Planning for the future is always a good idea, but it can also be overwhelming if you aren’t sure what to do. This is where an RIA Advisor comes in. They can help guide you to make good decisions and set you up for a financially secure future.
What Is an RIA Advisor?
A Registered Investment Advisor (RIA) is registered with the government to give investing advice. They stand apart from other types of finance advisors because of their fiduciary duty to their clients, which means the law requires them to act in your best interest. On the other hand, a regular investment broker may also give financial advice, but they can leave out options that may be better for you.
RIAs can also help provide financial advice beyond investing. While they won’t tell you how to spend your money, they can make recommendations on planning for your future.
The person you will speak to is an Investment Advisor Representative that works at an RIA. There is a bit of confusion by some that an RIA is a person, but it is actually the place where an IAR works. You will still hear people referred to as RIAs, but it helps to understand that the person is technically an IAR.
To become an IAR, the advisor must have passed the Series 65 or Series 66 exams, plus the Series 7. These tests allow advisors to give you financial advice and sell you stocks and bonds.
How Do RIA Advisors Help?
There is a common misconception that investment advisors are only for people who have lots of money to invest. However, this is far from the truth. An advisor can still be beneficial to someone with less money. For instance, starting your investing small at a younger age can compound into a comfortable cushion by the time you are ready to retire.
The main reason people meet with an RIA is to discuss investment options they can help out with. This includes purchasing stocks, bonds and savings. But, they can also help people plan for the future and provide invaluable investment education.
Nearly 50% of adults have no retirement savings and are left to hope that their pension, 401(k) or Social Security payments will be enough to live on. Unfortunately, this does not work out for many people, and they end up struggling in retirement.
But RIAs can also do more than help prepare for retirement. Looking at investing options or planning for your child’s college fund can all be achieved through an RIA. They can even help determine how much you should be investing versus saving and just how those investments should be made.
Another one of the many benefits of working with an RIA is that they are registered with the Securities and Exchange Commission. In doing so, all formal complaints are tracked, and you can easily view them. Even though advisors go through a rigorous process to become an advisor, it is still a good idea to check for any complaints.
What’s the Difference Between RIAs and Financial Advisors?
Many people use the terms “RIA” and “financial advisor” interchangeably, but there are some important factors that you need to know before searching for one. “Financial advisor” is an umbrella term used to describe a number of people who give investing advice.
However, the two main types of people who fall under the financial advisor umbrella are RIAs and brokers. The main distinction between the two is that an RIA has a fiduciary responsibility toward their client and is registered with the SEC, whereas a broker does not.
This is not to say that brokers aren’t a good option or that they are going to give you bad advice in an attempt to take your money. But the RIA is legally required to provide you the best information available to them.
On the other hand, a broker working for an investment firm may have quotas or goals to reach that are imposed by their parent company. These are not necessarily bad investments, but they may not be the best for your situation.
To further complicate things, there are also Certified Financial Planners and a range of other titles. Each state is different in what it allows advisors to call themselves, but a financial planner is not necessarily the same as a financial advisor. If you are unsure of someone’s qualifications, you should directly ask if they are a fiduciary.
What Does an RIA Advisor Charge?
RIA fees vary widely, but they typically hinge on the amount invested. A survey by Advisory HQ News Corp found that the average amount paid was 1.02% on a $1 million investment. However, you can expect lower investments to have higher costs to invest.
Investments above $1 million will likely have a fee of under 1%, while those under $1 million should expect a fee that goes up accordingly. While charging a percentage of your investment is the traditional method advisors use to bill for their services, recent changes have shifted that trend.
Some firms and advisors have begun charging flat fees for investing or consulting instead of a percentage. This may be better for some people who want some advice and don’t want to be pressured into investing. Because the advisor is getting paid for their time, they may be less likely to push you into investing.
This also brings up another important topic. You should never feel pressured to invest. This is why working with someone who does not work on commission may be better for you. Some RIAs do a consultation for free and then have a set price of upwards of $200 or more for future meetings and investments. They may also set you up with a monthly plan for recurring investments.
