What it Means to Be a “Registered Investment Advisor”

When I was home over the holiday break, my father asked me a very important question about why we are different from other large brokerage firms. I simply responded with an impatient answer: “We are an RIA, Dad.” At that moment, I realized that I hadn’t given him an adequate explanation as to what being an RIA truly means. Then it got me thinking, if anyone else were to ask me that question, how would I discuss the distinct differences between us and them, and explain what it means to be an “RIA”?

“RIA” is an abbreviation for “Registered Investment Advisor”, which indicates that our firm registered with the Securities and Exchange Commission, and is regulated under the Investment Advisors Act of 1940. Broker-dealers differ in that they are regulated by FINRA, a self-regulated organization (SRO) that is not affiliated with the US Government and is monitored in a different fashion. While some of the regulation differences are subtle, the guidelines to which we adhere are much more stringent and watched more carefully.

As an RIA, we have a fiduciary responsibility to our client. This means that our relationship with our clients is one of utmost trust and confidence, where we have an obligation to act in our clients’ best interests. The decisions we make in our clients’ portfolios are ones that we believe will best accomplish their financial goals; they are not products we are required to sell (unlike brokers who are paid a commission on products sold). This consideration for our clients is one of the most important distinctions between an RIA and brokers.

Another benefit of being an RIA is that we custody our clients’ assets outside of our firm, at Charles Schwab. This adds a layer of protection for both the advisor and the client, due to all of the strategic infrastructure and regulations in place at the custodian. The information that we provide our clients is the same information that Schwab provides. These checks and balances allow a greater transparency, and can provide reassurance as to what is happening in our clients’ accounts.

Our website has a plethora of information about RIAs, in addition to this article. We also promote an outside campaign, “RiA Stands for You”, which is a great resource for understanding the RIA model. If you have any questions, feel free to contact us.