Broker-Dealers vs. RIAs: An Overview

Imagine that you are an investor who wants to avoid the wirehouses. You may be in the market for an independent 澳洲幸运5官方开奖结果体彩网:financial planner or 澳洲幸运5官方开奖结果体彩网:financial advisor who does n🅰ot work for a large firm such as Wells Fargo or Morgan Stanley.

That covers a lot of territory, but ultimately all such planners and advisors who manage assets (other than annuities or life insurance) fall into one of two categories: They can either be 澳洲幸运5官方开奖结果体彩网:registered investment advisors (RIAs) or registered representatives that work for an independent 澳洲幸运5官方开奖结果体彩网:broker-dealerꦦ.&nb🌳sp;Aside from falling under different regulatory purviews, there are several different ways these professionals can provide and charge for their services.

Broker-Dealers

Registered representatives who work for major 澳洲幸运5官方开奖结果体彩网:wirehouses are often told what products to sell, what stocks to recommend, and how they can conduct their business. Representativ🔯es who work for independent broker-dealers do not have these restrictions, and they usually have a much wider selection of products and services for their clientele than wirehouse brokers✤.

Independent broker-dealers are equipped to offer a full range of investment offerings that can go far beyond mainstream vehicles such as mutual funds and annuities. Many of them provide 澳洲幸运5官方开奖结果体彩网:alternative investments such as hedge funds, venture capital, private place🍸ment offerings, oil and gas partnerships, and non-qualified plans. Sometimes there are also sophisticated investment or retirement programs that are tailored to specific groups ꦅor professions such as doctors or dentists.

Planners who work as reps for this type of company will charge a commission to purchase an investment, but they may have some leeway in how much they charge for a given type of transaction. The biggest advantage of an independent broker-dealer is that there is no unnecessary 澳洲幸运5官方开奖结果体彩网:bureaucracy.

RIAs

RIAs are considered to be acting in a 澳洲幸运5官方开奖结果体彩网:fiduciary capacity, and so 🥀held to a higher standard of conduct than 💯registered representatives. This fiduciary standard mandates that an RIA must always unconditionally put the client’s best interests ahead of their own, regardless of all other circumstances.

Depending on the value of their assets, RIAs must register with either a state securities regulator or the federal 澳洲幸运5官方开奖结果体彩网:Securities and Exchange Commission. RIAs are also required to disclose any possible conflicts of interest to their ⭕clients and act in an ethical manner in all of their business dealings.

Some RIAs charge clients a percentage of their assets under management while others charge either an hourly or a flat fee to dispense advice. Registered investment advisors usually must obtain a 澳洲幸运5官方开奖结果体彩网:Series 65 license as well as other qualifications.

Special Considerations

When it comes to choosing a planner, it may 🐠seem like an RIA would be the obvious choice. But the fact is that many planners who work on commissions also act very ethically and🀅 put their clients’ best interests ahead of their own. Being an RIA also doesn’t guarantee a certain level of competence, as the Series 65 exam deals chiefly with federal securities laws and regulations. However, many RIAs have more qualifications than a Series 65 such as other FINRA exams and certifications such as a CFP or CFA.

And to further complicate the matter, many independent brokers also carry the Series 65 license so they can offer turnkey managed money programs that provide active professional management. Some RIAs are likewise affiliated with a broker-dealer so they can offer products such as 澳洲幸运5官方开奖结果体彩网:variable annuities, which ♚do not lend theꦦmselves to a pure RIA platform.

The Bottom Line

RIAs and independent brokers both have considerable freedom in how they operate their businesses. RIAs are bound by a fiduciary oath, while independent brokers may ha𝔉ve access to specific products or services that are hard to find elsewhere.

The right choice for you is most likely going to depend more on the person rather than the business model. When yo🍬u find an advisor you feel truly comfortable wi𒅌th, the business model they use will likely be of secondary importance.