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What Is a Registered Investment Advisor (RIA)?

A registered investment advisor (RIA) is an individual or company who gives advice on the purchase or sale of assets. RIAs must get registered with the Securities and Exchange Commission (SEC) or state securities regulators. 

Traditional advisors will typically advise and oversee high-net-worth individuals’ investment accounts. Here’s what you should know about RIAs and how to tell whether an advisor is the right choice for you based on your financial situation.

How Do Registered Investment Advisor’s Work?

In most cases, an advisor will maintain a strong relationship with their client. RIAs often provide advice on a wide variety of financial topics, including retirement plans, insurance, and mortgages.

A RIA can be a large financial advisory company with millions of customers, or it can be a sole planner that works with individual clients. Registered investment advisors will have a professionally qualified risk manager on board who can invest investor funds in growth stocks, shares, and various assets.

What Do Registered Investment Advisor’s Offer?

Registered investment advisors (RIA) will help people from all financial backgrounds. They are well-equipped to assist any clients including individuals who do not have large amounts of money or assets.

Many financial consulting groups specialize in granting clients access to affordable investment programs. Many RIAs will suggest an asset allocation approach to clients while leaving strategic asset decisions for your account to a private entity.

Also, they will often delegate the task of making particular investment choices to wealth management firms.

RIAs Have a Fiduciary Responsibility

RIAs have a fiduciary responsibility to their customers, which ensures they have a moral commitment to give financial advice that is truly in the best interests of their clients. This ensures they can provide investment advice that suits the needs of their clients while still earning referral commissions or higher fees.

RIAs must report all potential conflicts of interest to their customers and also conduct themselves ethically.

How Is a RIA Compensated?

RIAs usually charge recurring rates based on a proportion of the funds they control. Advisors typically will charge an hourly fee, a retainer, or just a flat rate.

What Qualifications Does a RIA Need?

RIAs must pass the Uniform Investment Adviser Law Exam, also known as the Series 65 exam. You also will need to file a Form ADV, which requires a disclosure statement when applying to become an RIA.

How To Choose a Registered Investment Advisor

When you are choosing an RIA it’s important to identify your financial objectives and to take some time to interview different candidates who you can trust to provide you with financial advice. 

Identify Your Financial Objectives

RIAs will take the time to consider your economic position, priorities, and tolerance for risk, in order to help you accomplish your specific financial objectives. They are confident in their abilities to grow and preserve their clients’ capital, as well as assisting them in achieving their goals.

Run a Preliminary Screening

Before you consult with an advisor, you can run a preliminary screening and look up relevant details about them. By filing a Form ADV, all independent advisors are under requirement to publicly reveal information about their company.

Start Interviewing RIAs

You’ll want to analyze advisors critically when you start interviewing with them. Asking a straightforward list of questions to an advisor will help ensure that they are prepared to manage your finances.

You want to be certain that the person you hire is the right one for your unique financial situation.

Benefits of Working With a Registered Investment Advisor

There are many benefits to working with a RIA because they have to keep your best interests in mind. They offer personalized financial advice, they can be relatively affordable, and they can help manage your assets.

RIAs Must Keep Your Best Interest in Mind

RIAs, under SEC rules, must act in the best interests of their clients. They must report all of their services, and disclose or remove all conflicts of interest.

Holding a fiduciary duty to the customer decreases the possibility of conflicts of interest. Fiduciaries are expected to disclose all possible conflicts of interest to their customers, resulting in a more transparent environment between the RIA and their client.

RIAs Offer Personalized Financial Advice

RIAs provide tailored services with the intention of providing you with a blueprint of what you need to do to reach your financial objectives. Your RIA will find time to talk with you and discuss any questions you might have.

Most RIAs Are Fee-Only 

If an RIA is fee-only, that means that they are compensated entirely by the rates customers pay for their services. They get no commissions or kickbacks for promoting specific items.

Financial advisors usually charge you fees based on the proportion of the funds that they are maintaining. They are there to assist you with your investments, not their own, and they can not earn profits off what they offer to you.

RIAs Will Manage Your Assets

A successful RIA will ask you about your objectives and develop a strategy to help you achieve them. Any RIA will help you manage your assets and they can assist you with budgeting or retirement planning.

They may also assist you in investing your funds or suggest particular investments to help build your wealth.

Registered Investment Advisor vs Financial Advisor

A financial adviser will conduct trades on your behalf or assist you with transaction completion. Though RIAs must register with the SEC, financial advisors can instead register with the Financial Industry Regulatory Authority (FINRA). 

The main difference between them is that a financial advisor must provide customers with counsel that is appropriate for their needs, but it does not always have to be in their best interests.

RIAs Can Help You Plan For The Future!

A registered investment advisor (RIA) is an individual or company who gives advice on the purchase or sale of assets. RIAs have a fiduciary responsibility to their customers, which ensures they have a moral commitment to give financial advice that is truly in the best interests of their clients.

A financial advisor can help by keeping your assets under advisement and encourage you to build long-term financial security. You should consult a financial advisor today to help you manage and grow your wealth.