What is an RIA?

Hiring a financial advisor is not an easy task. What starts out as a business relationship often grows into something much bigger. It takes a certain level of trust to have someone manage your finances. This trust is similar to the trust you give to your friends and family. It is no wonder why financial advisors often feel like part of the family. The stockbroker, churning trades to make a quick buck, is an endangered species who is being replaced by the much more fruitful fiduciary, that is the RIA (Registered Investment Advisor) relationship. Is my money going to be safe there? Would I be better off with a big named firm? What exactly is an RIA?

An RIA is defined in the Investment Advisers Act of 1940 as “a person or firm that, for compensation, is engaged in the act of providing advice, making recommendations, issuing reports or furnishing analyses on securities, either directly or through publications.” They must register with either the SEC or with the state securities administrators. This isn’t to say the are endorsed by these regulatory agencies. It only means that the firm has met the initial and ongoing requirements for registration.

The key difference between an RIA and other types of advisors/brokers is that RIAs are bound to act in a fiduciary role at all times. This means an advisor is required to act in the best interest of their clients at all times. While brokers are required to make sure investments are suitable for their clients, they aren’t required to put their clients’ interests over their own. The fiduciary standard is the biggest advantage to working with an RIA. Because they are required to register with the SEC or state, fees and costs must always be transparent to you. They can offer personalized advice based on your investment objectives, risk tolerance, age and life stage. They can pinpoint strategies or investments that may be best suited to reaching your goals and help guide you through major life changes or periods of market volatility.

Your investments are not any safer being at a big named firm compared to an independent RIA. Investments always have the potential to lose value. Some investment vehicles are equipped with FDIC insurance to protect against risk, but these insurances are independent of the firm. Please consult with your advisor about the allotments of FDIC insurance allowed to each individual.

Renew Family Wealth operates according to the fiduciary standard. Our clients’ interests are always put above our own. We continually build relationships and enjoy helping our clients walk through their financial journey.