There are Registered Investment Advisors and there are Registered Representatives (AKA: brokers and broker-dealers). An RIA is a professional advisory firm that offers clients personalized financial advice. Advisors at RIA firms and Registered Representatives (brokers, broker-dealers) have different legal responsibilities to clients. Choosing between the two to manage your wealth? Decide whether you want “suitable” investments recommended or ones selected by your fiduciary.
- Registered Investment Advisors act as fiduciaries to their clients. This means their first and foremost obligation is to act in your best interests. The Investment Advisors Act of 1940 legally governs RIAs.
- A broker-dealer is required to recommend investments that are “suitable” for you, a lower standard than fiduciary.
For that reason alone, it’s worth seriously considering an RIA firm but the benefits don’t stop there.
RIAs give investment advice based on what’s best for you
Your investment advisor should understand every detail of your situation and financial goals. Dedicated RIAs like Boyer & Corporon Wealth Management build and maintain strong relationships with their clients because these firms are built around their clients’ needs. Suitable investment recommendations aren’t enough; RIAs are legally bound to work solely in your best interest.
RIA compensation model creates a win-win scenario
RIA’s fees are usually determined based on a percentage of your assets under management. You know the amount of your assets and the percentage paid to your advisor. The greater your asset growth; the greater the RIA firm’s compensation. The compensation model is simple and a win-win scenario for you both.
An RIA can handle complexities and special situations that come with wealth
Often an independent RIA offers a range of services to address the more complex investment needs of wealthy clients. These services might include business sales, tax situations, trusts, intergenerational transfers and estate planning assistance.
Money is a personal matter and RIAs take that very personally
Your RIA will spend a lot of time asking about your needs and objectives to find solutions that are tightly aligned. Over time, it’s completely natural for a relationship of mutual trust and respect to form thanks to ongoing communication and your RIA’s sense of accountability to you.
If only Bernie Madoff used a third-party custodian like RIAs do
RIAs typically use a third-party custodian to hold and safeguard your assets. That means you can double check account information provided by your RIA as a check-and-balance against fraud.
A legal responsibility to work in your best interest, a straightforward fee structure, ancillary services, personal accountability and visible fraud protection are key points to consider when deciding who manages your wealth. Especially amid talk of fiscal cliffs and global economic uncertainty, the benefits of an RIA certainly make sense.
This information is provided for general information purposes only and should not be construed as investment, tax, or legal advice. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.