2 calls for information about the IA’s fees,
investment style, potential conflicts of interest,
brokerage practices, affiliations with other
securities professionals, education and business
background, and other information relevant to a
client’s decision to hire the advisor. Part 1 must
be filed electronically through the Investment
Advisor Registration Depository (“IARD”), while
Part 2 must be completed in hard copy, kept as
part of an advisor’s books and records, and also
uploaded electronically via the IARD.
Part 1 consists of two subparts: Part 1A, which
must be completed by all IAs registering or
registered with the SEC or any state; and Part 1B,
which must be completed only by IAs subject
to state registration requirements. While Part
1 is not required to be delivered to clients, it is
publicly available online through the Investment
Advisor Public Disclosure (“IAPD”) website.
Part 2 of Form ADV requires information that
must be provided to clients and is intended
to function as an IA’s mandated disclosure
document. An advisor must keep Part 2 current,
provide or offer to provide it to clients as
required by Advisors Act Rule 204-3 (discussed
below), and maintain updated copies in its
records to provide to SEC examiners. Most states
require that state-registered RIAs, and in some
cases SEC-registered RIAs, file the most current
version of Part 2 with the state regulatory agency.
States have mandated that state-registered RIAs
meet their filing obligations by submitting Part
2 electronically via the IARD. State-registered
RIAs should contact their compliance consultants
or state securities regulators for details on
applicable state filing obligations.
Advisors Act Rule 204-1 specifies which items
on Form ADV must be amended promptly and
which items need to be amended only annually.
Submitting a Part 2 on IARD does not alleviate
an RIA’s Part 2 amendment filing or client delivery
obligations. An RIA must amend Part 1 each
year by filing an annual updating amendment
within 90 days after the end of the advisor’s fiscal
year. IAs must also amend the Part 1 and Part
2 promptly to reflect changes to information
provided on Form ADV.
Disclosure Obligations
Advisors Act Rule 204-3, commonly referred to
as the “brochure rule,” generally requires every
SEC-registered RIA to deliver Form ADV Part 2
(or a brochure containing all the same information)
to each client and each prospective client. Part
2 must be provided to clients at the time of
entering into an advisory agreement so long as
the client has a right to terminate the contract
without penalty within five business days. An IA
also must make actual delivery of a current copy
of its Form ADV Part 2, or make a written offer
to its clients to deliver a current copy of its Form
ADV Part 2, without charge within 120 days of the
RIA’s fiscal year-end.
IAs are not required to deliver a brochure to
investment company clients or to clients for
whom they provide only impersonal services
for less than $200. An IA entering into a contract
for impersonal advisory services for $200 or
more need only offer to deliver a brochure.
An IA should, in accordance with SEC guidance,
provide its brochure to each limited partner of
an investment limited partnership that the
advisor manages.
advisor.scottrade.com The offer requirement can be conveniently
met by including a sentence to that effect in an
individual client’s first-quarter bill or as part of a
mailing of client quarterly performance reports.
It is nevertheless advisable for the RIA to provide
the Form ADV Part 2A brochure in its entirety to
its clients.
The Advisors Act also requires an additional
disclosure to clients if an advisor experiences
an impaired financial situation. Specifically,
disclosure is required whenever an IA’s financial
condition is “reasonably likely to impair the ability
of the advisor to meet contractual commitments
to clients.” However, this only applies to IAs that
have discretionary authority or custody of client
assets.
Another type of event requiring additional
disclosure in the Form ADV relates to any legal
or disciplinary events that are material to an
evaluation of the advisor’s integrity or ability to
meet contractual commitments to clients. Rule
206(4)-4(b) establishes a rebuttable presumption
that certain legal and disciplinary events
involving an advisor or its “management persons”
are material. The Advisors Act also requires
mandatory disclosures for certain civil, criminal
or regulatory actions.
Finally, an RIA must completely disclose any
potential conflicts of interest with its clients
on Form ADV Part 2.
Recordkeeping Requirements
Section 204 of the Advisors Act and Rule 204-2
require that SEC-registered RIAs must maintain
and preserve specified books and records
and make them available to SEC examiners for
inspection. Rule 204-2 sets forth an extensive
list of these books and records, as well as
the length of time and location at which they
must be maintained. The requirement to keep
records does not turn on the medium in which
the document is created or maintained. Thus,
electronic documents, including e-mails, must
be maintained if they fall into any required record
category described below.
Generally, all books and records must be
maintained and preserved in an easily accessible
place for five years from the end of the fiscal year
during which the record was created, the first two
years in an appropriate office of the IA. Articles
of incorporation, partnership documents, minute
books, stock certificates of the advisor, and
other corporate or organizational documents
must be maintained continuously in the advisor’s
office until termination of the business and in
an easily accessible place of which the SEC has
been notified for three years after termination
of the RIA. Books and records are required to
be maintained on a “current” basis. The SEC
staff has taken the position that the meaning of
“current” depends on the circumstances of an
advisory business and the nature of the records
being kept. The required books and records
broadly fall into one of two categories: typical
business accounting records and those that the
SEC believes an IA should keep in light of the
fiduciary nature of its business. Advisers should
note that while most states have adopted similar
books and records requirements, each state has
typically modified its own version. Therefore
every state registered RIA should seek out
its jurisdictions’ required books and records
requirements, which are normally listed on a
jurisdiction’s securities division website.)
Required books and records required for
SEC-registered RIAs include:
—— Journal requirement:
Maintain journals in accordance with
generally accepted accounting principles,
including cash receipts, disbursements and
other records.
—— Ledger requirement:
Maintain a ledger (general and auxiliary or
other comparable records) in accordance
with generally accepted accounting
principles reflecting asset, liability, reserve,
capital, income and expense accounts.
advisor.scottrade.com —— Retention of canceled checks:
Save all canceled checks, bank statements,
reconciliations and checkbooks.
—— Retention of trial balances and financial
statements:
Retain all trial balances, financial statements
and internal audit work papers. Though
not specifically required, SEC examiners
(and some states) have asked for net capital
computation records..
—— Retention of paid and unpaid bills:
Assemble and save all documentation
of paid and unpaid bills or statements.
—— Memorandum order:
Keep a complete record of all orders
for securities purchased or sold and any
instruction from clients concerning such
purchase and sale.
—Retention of written communications:
Keep records of all written communications
sent and received regarding any recommendations or advice given or proposed, the
receipt, disbursement or delivery of funds
or securities, or the placing or execution of
orders (e.g., quarterly holdings of securities
and performance reports, financial plans,
billing correspondence, brokerage and
custodial statements and confirmations
of transactions).
—— Records of discretionary accounts:
Maintain a list of all accounts in which
the advisor has discretionary power.
—— Evidence of discretionary authority:
Retain all documents that grant the IA
discretionary authority (e.g., power of
attorney, limited trading authorization
forms, advisory and limited partnership
agreements, etc.).
—— Retention of written agreements:
Save all written agreements executed
between the IA and advisory clients,
vendors and any other parties.
—— Retention of communications:
Keep a copy of all advertisements, notices
or circulars, newspaper articles, investment
letters, bulletins or other communications
to clients if sent to 10 or more persons. If
recommending specific securities, maintain
a record of the rationale behind the
recommendation.
—— Disclosure document retention:
Keep copies of disclosure documents (Form
ADV brochures and supplements) given to
clients or prospective clients. Keep a record
of dates that each disclosure document was
given or offered to be given to any client
or prospective client who becomes a client
and retain written requests for disclosure
documents received from clients.
—— Retention of solicitor documents:
Retain the original signed and dated client
acknowledgement of receipt of the solicitor’s
disclosure document and the advisor’s
disclosure brochure (Part 2 of Form ADV).
Also, maintain agreements with solicitors
establishing the solicitation arrangement
and copies of the separate written disclosure
document prepared by third-party solicitors
and delivered to clients.
—— Insider trading compliance:
Retain written supervisory procedures
in compliance with Section 204A of the
Advisors Act.
—— Advisors with custody over client accounts:
Comply with SEC Rule 204-2(b) record
keeping requirements.
—Organizational records:
Retain and keep current articles of incorporation and amendments, stock books, charters,
minute books, and other organizational
documents of the entity.
—— Investment management/supervisory services:
Retain client transaction records (securities
purchased and/or sold, the date, amount,
advisor.scottrade.com and price) and client securities position
listings.
—— Client suitability documentation:
Retain records documenting basic
information on the client and the appropriate
investment management style provided
by the IA (e.g., new account forms, client
questionnaires, summary sheets, etc.).
—Performance data records:
Retain supporting calculation and work
papers of performance data used. Performance data records must be maintained for
the five-year period from the date last used.
All client records relating to performance of
their accounts must be maintained for all
periods during which client performance
returns were included in any advertised rates
of returns. This will generally include all of
the IA’s client accounts for the relevant time
periods (from when the performance returns
first appeared until five years after the
composite or numbers were last used).
In addition to the records listed above, SEC rules
relating to proxy voting, compliance programs,
and code of ethics each operate in conjunction
with Rule 204-2 recordkeeping requirements.
RIAs should also maintain ready access to other
records typically requested for review by SEC
and state examiners. These records include:
—— Current and terminated client lists, including
reasons for termination;
—— Organizational chart and list of employees
and related persons;
—— List of employees subject to disciplinary action;
—— Mutual fund/limited partnership documents;
—— List of trade errors;
—— Gift and entertainment log;
—— Records evidencing review of marketing
materials;
—— Compliance checklists and exception
reports;
—— Inventory of compliance risks;
—— Business continuity plan;
—— Complaint file containing copies of written
client complaints and any responses;
—— Trading records pertaining to trade allocations,
best execution and soft dollars; and
—— Litigation/arbitration documents.
If an IA is going to maintain and preserve required
records on microfilm, microfiche or electronic
media (converting paper to electronic record),
the following requirements apply:
—— Arrange and index the records to permit easy
location, access and retrieval of any particular
record;
—— Legible, true and complete printouts and
copies of the required records must be
provided promptly to the SEC upon request
along with a means to view and print them;
—— Reasonably safeguard records from loss,
alteration or destruction; and
—— Limit access to authorized personnel
only, including the SEC and its staff, and
reasonably ensure that any reproduction
of a non- electronic original record on
electronic storage media is complete,
true and legible when retrieved.
Insider Trading Policies and Procedure and
Code of Ethics
Section 204A of the Advisors Act requires every
IA to establish, maintain and enforce written
policies and procedures reasonably designed
to prevent the misuse of material, nonpublic
information by the advisor and any person
associated with the advisor. In order to protect
itself against the substantial monetary penalties
and reputational risk that may befall an advisor
who misuses inside non-public information,
advisor.scottrade.com advisors often supplement these policies and
procedures with proactive programs to review
and place restrictions on personal trading by
employees and other potential conflicts of
interest. Development of educational programs
and the adoption of blackout periods and
restricted lists are often elements of these
compliance programs.
Advisors Act Rule 204A-1 and related
recordkeeping obligations require RIAs to adopt
codes of ethics. At a minimum, an advisor’s codes
of ethics must incorporate the following:
a. Standards of Conduct:
Set forth a minimum standard of conduct
for all supervised persons;
b. Compliance with Federal Securities Laws:
Require supervised persons to comply
with federal securities laws;
c. P
ersonal Securities Transactions:
Require each of the IA’s access persons
to report personal securities holdings at
the time the individual becomes an access
person (and at least once annually thereafter)
and to make a report at least quarterly of all
personal securities transactions concerning
reportable securities to the IA’s chief
compliance officer or other designated
person;
d. Pre-approval of Certain Securities Transactions:
Require the chief compliance officer or
other designated persons to pre-approve
investments by the access persons in IPOs
or limited offerings;
e. Reporting Violations:
Require all supervised persons to promptly
report any violations of the code to the
advisor’s chief compliance officer or other
designated person;
f. D
istribution and Acknowledgment:
Provide each supervised person with a
copy of the code and any amendments, and
obtain a written acknowledgment from each
supervised person recognizing receipt and
review of the code;
g. R
ecordkeeping:
Keep copies of the code, records of
violations of the code and of any actions
taken against violators of the code, and
copies of each supervised person’s
acknowledgement of receipt of the code;
h. Advisor Review and Enforcement:
An IA’s code must include, among other
things, procedures for reviewing the personal
securities reports of persons subject to the
firm’s reporting requirements; and
i. Form ADV Amendment:
Provide a summary description of the
advisor’s codes of ethics in Form ADV
Part 2, including an offer to provide a copy
of the code upon a client’s or prospective
client’s request.
Contractual Requirements
Section 205(a)(1) of the Advisors Act limits the
ability of a RIA to charge performance-based
fees. More specifically, a RIA may not enter into
an advisory contract with a client if the contract
provides for compensation based on a share of
capital gains of the client’s funds. The Advisors
Act contains exceptions from this prohibition
which allow performance fees to be charged to
clients who are registered investment companies
and private investment companies exempt from
registration under the Investment Company Act
pursuant to Section 3(c)(1) and 3(c)(7)of that Act.
In addition, Rule 205-3 provides an additional
exception allowing performance fees to be
charged to certain high-net-worth clients
defined as “qualified clients.” An IA may charge
a performance- based fee to clients who:
—— Have $1 million in assets under management
with the advisor immediately after entering
into an advisory contract; or the advisor
reasonably believes, immediately prior to
entering into the advisory contract, have
a net worth of $2 million; or
advisor.scottrade.com —— Are qualified purchasers as defined
in Section 2(a)(51)(A) of the Investment
Company Act (which includes “knowledgeable
employees” of the advisor). (Please note
that these requirements are required to be
updated by the SEC periodically, so if your
firm deals with this clientele, further due
diligence should be done to determine
current standards.)
Written contracts between an advisor and
its clients are not expressly required by the
Advisors Act. However, as a matter of good
business practice and for the purpose of
enhancing internal controls and mitigating
risk, an IA should ensure that all of its advisory
contracts are in writing.
An advisory contract, written or oral, must
provide that the advisor may not assign the
contract without the client’s consent in accordance with Section 205(a)(2) of the Advisors Act.
“Assignment,” as defined under Section 202(a) (1)
of the Advisors Act, includes the transfer of a
controlling block of an advisor’s voting securities
(whether by issue of new shares or transfer by
a shareholder). Sections 2(a)(4) and 2(a)(9) of the
Investment Company Act of 1940 provide that
a transfer of 25% or more of an advisor’s voting
securities is presumed to be an assignment of
the advisor’s contracts. The Advisors Act does
not include a similar provision, but the SEC staff
may well construe “assignment” in a similar
manner. Advisors Act Rule 202(a)(1)-1 excepts
a transaction which does not result in a change
of actual control or management of the advisor.
A nominal reorganization, such as a change
in an advisor’s domicile or legal form, also
is not considered an assignment.
If an IA is organized as a partnership, Section
205(a)(3) of the Advisors Act requires that the
advisory contract provide that the advisor will
notify the client of any changes in the general
partners of the partnership within a reasonable
time after any change. The SEC staff has
construed this provision to not require a limited
partnership to notify clients of changes in its
limited partners. The SEC staff has also stated
that it is a breach of an advisor’s fiduciary duty
to restrict unduly a client’s right to terminate
an advisory contract (e.g., allowing the client
to terminate only once per year or prohibiting
termination within the first year of the advisory
relationship).
—— Represent that any report, graph, chart,
formula or other device can, in and of itself,
be used to determine which securities
to buy or sell, or when to buy or sell such
securities, or can assist persons in making
those decisions, unless the advertisement
prominently discloses the limitations and
difficulties regarding their use; and
Section 215(b) of the Advisors Act states that
an advisory contract may not purport to waive
compliance with the Advisors Act or rules thereunder. The SEC staff has taken the position that
hedge clauses and mandatory arbitration clauses
may therefore not be included in an advisory
contract. A “hedge clause” purports to absolve
the IA of liability and provides for indemnification
of the IA by the client except in cases of the
advisor’s gross negligence, reckless or willful
misconduct, illegal acts, or acts outside the
scope of the IA’s authority.
—— Represent that any report or other service
will be provided free of charge, unless there
is, in fact, no obligation or condition for
receipt of such report or service.
Advertising Restrictions
Advisor Act Rule 206(4)-1 prohibits SECregistered RIAs from using any advertisement
that contains any untrue statement of material
fact or that is otherwise misleading. The term
“advertisement” is defined broadly to include
any notice, circular, letter, or other written
communication addressed to more than one
person or any notice or other announcement
in any publication or by radio or television (or
the Internet or a recorded telephone message)
regarding investment advice or advisory services.
In addition, an advertisement may not:
—— Use or refer to testimonials (which include
any direct or indirect statement of a client’s
experience or endorsement);
—— Refer to past specific recommendations
made by the advisor that were profitable,
unless the advertisement sets out a list of all
recommendations made by the advisor within
the preceding period of at least one year and
complies with other specified conditions;
advisor.scottrade.com In addition, while not specifically addressed
in Rule 206(4)-1, performance advertising by
investment advisors is generally governed by
the general antifraud prohibition contained
in subparagraph (5). In addition, the SEC staff
has clarified its views through no-action letters
on an advisor’s use of its past performance in
advertisements, including the oft-cited letter
issued to Clover Capital Management, Inc. in
1986 (WL 67379 [Oct. 28, 1986]).
Additionally, the SEC staff has stated that RIAs
should NOT use the term acronyms “RIA” or “IAR”
in their advertising. These terms if used must be
fully spelled out. RIAs should also remember that
the term “registered investment advisor” refers to
the firm and the term “investment adviser representative” refers to the individual. They cannot be
interchanged. The SEC has stated that using the
acronyms (rather than full spellings) after the firm
or individual’s name may falsely indicate a degree or a licensed professional position for which
there are certain qualifications.
Custody
The SEC in 2004 adopted amendments to
Advisors Act Rule 206(4)-2 to modernize the
Custody Rule. The rule states that an advisor
has custody of client assets when it holds,
“directly or indirectly, client funds or securities
or [has] any authority to obtain possession of
them.” Along with providing a definition of
custody, the rule also provides three examples
of circumstances in which an advisor has custody
of client funds or securities:
1. P
ossession of a client’s funds or securities:
An advisor that holds a client’s certificates or
cash has custody. The rule, however, expressly excludes inadvertent receipt of such assets
by the advisor, provided the advisor returns
the asset(s) to the sender within three business days of receiving them. The rule
further details that while an advisor may
assist aclient to forward funds and/or securities, the advisor cannot directly forward them
(i.e., take direct possession of a security and
send it via overnight delivery to the client’s
broker or custodian on behalf of the client)
without being deemed to have custody.
Finally, the rule also clarifies that an advisor
that receives a check drawn by the client and
made payable to a third party is not deemed
to have custody.
2. A
uthority to withdraw funds or securities
from a client’s account: An advisor with any
ability to withdraw funds or securities from
a client’s custodial account (e.g., checksigning authority, general power of attorney,
direct debiting of advisory fees) is deemed
to have custody.
3. A
cting in any capacity that gives the advisor
or their supervised person(s) legal ownership
of, or access to, the client funds or securities
(e.g., RIA acts as both the general partner
and investment advisor to a limited
partnership, or trustee of a trust in which
an advisory client is a grantor or beneficiary
of the trust).
Advisors with custody are required to maintain
client funds and securities with a “qualified
custodian.” Qualified custodians include banks,
savings associations, registered broker-dealers,
registered futures commission merchants and
certain foreign financial institutions. Certain
registered investment advisors may also be
qualified custodians (e.g., registered advisors
advisor.scottrade.com that are also registered broker-dealers and/or
banks or separately identifiable departments
or divisions of banks). In the case of shares of
open end mutual funds, the fund’s transfer agent
may be used in lieu of the above-mentioned
qualified custodians. Client assets must be held
in an account under the client’s name or under
the advisor’s name as agent or trustee for its
client. The advisor must notify clients in writing
of the qualified custodian’s name, address
and manner in which the assets are maintained
as well as any changes in such information.
The advisor must also arrange for account
statements to be sent to clients at least quarterly
by either the advisor with custody or the qualified
custodian. Alternatively, clients may elect to
have an “independent representative” receive
the quarterly statements on their behalf. If the
account statement requirement is to be satisfied
by the qualified custodian, the advisor is required
to have a reasonable belief that the qualified
custodian has done so. If the advisor elects to
send the account statement to its clients, the
advisor is subject to a surprise audit by
an independent public accountant.
The rule includes a special provision for IAs
that are both general partner and investment
advisor to an investment pool or that hold a
client’s privately offered securities. In addition,
while advisors that directly debit advisory fees
from client accounts will be deemed to have
custody, advisors that have custody only as a
result of the direct debiting of advisory fees may
answer “no” to Item 9 of Form ADV, Part 1A. It
should be noted that many states have custody
requirements that may differ markedly from
those discussed above.
Compliance Policies and Procedures
Advisors Act Rule 206(4)-7 makes it unlawful
for an SEC-registered RIA to provide investment
advice unless the advisor has adopted and
implemented formal written policies and
procedures designed to: prevent violations
of the Advisors Act and the rules thereunder
by the advisor or its supervised persons; detect
violations that have occurred; and promptly
correct any violations that have occurred.
Fundamentally, the rule requires that each
SEC-registered RIA:
—— Establish and implement written policies
and procedures reasonably designed to
prevent violation of federal securities laws;
—— Review the firm’s policies and procedures
on at least an annual basis; and
—— Designate a chief compliance officer to be
responsible for the administration of those
policies and procedures.
In recognizing that there cannot be a “one size
fits all” model for advisors, the SEC provided
broad guidelines for consideration when drafting
a firm’s written policies. The SEC suggested
in the adopting release that advisors’ written
policies and procedures should address the
following areas to the extent applicable:
—Portfolio management: Procedures for
block trading, asset allocations, conforming
to clients’ investment objectives and restrictions; appropriate disclosures and fulfilling
regulatory requirements.
—— Trading practices: Best execution (including
ongoing evaluation and documentation);
soft dollar issues; directed brokerage; block
trading; and trade allocations for aggregated
trades.
—— Proprietary trading by the advisor, and
personal trading activities by the advisor’s
related persons.
—— Accuracy of disclosures to clients, regulators,
and investors (including advertisements and
account statements).
—— Safeguarding client assets from conversion
by advisory personnel.
—— Accurate creation and secure maintenance
of required records.
advisor.scottrade.com —— Marketing of advisory services, including
the use of solicitors.
—— Procedures to value client holdings and
assess fees based on those valuations.
—— Privacy protection of client records and
information.
—— Proxy voting.
—— Business continuity planning.
—— Information security.
Rule 206(4)-7 (“Compliance Programs Rule”)
requires an RIA, no less frequently than annually,
to evaluate its policies and procedures to
ascertain if they are adequate and have been
implemented effectively. The review should
evaluate the adequacy of existing procedures
and the effectiveness of their implementation,
and should incorporate, among other things:
—— Any compliance issues addressed by the
firm during the past year;
—— Changes in the advisor’s business activities
and/or affiliations; and
—— Regulatory changes.
While an IA is not required to create a written
report summarizing its annual review and
findings, the SEC will expect that the IA has
maintained at least some written materials
evidencing that it conducted the annual review.
For additional guidance on the SEC staff’s
views with regard to the annual review process,
consult Examiner Oversight of “Annual” Reviews
Conducted by Advisors and Funds, available at
www.sec.gov/info/cco/ann_review_oversight.htm.
Advisors are also required to designate a
chief compliance officer (CCO) responsible
for administering the firm’s compliance policies
and procedures. The CCO must be not only
competent and knowledgeable about the
Advisors Act, but must also be empowered
with full responsibility and authority to develop
and enforce the firm’s policies and procedures.
Consequently, the CCO must have sufficient
authority to compel others within the firm to
adhere to the firm’s policies and procedures.
Form ADV Part 1, Schedule A, Item 2(a) requires
that each advisor and applicant for SEC registration
must identify a single compliance officer.
Additional recordkeeping requirements have
also been added to Advisors Act Rule 204(2) in
conjunction with the Compliance Programs Rule.
Rule 204(2)(a)(17) requires that RIAs:
—— Maintain copies of their policies and
procedures, along with any revisions;
—— Maintain all records documenting the annual
review(s); and
—— Retain required records for five years.
Supervision
An RIA has a statutory duty under Section 203(e)
(6) of the Advisors Act to supervise the activities
of persons who act on its behalf. However, an IA’s
implementation of a reasonable compliance
program permits an IA to rely on the safe harbor
in Section 203(e)(5) of the Advisors Act and
thereby satisfy its duty of supervision if it establishes and implements policies and procedures
that are reasonably designed to prevent and
detect (insofar as practicable) any violations of
law by a supervised person, and has reasonably
discharged the duties and obligations incumbent
on it by reason of such policies and procedures
without reasonable cause to believe that such
policies and procedures were not being followed.
The scope of the service will include basic
questions about the operation of a registered
investment advisor and related compliance
and registration areas. If an inquiry requires
extensive research, significant review of materials
or drafting of materials, then Lexington will offer
its standard compliance consulting packages
for a fee. If you choose to retain Lexington for
compliance consulting services that are outside
the scope of the hotline, you are responsible for
making all required payments. Scottrade and
Lexington are not affiliated. Scottrade is not
responsible for statements, offers or products
issued by Lexington. Please research any product
or service carefully before making a purchase.
1
Scottrade® Advisor Services will reimburse
account transfer fees up to $100 charged by
another broker when your clients transfer an
account, or household of accounts, with a total
value of $50,000 or more to Scottrade as of
July 21, 2016. Household is defined by mailing
address. Scottrade® Advisor Services reserves
its rights to terminate this offer at any time, and to
change or extend this offer at its sole discretion
without prior notice. Void where prohibited.
2
3
Source: Source: RIA in a Box as of June 2016.
This material is for informational purposes only and Scottrade is not responsible for any errors or omissions. Scottrade does not provide tax
or legal advice and the information contained herein is not meant as a replacement for professional advice. Please consult your tax or legal
advisor for questions concerning your personal tax, financial or legal situation. Although the sources are deemed to be reliable, Scottrade
makes no warranty with respect to the contents, accuracy, completeness, timeliness, suitability, or reliability of the information. The information
presented or discussed is not, and should not be considered, a recommendation or an offer of, or solicitation of an offer by, Scottrade or its
affiliates to buy or engage in any specific practice management strategy or service. You are fully responsible for your decisions. Your choice
to engage in a particular strategy or service should be based solely on your own research and evaluation of the risks involved, your financial
circumstances, and your objectives. Scottrade, Inc. and its affiliates are not offering or providing, and will not offer or provide, any advice,
opinion or recommendation of the suitability, value or profitability of any particular practice management strategy or service.

A guide to taking control of your business

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