RIA Acquisition Due Diligence Checklist

Download the target's most recent ADV filings from IAPD and compare against the firm's internal copies. Watch for material amendments filed in the last 12 months — disciplinary disclosures, custody changes, or new fee schedules — that signal items needing follow-up.

Confirm registration aligns with AUM thresholds — federal registration at $100M+, state registration below. Targets straddling the line often have notice-filing gaps in states where they hold clients but never registered.

Identify all 25%+ beneficial owners for CTA reporting purposes and reconcile against the ADV Part 1 Schedule A/B disclosures. Document any side letters, profit interests, or phantom equity that won't appear on the formal cap table.

Pull the last three years of board or member minutes. Look for unresolved compliance escalations, related-party transactions, and any committee findings that didn't make it into the ADV.

Identify advisors whose departure would put more than 10% of AUM at flight risk. Note non-compete and non-solicit terms in their employment agreements — many state courts will not enforce these against departing advisors absent narrow tailoring.

Pull AUM by household for 36 months and flag the top 10. Concentration above 25% in the top 10 households is a deal-pricing issue — single-household departure can swing valuation materially.

Break out AUM fees, planning fees, commission/12b-1 trail, insurance overrides, and any solicitor referral revenue. Hybrid RIA/BD revenue carries different post-close run-rate risk than pure fee-only AUM.

Request reviewed or audited statements where available; tax-basis P&Ls otherwise. Reconcile reported revenue to custodian fee debits and tie advisor compensation to the cap table.

Pull a sample of 25 households across Schwab, Fidelity, or Pershing and recompute the most recent quarterly fee from contracted rate × billing-period balance. Variance over 2% on any sample household warrants a full audit of the billing engine.

Most RIA fees are auto-debited and AR is minimal. Anything over 60 days for planning fees or held-away fee invoicing usually points to an admin process gap the buyer will inherit.

Request the most recent deficiency letter, the firm's response, and evidence of remediation. Open or partially-remediated findings travel with the firm post-close — buyer inherits the exam history.

Confirm CIP is documented per account type, beneficial-owner collection at 25%+ for entity accounts, and ongoing OFAC screening with hits log. PEP / EDD documentation should exist for any flagged client.

Run BrokerCheck and IAPD on every IAR. Customer complaints, regulatory actions, and termination disclosures sometimes appear on the rep's record but never made it to firm-level ADV Item 11.

Sample quarterly access-person reports against custodial trade confirms. Pre-clearance gaps and undisclosed outside business activities are the most common findings in this area.

If the firm relies on the SEC's no-action SLOA exception, verify all seven safeguard conditions are documented per client. A single missed condition tips the firm into custody and triggers a surprise exam requirement the buyer will inherit.

For each unresolved finding, document the corrective action plan, owner, and expected closure date. Negotiate either a closing condition (remediate before close) or a purchase-price adjustment with escrow.

Catalog every custodian (Schwab, Fidelity, Altruist, Pershing) and the PMS in use (Black Diamond, Orion, Tamarac, Addepar). A multi-custodian target with a single-custodian buyer means a repapering project of every household post-close.

Confirm Smarsh, Global Relay, or Microsoft Purview is capturing all advisor email. Ask directly about texting — if the firm uses iMessage or WhatsApp without MyRepChat or Hearsay Relate, you are inheriting the same off-channel exposure that drove $2B+ in 2022-2024 enforcement.

Review the written information security program, identity theft red flags program, and last penetration test. Confirm MFA on custodian portals, CRM, and email — single-factor advisor logins are the most common wire-fraud vector.

Pull the IAA, Form CRS, and Reg BI disclosures. Check that CRS delivery is logged in the CRM at recommendation time — non-delivery has been a recurring exam focus since the 2020 effective date.

Request SOC 2 Type II reports for the PMS, CRM, archiving vendor, and any cloud doc store. Read the BCP — RIAs without a tested BCP and named successor advisor are common citation targets.

Distill findings into deal-impacting, remediation-required, and informational categories. Each deal-impacting finding should have a recommended price adjustment, escrow holdback, or closing condition.

Acquiring CCO and deal lead jointly sign off. Approval with conditions means the conditions become closing requirements in the purchase agreement; rejection ends the deal.

For approval-with-conditions outcomes, schedule a working session with the target's CCO and deal counsel to translate each condition into a closing covenant with named owner and deadline.