By Helen Rexwinkel, Director and Cameron Dogan, Senior Associate
Launching an investment advisory firm is an exciting but complex endeavor, requiring a strong operational foundation to ensure long-term success. Early-stage decisions — structuring the firm, selecting vendors and designing governance frameworks — have lasting impacts. With the right approach and support from experienced strategic partners, new managers can navigate these complexities efficiently, avoiding common missteps that hinder growth.
Building a Strong Foundation
Establishing an investment firm involves multiple phases, each requiring careful planning and execution. The foundation must be strong enough to support both immediate operational needs and long-term growth. Whether structuring the firm, launching the first fund or managing its lifecycle, the right framework helps ensure stability, efficiency and investor confidence.
Firm and Fund Setup
Early, yet impactful, decisions include choosing the right firm and fund structure, ownership model and tax strategy. Making informed decisions that align with investment strategy, regulatory requirements and future vision can help avoid costly mistakes. Here are three steps you can take to set your firm up for success in the earliest phase:
- Engage Critical Hires and Support: Not all hires need to be day-one employees. Leveraging outsourced Chief Financial Officer (CFO), Chief Compliance Officer (CCO), Chief Technology Officer and operations professionals provides access to immediate specialized knowledge with cost-flexibility. It helps ensure operational stability while you focus on core investment and fund-raising activities.
- Build a Strong Governance Framework: Develop clear policies and procedures for decision-making, oversight, risk management and compliance. A well-defined governance structure protects against future failures in accountability and regulatory adherence, which can cause significant disruption to your business.
- Select the Right Technology and Vendors: Choosing the right technology infrastructure and vendor relationships is critical for scalability and efficiency. Fund administration, compliance technology and reporting tools should align with the firm’s needs and investor expectations, both now and as you grow.
Fund Launch
A successful fund launch requires operational readiness, regulatory compliance and investor preparation. Taking the right steps early can set the foundation for long-term success.
- Select and Engage Fund Administrators: Choose a fund administrator aligned with your firm’s strategy, structure and investor demands. A well-integrated administrator supports compliance, reporting and operational efficiency.
- Complete Regulatory Filings and Compliance Requirements: Ensure all necessary registrations, disclosures and filings are in place and establish clear internal compliance procedures to maintain adherence to ongoing regulatory obligations.
- Develop Investor Due Diligence Materials: Well-structured investor communications, including due diligence questionnaires (DDQs) and request for proposal (RFP) responses, enhance credibility and help attract and retain capital. Preparing detailed, institutionalized responses in advance streamlines investor onboarding.
- Implement a Thoughtful Tax Strategy: Proactively consider fund and firm structure, jurisdiction and investor tax efficiency. Engaging tax advisors early can optimize tax efficiency and future planning and help ensure you meet compliance requirements.
- Conduct Pre-Deal Diligence: Establish a robust due diligence framework to assess risks, governance structures and operational efficiencies of target investments before making investments; this is critical to informed decision-making and investor confidence.
Fund Lifecycle
Managing a fund requires continuous and proactive oversight to maintain stability, investor confidence and compliance – and position for growth.
- Maintain Transparent Valuations: A clear, consistent valuation process helps ensure accuracy and investor trust. Regular audits and third-party reviews enhance transparency and mitigate valuation risks.
- Ensure Ongoing Compliance and Governance: Firms must actively monitor the evolving regulatory landscape in order to stay compliant with industry regulations. Maintaining strong governance practices, internal controls and regular compliance reviews helps avoid regulatory pitfalls.
- Adapt to Market Conditions: As the markets fluctuate, firms need to be prepared to adjust investment strategies, risk management frameworks and operational processes accordingly. Proactively assessing risks and opportunities enables firms to remain competitive.
- Excel at Investor Reporting and Communication: Regular and clear reporting to investors fosters trust and strengthens relationships. Well-prepared financial statements, performance updates and risk disclosures enhance investor engagement.
- Implement Scalable Operational Processes: As a firm grows, its operational needs will expand. Investing in scalable technology, efficient workflows and experienced personnel supports seamless fund operations and sustainable growth.
Contact Us
Navigating the complexities of launching and managing an investment firm requires thoughtful planning and the right resources. If you have any questions or would like to discuss these considerations further, please reach out to your PKF O’Connor Davies client service team or any of our dedicated Financial Services Advisory team members below:
Michael Stellwagen
Partner
mstellwagen@pkfod.com | 914.421.5654
Helen Rexwinkel
Director
hrexwinkel@pkfod.com | 203.705.4143
Cameron Dogan
Senior Associate
cdogan@pkfod.com | 212.286.2600