What is a registered investment advisor?

1 min readLast updated December 22, 2023by Rachel Carey

A registered investment advisor can take the stress and guesswork out of managing your assets, but you need to understand what an RIA is and what they do so that you can find your perfect fit.

Summary 

  • An RIA is a firm that provides financial and investment advice and services. 

  • RIAs must register with the SEC or other regulatory body and are bound by their fiduciary duty. 

  • You can research RIAs on the SEC’s Investment Adviser Public Disclosure website. 

  • RIA fee structures vary greatly, ranging from the percentage of assets under management to hourly rates. 

  • Unbiased can match you with a financial advisor perfectly suited to meet your needs.  

What is a registered investment advisor (RIA)? 

A registered investment advisor (RIA) is a firm that provides clients with fiduciary advice, with particular emphasis on securities investments.  

RIAs may also manage clients’ assets and investment portfolios. Depending on the value of the assets they manage, RIAs must be registered with either the US Securities and Exchange Commission (SEC) or state-level securities agency. 

Unlike some other types of financial advisors, registered investment advisors are obligated to act in a fiduciary capacity on behalf of their clients. This means that RIAs must only ever provide investment advice in their client’s best interests.  

What does a registered investment advisor do? 

Registered investment advisor firms provide an extensive range of RIA services.  

One of the most frequently performed RIA financial services involves assisting clients with building and managing investment portfolios.  

Other services provided by registered investment advisors include: 

  • Budget management 

  • Debt management 

  • Financial planning 

  • Insurance  

  • Wealth management 

  • Retirement planning 

  • Tax planning 

  • Risk management 

  • Estate management 

Whether you’re a private individual trying to secure a comfortable retirement or a major corporation in need of support with asset management, registered investment advisors can assist you.  

How do RIAs make money? 

Let’s take a look at the most common registered investment advisor fee structures: 

  • Asset under management (AUM) fees: This involves charging an annual percentage of your AUM. 

  • Fixed/flat rates: Some firms offer fixed fee brackets. The higher the value of your AUM, the higher your fee bracket will be. 

  • Hourly rates: This involves simply charging by the hour. The hourly rate is the same, regardless of the value of your assets.  

  • Annual retainers: RIA fees in the form of annual retainers are a lot like flat rates by AUM. With annual retainers, however, firms consider the complexity of your needs as well as your AUM.  

  • Packages: To service clients with very specific and limited needs, RIAs may offer fee structures that group related financial services into one package.  

  • Hybrid RIA fee structures: To accommodate a broader range of client budgets, many RIA firms offer various fee structures for clients to choose from.  

It is important to note that because registered investment advisors must adhere to their fiduciary duty, they do not earn commissions from the financial products (for example, insurance plans) that you select.  

RIA vs. IAR: what is the difference? 

As discussed, a registered investment advisor (RIA) is a professional firm that provides financial and investment advice and offers related services. 

As the title suggests, an investment advisor representative (IAR) is the individual who, representing their RIA, interacts with clients and provides said advice and services. Essentially, IAR is the job title of the actual person who works with clients on behalf of their employer, an RIA. 

At times, a registered investment advisor firm may be made up of one individual. In this case, that individual is both the RIA and the IAR. 

Both RIAs and IARs are bound by their fiduciary duty to act in their client’s best interests. 

How to become a registered investment advisor? 

To form a registered investment advisor firm, you must pass the Series 65 exam in Uniform Investment Advisor Law with the Financial Industry Regulatory Authority (FINRA).  

You must also register with the SEC or relevant state authority, which includes submitting Form ADV, a detailed document about your firm (discussed below). 

However, while official registration as an RIA does not require any further designations or licensing, you are unlikely to achieve success in this field without these. In fact, some states may even waive the Series 65 exam if you already carry certain designations. 

You can also boost your credentials and competencies by completing other FINRA exams, such as the Series 66 and 7 exams.  

How do RIAs register? 

The steps to register as an RIA can be broken down as follows: 

  1. Pass the Series 65 exam or (if you only require state registration) have valid Series 7 and Series 66 qualifications. 

  2. Draft compliance documents for your registered investment advisor firm. This includes Form ADV Parts 1 and 2 for the SEC and U4 forms for state agencies. These forms disclose the nature of your organization, the types of clients you serve, your RIA fee structure, and possible conflicts of interest. They will also include your FINRA CDR number and account ID information. 

  3. Register with the SEC or state regulator by submitting these forms. 

  4. Create a detailed written compliance program, in line with regulatory standards, that covers all aspects of your practice. 

How do I choose an RIA? 

Your research process should begin with the SEC’s Investment Adviser Public Disclosure website, which lists every registered investment advisor in the US. 

You can also take a look at review sites to see what other customers have to say about the RIAs you are considering, as well as these firms’ own websites and social media profiles. 

Here are some key areas to consider: 

  • Scope of services: Do they offer the specific services you require?  

  • Assets under management: Can they handle the value of the assets you need to be managed? You can find each RIA’s AUM on the SEC’s investment advisor public disclosure site. 

  • Fees charged and available fee structures: Can you afford their services, and do they offer the best possible pricing options? 

  • Details in their Form ADV: You can also find this on the SEC or state agency site, and it will answer most of the questions you may have. 

  • Credentials of IARs: Checking out the IARs employed by an RIA will give you a better idea of the individual you’ll be working with, as well as the ethos of the firm as a whole. FINRA’s free online BrokerCheck tool will tell you about each IAR’s qualifications, expertise, and even any disciplinary actions taken against them. 

What fees do RIAs charge? 

Several factors influence RIA fees and how they are structured: 

  • The client’s financial position (including the value of the assets they want managed). 

  • The client’s RIA service needs. 

  • The extent and intricacy of the RIA services offered. 

  • The size and kind of the RIA firm. 

  • The location of the RIA firm. 

  • The qualifications and experience of the advisor. 

While varying fee structures can make it difficult to compare like with like when it comes to RIAs, here is a general overview of how much you can expect to pay

Typical costs of financial advisor fees 

Fee TypeTypical CostInvestment Amount
Flat fee $7,500 – $12,500 $1 – $1,999,999
Hourly fee $120 – $300 per hour Varies
Percentage of AUM 1.05% – 1.02% $500,000 – $1,000,000

Seek expert investment advice 

You now have a general overview of the world of registered investment advisors, including what they do, how much money they charge, and how to choose the best one for you. 

If you want to be matched with an expert, SEC-regulated financial advisor, Unbiased can help. Let us match you with an advisor who can provide the financial advice and guidance you need to secure your future.   

Senior Content Writer

Rachel Carey

Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.