A Registered Investment Advisor (RIA) is a firm or individual registered with the U.S. Securities and Exchange Commission that manages investments for others.

Fiduciaries - By definition an investment advisor is considered to be acting in a fiduciary capacity on behalf of clients.

Fee Basis - All the RIAs used by us are compensated on a fee basis (a percentage of assets under management) rather than a commission basis.  Simply put, you have to make more money for the RIA to make more since their compensation is a fixed percent of your total assets. With a fee basis arrangement a RIA has the incentive to reduce transaction charges to their lowest level.

Higher Standard - Registration with the SEC causes one to become legally responsible for the investment advice given. SEC registration requires more disclosure to existing and potential clients and filing of periodic reports with various regulatory bodies. SEC compliant firms are also required more accurate records of the financial advice given to clients and to retain the records longer.

Lower Fees - There is usually a 2% to 2.5% advantage over the funds sold by registered reps (brokers). RIAs usually charge a fee of 1% annually to manage your portfolio.

What to demand in your relationship:

Certifications - Look for firms that have a high proportion of portfolio managers with a CFA^®, CFP^®, or advanced college degrees.

Transparency - Monthly statements should be provided in a timely manner and access provided so you can review your accounts on-line.

Segregated Accounts - Your money should be in your name and not in a “Street” name.  A regulated trust account is the safest option.

Learn more about Risk Tolerance