Key Takeaways
What does RIA mean? A Registered Investment Advisor (RIA) is a financial firm with a fiduciary duty to always act in your best financial interest, not their own.
- Fiduciary duty means they must place your financial interests first.
- Check their history and background on the SEC’s IAPD tool.
- Fees are transparent, typically based on Assets Under Management (AUM).
- RIAs offer comprehensive, holistic planning, not just investment advice.
While most Americans choose to manage their own money, there often comes a point where you’d be better off hiring a professional. Maybe you’re approaching retirement and need guidance through the transition, or you’re planning to sell your business. Perhaps the complexity shows up much earlier—when you’re juggling college savings, rental properties, and equity compensation all at once.
However, choosing the wrong registered investment advisor (RIA) can be costly. If you don’t understand your options, you may end up with bad investment advice, overpriced products, and recommendations that benefit the advisor—not you. This problem is unfortunately common due to the misleading and even unethical practices some advisors use to sell complex products.
This blog will answer your pressing questions: What does an RIA mean? What services do they provide? And how transparent are their fee structures?
What is a Registered Investment Advisor (RIA)?
A registered investment advisor (RIA) is a financial services firm registered with the Securities and Exchange Commission (SEC) or a state securities regulator. What sets RIAs apart is their fiduciary duty—they’re obligated to act in their client’s best interests.
This high standard of care means that their advice or product recommendations consider all your needs. RIAs can also help you avoid possible high-fee investments and other financial pitfalls often associated with non-RIA financial advisors.
What is an IAR?
IAR stands for Investment Advisor Representative, or someone who works at an RIA. In other words, RIA is the firm, while IAR is an individual advisor.
How do You Confirm You’re Working with an RIA?
Verifying that your advisor is an IAR or that their firm is an RIA is simple: look them up. You can use the SEC’s Investment Adviser Search (IAPD) tool to search for either the individual or the firm and verify their registration status.
The IAPD tool allows you to:
- Verify the firm’s and individual advisor’s registration status.
- See their years of experience and the exams they’ve passed.
- View any disclosures or disciplinary actions against them, which are called “disclosures” on IAPD.
- Review their business operations, services, and fees, which are detailed in their Form ADV filing.
What Services Does an RIA Offer?
RIAs offer a suite of services to help you manage, grow, and protect your wealth. Here are the most common ones:
- Retirement planning – RIAs can determine how much you need to save for retirement, what retirement accounts you should get, and how to create a sustainable withdrawal strategy.
- Investment planning – They can advise you on where and how to invest your money based on your financial goals, risk tolerance, and time horizon.
- Tax strategy – They can help create tax strategies to minimize tax liability.
- Business exit planning – They can develop a plan for you to exit your business, including minimizing the tax impact and limiting your risk.
- Estate planning – Many RIAs also assist with estate planning, including distributing your assets after death.
- Executive planning – They can help executives manage complex finances, including benefits, compensation, and taxes.
- Social Security planning – RIAs can evaluate when to claim your Social Security benefits and guide you in maximizing your lifetime benefit.
- Insurance review and planning – RIAs can review your insurance needs and policies to ensure you are adequately protected.
Note: Not all RIAs offer all these services, so it’s essential to check with each firm or financial advisor before working with them.
How Much Does an RIA Charge?
Don’t just hire the first financial professional you see. Before sealing the deal, you should know how much they charge. Of course, it will vary by firm, but here’s a typical RIA cost and fee structure:
- Initial consultation
An RIA may charge you around $500 to $1,000 for the initial meeting to discuss your financial situation. However, many firms will offer a one-time complimentary consultation to see if it’s a good fit. - Ongoing advisory fees: The AUM Model
Most RIAs charge an ongoing fee based on a percentage of assets under management (AUM). Typical fees range from 0.5% to 2% of AUM, depending on the amount of assets managed and services provided.Firms charge an average of around 1% of AUM, which often includes year-round portfolio management. This percentage usually decreases as the size of the managed assets increases (e.g., higher portfolio values are charged a lower rate). - Flat fees or retainers
Some firms charge a set annual fee for comprehensive financial planning services, typically ranging from $4,000 to $8,000 per year. This model is popular among high-net-worth clients who want planning without percentage-based fees on large portfolios. - Hourly Rates or project-based fees
Some advisors charge an hourly rate for specific advice or consultations, with typical rates ranging from $200 to $400 per hour. A flat fee for a particular task, such as creating a comprehensive financial plan, typically averages around $3,000.
Understanding the advisor’s qualifications, services provided, fee structure, and potential conflicts of interest can help you feel confident that they’re keeping your best interests in mind. Doing this due diligence and finding the right fiduciary advisor enables you to secure better outcomes now and in the future.
If you’re looking for a trusted and qualified RIA partner, consider taking advantage of a complimentary meeting with one of our advisors. Reach out today to start achieving your financial goals.
Tencap Wealth Coaching is Here to Help
Knowing your advisor’s qualifications and terms ensures you receive sound advice for your specific needs.
At Tencap Wealth Coaching, we’re focused on helping you achieve all your financial goals and more through academically sound financial planning. From investment management to retirement planning and tax strategies, we’re here to manage the complexities of your money and allow you to relax and enjoy life.
Learn more or schedule an introductory meeting below.
Schedule a meeting.
FAQs
What is a registered investment advisor (RIA)?
An RIA is a financial services firm registered with the SEC or state regulators. What sets them apart is their fiduciary duty, meaning they’re legally required to prioritize your best interests.
How do I check an advisor’s registration status?
You can verify an advisor or firm’s registration, experience, and disclosures using the SEC’s IAPD tool. This check can help you find a trustworthy fiduciary.
How much do RIAs charge?
Most RIAs charge an ongoing fee based on AUM, typically ranging from 0.5% to 2% annually. The industry average is around 1% of AUM. Other fee options include flat fees or hourly rates.
Disclaimer: The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Utah or where otherwise legally permitted. All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or an indication of future results. Moreover, this material has been derived from sources believed to be reliable, but it is not guaranteed to be accurate or complete, and it does not purport to be a comprehensive analysis of the materials discussed. Purchases are subject to suitability. This requires a review of an investor’s objective, risk tolerance, and time horizons. Investing always involves risk and possible loss of capital.
Nick Carrigan
Nick trains and develops families in creating, maintaining, and growing wealth. This includes educating clients on the science and academics of investing, comprehensive financial planning, and ongoing coaching to ensure discipline for a lifetime. Nick has seen this create incredible levels of freedom, fulfillment, and love for the families he works with.
