Let’s learn what RIA Advisors are and discover the benefits, advantages, and how they charge for their services.
A registered investment advisor (RIA) is a professional financial firm that advises clients on securities investments and may manage their financial portfolios.
The Securities and Exchange Commission (SEC) or state securities administrators register RIAs.
RIAs have fiduciary obligations to their clients, which means they have a fundamental duty to always and only provide investment advice that is in the best interests of their clients.
As we have always said in our blogs, with over 16 years of Real Investment Advice, we’re in the business of helping our clients reach their unique financial objectives.
RIA does things differently.
At RIA Advisors, we work with a diverse range of individuals, families, and business clients, providing personalized money management and financial planning services tailored to each client’s unique needs.
Let’s discuss the benefits of this RIA Advisors to us as individuals in our everyday lives concerning our finances.
It takes time and energy to monitor a growing portfolio.
RIA can assist you in multiple ways, including the following:
· An RIA Is Legally Bound to Work for Your Benefit
According to the U.S. Securities and Exchange Commission (SEC), your investment advisor has a “fundamental obligation” to act in your best interests.
They make their recommendations solely based on your needs, and you can openly communicate with them if you need clarification.
· Most RIAs Earn Asset-Based Compensation
RIAs typically structure their fees as a percentage of their clients’ assets under management (AUM).
A payment structure based on successful investing is advantageous for the client as it directly aligns their financial interests with those of the advisor.
As a result, the RIA’s income will increase proportionally to the wealth it helps grow for the client.
· RIAs Must Maintain Public Business Records
You don’t want to take unnecessary risks when choosing an advisor, and with an RIA, you don’t have to.
Through Form ADV, you’ll enjoy complete transparency on how the RIA operates, from its ownership to its employees, and even learn about any disciplinary filings against the firm or its personnel.
· RIAs Focus on the Client
RIAs aren’t beholden to a specific product or company, allowing them to offer unbiased advice without the influence of another entity.
They may work with third-party custodians, but these larger broker-dealers or banks can assist with additional reporting, account management, and customer service.
· RIAs Usually Have a Helpful Professional Network
Building a diverse professional network can be a time-consuming process.
Fortunately, RIAs typically draw on their broad network of estate planners, insurance agents, and other professionals to offer insight and help you protect your wealth.
Advantages of Working with a Registered Investment Advisor
1. Registered Investment Advisors use strategic investment strategies.
Investing isn’t one-size-fits-all, and there are multiple approaches to consider.
An RIA can help you determine your short- and long-term goals and provide a comprehensive investment management strategy to help make those goals a reality.
Depending on what you’re looking to get out of your investments, they’ll be able to manage your assets through the big decisions that could have a dramatic impact on your financial future and help you arrive at the proper strategy for your unique situation and phase of life.
2. Registered Investment Advisors protect you from your emotional biases.
RIAs understand market volatility and also recognize how intimidating it can be for investors to experience it firsthand.
An experienced professional can help you regulate your emotions and prevent making rash decisions that may negatively impact your portfolio in the future.
3. Registered Investment Advisors bring experience.
Seasoned RIAs have lived through many market cycles, experiencing trends and significant anomalous events, too.
Their entire job centers on navigating the markets through their investment management philosophy, so they’ll be able to bring experience to the table to guide your portfolio through the uncertainty.
Additionally, an RIA’s knowledge and experience can help you better understand industry trends and interpret data that may be difficult to comprehend on your own.
4. Registered Investment Advisors are fiduciaries who work for YOU.
Independent RIAs dedicate themselves to working for YOU, the client, in a fiduciary capacity to help you achieve your goals.
An RIA who is the right fit for you will share your common values and be someone that you can trust implicitly with your money.
They’ll be able to speak with you intelligently about what’s occurring in the markets and with your investments, explain it to you in lay terms, provide complete transparency, and manage your assets prudently to make the most of the many investment choices available.
5. Registered Investment Advisors can identify hidden opportunities.
When you think of investing, it may seem like it’s just about buying shares of companies that you predict will do well in the future, but it’s much more complex than that.
RIA also considers factors such as tax implications and time horizons.
Working with an RIA means you have someone in your corner who understands the nuances of this and can help you maximize opportunities in your portfolio.
6. Registered Investment Advisors do the legwork.
An experienced RIA will be able to use tools, resources, knowledge, and relationships at their disposal to handle all the legwork for you.
They’re the ones who will do the research, create short-term and long-term plans for your investments, implement their investment management philosophy, and then execute those plans on your behalf.
Saving yourself time is one of the most significant advantages of working with a Registered Investment Advisor.
How Registered Investment Advisors (RIAs) Make Money
The following are some common fee structures for investment advisory firms:
· Management Fees
An RIA can collect an annual management fee as a percentage of its AUM.
Management fees can align incentives, as an RIA who can raise the value of a client’s portfolio can collect a higher management fee.
· Performance-Based Fees
An RIA can assess a fee based strictly on the performance of a portfolio.
Not all clients are eligible for this type of fee structure, though; only those with at least $1.1 million in assets managed by the RIA or $2.2 million in net worth generally qualify.
· Asset Class-Based Fees
Some RIAs who charge management fees vary the percentage rates based on the asset class.
An RIA may charge a management fee of 1.5% for equities, such as stocks, and a 0.75% management fee for fixed-income investments, including bonds.
· Hourly or Flat Fees
RIAs are increasingly providing fee-based services that are not contingent upon the client’s investment amount.
Investors can work with RIAs that charge fees on an hourly or flat-rate basis, with some offering subscription-based services.
Conclusion
Here are all the things you need to know about RIA Advisors.
Hiring one RIA advisor from a financial firm today can help you go all the way in life.
And if you don’t know where to go and how to process it, that’s where we come in.
At Real Investment Advice, we offer a series of in-house financial survival guides to help you navigate the markets and achieve your financial goals.
We know how to get you back on track.
