A registered investment adviser (RIA) is a firm or person that provides investment advice for a fee. RIAs are registered with the U.S. Securities and Exchange Commission or a state securities regulator, depending on how much money they manage for their clients (also known as “assets under management” or AUM).
What separates an RIA from other financial descriptors, such as “financial advisor,” “investment manager” or “wealth manager” is that the RIA title is regulated. That means there are rules regarding how they operate, but it doesn’t in and of itself guarantee a higher level of service or knowledge. You’ll still have to vet any RIA you want to work with, the same as with any other financial professional.
Financial advisor or adviser?
A financial advisor with an “o” is an unregulated term. A financial adviser with an “e” is the legal term used by the SEC. In everyday usage, however, many financial advisers may use “advisors” on their websites or marketing materials.
Regardless of the spelling, part of the work vetting a financial adviser is to check if their certifications match up. One of the easiest ways is to use FINRA’s BrokerCheck tool to search for advisers by name, firm or location.
What about RIAs and IARs?
An investment advisor representative (IAR) is an individual who works for and is supervised by an RIA. The RIA is the registered firm; the IAR is the person giving advice on its behalf. The two terms refer to different things and shouldn't be used interchangeably (but often are).
How a registered investment advisor can help you
This varies by RIA, but for the most part, RIAs should be able to help you with the following:
Investment advice: determining what to buy and sell, when and how much.
Investment management: monitoring your investments, tracking their progress toward your goals and watching for signals to change course.
Financial planning: creating a comprehensive set of goals and plans for your entire financial life, including retirement, college funding, major purchases or sales, life changes, business succession planning, medical events and other situations.
Retirement planning: determining how much you need to retire, where the money will come from, how much to draw down each year in retirement and tax planning.
Some RIAs specialize in niche topics. If you’re looking for help in a particular area, you can narrow down your list of candidates by asking potential advisors about their experience in that area and if they’ve helped clients similar to you before. A few common areas of expertise include:
Estate planning.
Equity compensation including incentive stock options and restricted stock units (RSUs).
Divorce.
Building generational wealth.
Cryptocurrency.
Options, futures and other alternative investments.
Financial planning as an immigrant or non-U.S. citizen.
Tax strategy.
Tax preparation.
Who regulates registered investment advisors?
Registered investment advisors are regulated by either the SEC or the advisor’s state’s securities regulator. Which governing body regulates them depends on how much money the advisor manages:
How much the advisor manages | Who regulates |
|---|---|
$110 million or more in client assets | SEC |
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. 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 want to work with a human, consider traditional financial firms that 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. This means they work in their client’s best interest, instead of recommending investments that financially benefit them. Also learn how a financial advisor is paid by asking about their fee structures. A fee-only advisor doesn't earn commissions from products they recommend, which can reduce certain conflicts of interest. That said, fee-based advisors aren't automatically worse. Knowing exactly how an advisor is compensated can help you decide what works for you.
3. Find an RIA who can relate. It is possible to find an advisor with similar life experiences if that’s important to you. 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 use, such as "financial advisor," are not regulated. 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 uses, it’s on you to vet them. Check an advisor's background or credentials before trusting them with your financial information. You can look up a firm or individual's registration, fee structure and disciplinary history using the SEC's Investment Adviser Public Disclosure (IAPD) database at adviserinfo.sec.gov, or FINRA's BrokerCheck at brokercheck.finra.org.
6. Consider using a matching service. Services such as Zoe Financial, Harness Wealth, NAPFA's fee-only advisor search and the Garrett Planning Network connect consumers with vetted financial professionals, often at no direct cost to the user (the advisor typically pays to be listed). Compare multiple services and read the fine print on how each one selects and compensates the advisors in its network.
How do RIAs make money?
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.
Fee-only
Some RIAs charge an ongoing fee based on the amount of assets they manage for you. This is called the AUM fee and can be billed monthly, quarterly or annually.
Many RIAs structure their fees on a tiered percentage model. For example, you may be charged 1.15% on the first $500,000 you invest with an advisor, and then 1% on the next $500,000 to $2 million. That would bring your blended fee to 1.075% and an annual cost of $10,750 on a $1 million portfolio. (These numbers are for illustrations only. As you’ll see in our roundup of the best financial advisors we reviewed, fees vary dramatically.)
Fee-based
Advisors who use a fee-based model earn commissions from products they recommend and sell to you. Because fee-based advisors can earn commissions in addition to client fees, it's worth asking directly how they're compensated on any product they recommend, and it's worth reviewing their Form ADV Part 2 for a full description of potential conflicts of interest.
Hourly or flat-fee
It is also possible to work with an RIA for a special project or one-off service. In this case, they could charge you on an hourly basis or through a flat-fee that covers all their work.
» Don’t hesitate to ask: Questions to ask a financial advisor
