The Different Options:
Registered
Investment
Advisor (RIA)
Investment
Advisor (RIA)
Registered Representative (stockbroker)
There are important differences between Independent Registered Investment Advisors and Registered Representatives. Make sure you understand what they are.
Independent RIA:
- In the business of giving advice
- Independent: RIA firm typically not owned by another
- Fiduciary: legally required to put clients' interests first (a higher standard than suitability)
- Typically fee-based compensation for advice (asset-based or performance-based)
- Regulated by the SEC or states (as applicable)
Registered Representative(Stockbroker):
- Brokerage firm primarily in the business of buying and selling securities
- Registered Representative typically an employee/contractor of brokerage firm
- Typically compensated by commissions on product transactions
- Held to suitability standards, not fiduciary standards
- Often "look like" an advisor in marketing collateral and Web sites
- Regulated primarily by FINRA (a self-regulatory organization)
Questions you should ask yourself:
- What am I looking for — assistance with buying/selling securities, investment advice, or both?
- How do I want to pay my financial professional? Fees? Commissions?
- How important is it that my financial professional have a fiduciary responsibility to put my interests first?
Make sure you read the fine print!