RIA - Not Just Another Acronym
When an individual, family, or business owner seeks financial advice, most would agree that they are looking for sound financial guidance from a trusted advisor, while maintaining a transparent relationship. It’s as simple as that. Over the past two decades, not only has the investment landscape drastically changed, but also the nature in which financial advice is provided. Enter the RIA, or Registered Investment Advisor. An RIA is a firm that has a fiduciary duty to put their clients’ best interests in front of their own. RIAs are by no means a new concept, thanks in large part to the Investment Advisers Act of 1940. However, in recent years, the shift to the RIA structure can be attributed to clients holding their financial advisors to a higher level of standards, while putting an emphasis on fiduciary advice. What does this mean to clients?
Fiduciary Standards - RIAs are legally obligated to serve the best interests of its clients and cannot put its own interests ahead of the interests of its clients. This minimizes the potential for conflicts of interest and impartiality. Advisors must maintain both a “Duty of Care” and a “Duty of Loyalty” to their clients.
Transparency - If a conflict of interest is not able to be completely eliminated, RIAs are required to disclose them to the client. In addition, RIAs are typically compensated with one fee, based on assets under management, in contrast to earning commissions from the purchase or sale of securities. This simplified fee structure helps clients know what they are paying for.
Autonomy - Not only does this structure provide advisors with the freedom to choose who they want to work with, it gives them the freedom to choose how they want to work with clients. With no ties to certain products or services, it allows advisors to choose from a wide variety of solutions to ensure the right fit for any given strategy.