Executive Summary:
- Registered Investment Advisors (RIAs) are financial services firms registered with the SEC or state securities regulators. They have a fiduciary responsibility to act in their client’s best interests.
- RIAs provide a wide range of services, including retirement planning, investment planning, tax strategy, business exit planning, estate planning, executive planning, Social Security planning, and insurance review.
- To confirm if a firm is an RIA, you can use the SEC’s Investment Adviser Search tool, which verifies the firm’s registration status and the experience, exams passed, and any disclosures or disciplinary actions for individual advisors.
- RIA fees can include an initial consultation fee, ongoing advisory fees based on a percentage of assets under management (AUM), and flat fees or hourly rates for specific services. Transparency is vital in understanding the fee structure and potential conflicts of interest.
While most Americans choose to manage their own money, Tencap believes there often comes a point where they’d be better off hiring a professional wealth manager to oversee their assets and build out an intelligent financial plan. There are so many opportunities to deploy wise strategies and create stretch benefits for your children (if you have kids and wish to leave them money) that working with a qualified financial advisor has a host of benefits!
For some, that point is when they’re approaching retirement and need help navigating the approach to retirement or when they plan to exit their business. For others, it happens earlier, when the complexity of juggling the kids’ education, rental properties, and equity compensation becomes too much to handle. In another category is a group that absolutely love their jobs and the people they work with and work later than most.
When searching for a financial professional, it is critical to understand the different options available. Failure to do so could result in bad investment advice, complicated and costly financial products, and flat-out getting a product that benefits your “advisor,” not you.
And unfortunately, that’s all too common, as journalist Ron Lieber detailed in his New York Times article, “We Went to a Steak Dinner Annuity Pitch. The Salesman Wasn’t Pleased.”
So how can you avoid that type of situation? That’s a difficult question to answer, but the reality is Tencap believes there are some specific things to look for that will help create a successful outcome. One suggestion is to find a Registered Investment Advisor (RIA).
What is an RIA?
A Registered Investment Advisor is a financial services firm registered with the Securities and Exchange Commission (SEC) or a state securities regulator.
RIAs have a fiduciary responsibility to their clients. They “have a fundamental obligation to act in the best interests of their clients and provide investment advice in their clients’ best interests. RIAs owe their clients a duty of undivided loyalty and utmost good faith,” according to the SEC.
The founders of an RIA firm must pass specific proficiency tests, demonstrate knowledge of investment strategies, and adhere to strict regulatory standards to become licensed.
This means you can rest assured that the advice or product recommendations you receive from an RIA have your best interests in mind. They may also help protect you against possible high-fee investments and other financial pitfalls when dealing with a non-RIA financial advisor.
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 their firm is RIA is simple: look them up.
The SEC has an Investment Adviser Search tool you can use to search either the individual or the firm and verify that they are registered. You’ll also see their years of experience, the exams they’ve passed, and any disclosures or disciplinary actions against them.
What Services Does an RIA Offer?
Registered Investment Advisors offer various services to help individuals manage their finances. Here are some of the typical services they may provide:
- Retirement Planning: RIAs can determine how much you need to save for retirement, select appropriate retirement accounts, and create a sustainable withdrawal strategy.
- Investment Planning: RIAs provide expert advice on where and how to invest your money based on your financial goals, risk tolerance, and time horizon.
- Tax Strategy: They can advise on 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 their complex finances, including benefits, compensation, and taxes.
- Social Security Planning: RIAs can evaluate when to claim your Social Security benefits and provide strategies for maximizing your lifetime benefit.
- Insurance Review and Planning: RIAs can review your insurance needs and policies to ensure you are adequately protected.
Please note that not all RIAs offer all these services. It’s essential to check with each firm or financial advisor before working with them.
How Much Does an RIA Charge?
Lastly, when hiring a financial professional, know how much they charge. Of course, it will vary by firm, but here’s a typical RIA cost and fee structure:
- Initial Consultation: There may be a fee for the initial meeting to discuss your financial situation. This often ranges from $500 to $1,000. However, many RIAs will offer a one-time complimentary consultation to see if it’s a good fit.
- Ongoing Advisory Fees: 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. According to Investopedia, firms charge an average of around 1% of AUM.
- Flat Fees or Hourly Rates: Some may also charge a flat fee or hourly rate for specific services in addition to or in place of an AUM fee.
In the end, transparency is the key to making an informed decision when hiring a financial professional.
Understanding the advisor’s qualifications, services provided, fee structure, and potential conflicts of interest can help you feel confident that your advisor is giving sound advice with your best interests in mind. By doing your due diligence and finding the right fiduciary advisor for you, you ensure that you are getting the best possible outcomes now and in the future.
If you’re looking for a trusted and qualified RIA partner, we invite you to take advantage of a complimentary meeting with one of our advisors. Reach out today and get on the path to achieving your financial goals.
Tencap Wealth Coaching is here to help
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 are here to manage the complexities of your money and allow you to relax and enjoy life with your partner.
Learn more or schedule an introductory meeting below.
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Joe Griffin
Joe has been building and managing financial planning firms for the past 13 years. He loves the financial planning space and is very proud of the success and growth that has come from his proprietary marketing and leadership. Joe spent years being involved with the bright minds of the investment committee at Utah’s 529 college savings plan – a plan managing over 20 billion. Joe only works with firms that are stated fiduciaries on a client relationship. Joe is committed to leading a financial planning firm with ethics and integrity. The money management philosophy that Tencap subscribes to is built on strong academics and is supported by a highly impressive academic board. We can't wait to coach you on the excellence that Tencap stands for.
