What Is a Registered Investment Advisor?

There are a lot of abbreviations and acronyms in the financial planning world, from CFPs, CPAs, and CFAs to RIAs.

While registered investment advisors (RIAs) are similar to financial advisors, the two financial professionals aren’t exactly the same.

An RIA is a type of financial advisor that provides investment advice. Read on to learn more about the services RIAs provide and get tips on choosing the right one.

What Is a Registered Investment Advisor (RIA)?

An RIA is an individual or firm that specializes in investment advisory services. RIAs are held to a higher standard than some advisors.

They’re called registered investment advisers/advisors because of their requirement to register with the U.S. Securities and Exchange Commission or their state securities administrators,  according to the Investment Advisers Act of 1940.

Another distinction is that RIAs are fiduciaries. The fiduciary duty is a  legal requirement to act in a client’s best interests and disclose any potential conflicts of interest.

Most RIAs also hold other designations, like Certified Financial Planner (CFP), Certified Public Accountant (CPA),  ChFC (chartered financial consultant), or CFA (chartered financial analyst).


What Services Do RIAs Offer?

While RIAs specialize in investment strategies, they may offer other financial services, too. Here are a few of the topics an IRA can help you with:

RIAs vs. IARs

To understand what an RIA is, it’s important to distinguish it from an investment adviser representative (IAR).

RIA usually refers to the advisory firm itself, while, an IAR is a person who works for an RIA. In other words, the RIA is the firm, while the IAR is the individual advisor. An IAR can have its own RIA firm, but they’re still considered an IAR representing an RIA.

Investment advisor representatives pass the Series 65 (Uniform Investment Advisor Law) exam, a test administered by the Financial Industry Regulatory Authority (FINRA) that covers federal securities laws and topics around investment advice.

Any additional certifications require specific education and training (the CFP certification is particularly tough to earn), and some states allow advisors with these designations to waive the Series 65 exam.

SEC vs. State Registration

Once again, all RIAs are either registered at the federal level with the Securities and Exchange Commission (SEC) or at the state level with a state securities regulator.

Who an advisor registers with depends on the amount of money they’re managing. If they manage $110 million or more in client assets, they’re required to file with the SEC, while RIAs managing smaller amounts of assets register with their respective states.

How RIAs Get Paid

RIAs can get paid in a few different ways. Here’s a look into each one:

1. Percentage of Assets Under Management (AUM)

Many advisors will charge you based on how many assets they manage for you, typically charging around a  1% asset management fee. The more assets you have, the lower the percentage tends to be.

For example, take a look at the chart below, which shows annual portfolio management fees for one of the largest RIAs in America:

Assets Annual Fee
$0 – $400,000 1.75% on the first $400,000
$400,001 – $750,000 1.25% on the next $350,000
$750,001 – $1,000,000 1.00% on the next $250,000
$1,000,001 – $3,000,000 0.75% on the next $2,000,000
$3,000,001 – $10,000,000 0.60% on the next $7,000,000
$10,000,001 – $25,000,000 0.50% on the next $15,000,000
$25,000,000 + Negotiable 

2. Flat Fee

Some advisors charge a flat monthly or annual fee. The cost depends on the complexity of your financial situation, and it can vary from $1,000 to $8,000 per year.

Some advisors also charge a flat fee for creating a personalized financial plan for you. You won’t receive any ongoing advice—just the plan.

This could make sense if you want to pay a one-time fee for a comprehensive plan and don’t think you’ll need a professional to help keep you on track.

3. Hourly Fee

With this fee structure, you’ll be charged by the hour, which is often anywhere from $100 to $400.

If you go this route, you pay for the time you need. You won’t get ongoing advice like an advisor charging an AUM fee or flat fee would provide, but you can ask any questions about personal finance and your investment portfolio during your session.

Note: Since RIAs are held to a fiduciary standard and must give advice in your best interest, they aren’t paid on commission like broker-dealers, which could create a conflict of interest.

Instead, their fiduciary obligations mean they’ll act in your best interest, using your risk tolerance and goals to determine the suitability of an investment rather than basing their decisions on commissions.

Should You Work With an RIA?

If you’re considering working with an RIA, here are some steps to take to make a decision:

  • Consider the benefits: To decide if an RIA is right for you, start by determining whether or not you need a financial advisor in general. There are a lot of benefits that come from hiring a professional: You can reach your financial goals faster, save time and stress, and avoid costly mistakes.
  • Factor in life changes: If you recently hit a milestone or experienced a major life change, like getting married or earning a big promotion, you could probably use an RIA’s services.
  • Get proactive help: If you continually put off important money decisions, a financial advisor could help you be more decisive and active in steering your finances as they help you set and reach goals.
  • Decide on the type: Think about exactly what type of financial advisor you need. If you’re ready to invest but have no clue how to start, a robo-advisor might be a good fit. If you’re a high-earner with a lot of assets, you probably want to go beyond a robo-advisor and hire a registered investment advisor to manage your investment portfolio.
  • Consider minimum requirements: Keep in mind that some RIAs require an account minimum, meaning you have to have a certain amount of assets to work with them, sometimes more than $100,000.

How to Choose an RIA

If you’re ready to hire an RIA, take the steps below to choose the right advisor:

  • Get referrals: Ask friends, family, and coworkers for recommendations, and check out online reviews for prospective advisors.
  • Use online resources: If you don’t have a referral, search for RIAs in your area using The National Association of Personal Financial Advisors (NAPFA), the Fee-Only Network, or the Garret Planning Network.
  • Vet with BrokerCheck: To verify that an investment advisor has their proper state or SEC registration, use BrokerCheck, a site run by FINRA. Just type in the name of the advisor you’re considering to see their background, including their education, business history, and licensing.
  • Check the Form ADV: RIAs must file a Form ADV. This is a public disclosure form that anyone can find on the SEC’s IAPD site (it also should be on the RIA’s website). The Form ADV will give you more information on an RIA’s services, fees, and any other affiliations (like a brokerage business on the side, for example).

Bottom Line

All in all, a registered investment advisor is a valuable resource for investors to achieve their financial goals and secure their financial future.

With their expertise and guidance, RIAs are equipped to create a customized investment plan that aligns with your unique needs and financial goals.

If you’re considering working with an RIA, be sure to ask questions, do your due diligence, and choose an advisor you feel comfortable working with who has your best interests at heart.

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