Registered investment advisor definition
Registered investment advisors (RIAs) are financial professionals or companies that can give you personalized investment advice and help with most financial topics. Registered investment advisors are regulated by the government, unlike some other types of financial professionals.
Several of the titles financial professionals go by, such as “financial advisor,” “investment manager” or “wealth manager” are not regulated. No matter what title a financial professional goes by, it’s important to see if they are registered with the U.S. Securities and Exchange Commission — the governing body that regulates RIAs — or with their state’s securities regulator.
Registered investment advisors vs. advisers
While “investment adviser” is the legal term used by the SEC, it is often spelled “advisor.” Regardless of how it’s spelled, it’s best to double-check any advisor’s qualifications. One of the easiest ways to verify an advisor is with FINRA’s BrokerCheck tool. You can search for advisors by name, firm or location.
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What can registered investment advisors do?
This will depend on the individual RIA, but for the most part, RIAs should be able to help you with the following:
Some RIAs specialize in niche topics. If you’re looking for help in a particular area, make sure you ask any potential RIAs if they can assist with that topic specifically. A few common niches include:
Who regulates registered investment advisors?
Registered investment advisors are regulated by either the SEC or the advisor’s state’s securities regulator. The governing body is determined by how much the advisor manages:
How much the advisor manages
$110 million or more in client assets
Less than $100 million in client assets
State securities regulators
Note: Between $100 million and $110 million, advisors may elect to register with the SEC.
How to find a registered investment advisor
Many registered investment advisors are available online, and offer a wide range of pricing structures. Here are some guidelines to make it even easier to find financial help.
1. Know what you need. Figuring out what services you actually need from an advisor can help you determine which service is best for you. If you only need help managing investments, a robo-advisor may be a good choice. If you need help with tax strategy, estate planning or just want to work with an actual person, it may be smart to look into traditional financial advisors (who are also registered investment advisors).
2. Be picky when it comes to fiduciaries and fees. Some financial advisors have a fiduciary duty to their clients, meaning they have to work in their client’s best interest — they can’t just recommend investments to you that will financially benefit them. It’s best to work with a licensed, registered fiduciary. Ask any potential advisors about their fee structures. It’s best to work with an advisor who is fee-only. That means they do not receive commissions from investments they recommend.
3. Find an RIA who can relate. The people who need help with their money are as diverse as the people who can give it, so if it’s important to you to find an RIA with similar life experiences, be sure to include that in your search criteria. Some RIAs specialize in financial planning for the LGBTQ+ community, people with disabilities, veterans, those looking for halal investing options or who are recovering from financial abuse. There are also resources to find financial advisors of color.
4. Take titles with a grain of salt. Many of the titles advisors go by, such as “financial advisor,” are not regulated by any type of governing body. Just because a potential advisor uses a title that sounds official does not mean that they have any particular training or certification.
5. Verify their background. No matter what title an advisor goes by it’s on you to vet them. Always double-check an advisor’s claims about their background or credentials before trusting them with your financial information.
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6. Use an online marketplace. Services such as Zoe Financial and Harness Wealth connect people with registered investment advisors through a pre-vetted network of financial professionals. These services take the legwork out of searching for an advisor and can help you find someone who meets your needs and budget. These services are free to users — the advisors typically pay to be part of the network.
RIAs vs. investment advisor representatives (IARs)
Individuals can be registered investment advisors, but it can also be used as an umbrella term. If many people work at a company that is a registered investment advisor, those employees or affiliates can be called investment adviser representatives, or IARs.
How do RIAs make money?
Some RIAs charge an ongoing fee, typically annually or monthly, based on the amount of assets they manage for you. Some are paid commissions from the products they sell to you (though these advisors are likely not fiduciaries, so you may want to opt to avoid anyone who uses this fee structure). Some charge an hourly fee for the services they provide and others offer a flat fee for a specific service. Sometimes firms or advisors offer a few fee options. Don’t be afraid to ask any advisor what they charge and compare their fees to others before moving forward.