Why You Should Look for a Registered Investment Advisor


Why You Should Look for a Registered Investment Advisor

Standards matter, especially in workplace retirement plans.


Provided by Jonathan R. Broadbent


Who should aid your workplace retirement plan? In recent years, more and more employers and their Responsible Plan Fiduciaries have found their answer to that question: a Registered Investment Advisor.


What is the RIA difference? RIAs have a fiduciary duty to act in your best interest. That is a legal obligation, and it is expressed in the investment recommendations the RIA and their representatives make and the advice and guidance they offer. If even the potential for a conflict of interest exists, it must be fully disclosed.1,2


Investment brokers are not asked to work by a fiduciary standard, only a suitability standard. Under a suitability standard, a broker is asked to recommend investment products that are “suitable” for a client – an investment that is regarded as appropriate for his or her objectives. An investment conveniently offered by his or her broker might meet that standard – one offered with little or no evaluation of other options, one that may have high fees and bring that broker a relatively large commission.1


In fact, the typical investment broker works on a commission basis – a percentage of his or her compensation depends on product sales. Just who ends up paying the broker those commissions? They may be paid by the investment companies involved – or the client. They may not even be mentioned until after the product sale.1  You should check your fee disclosures carefully to determine conflicts of interest, the nature of the relationship, and all sources of revenue.


In contrast, many RIAs assist workplace retirement plans on a fee basis. The management fees usually represent a percentage of the plan's assets or a simple flat fee. Hourly or per-project fees may be charged for other services. These fees are disclosed up front. RIAs are typically not affiliated with brokerage or investment management firms, so the potential for brokerage directives coloring the advisor-client relationship is diminished or may be eliminated entirely.1,2


As the designation implies, an RIA is an investment advisor that has registered with either the Securities and Exchange Commission (SEC) or the securities authorities in the state(s) in which they operate. Technically speaking, an RIA is a financial firm. The individual advisors working for the RIA are IARs, or Investment Advisor Representatives – but the phrase “RIA” is often informally used to refer to both an IAR and the firm for which she or he works.1,2


The demand for RIAs is growing. Those responsible for the prudent administration of workplace retirement plans often turn to RIAs.  From 2008-12, assets under management by RIAs increased an average of 8.8% annually, to the point where they were managing $1.5 trillion of invested assets in 2014. Additionally, the number of RIAs grew by 8% per year from 2008-12.3


Those statistics bear out an emerging truth: Responsible Plan Fiduciaries want unbiased consulting, and see value in working with RIAs that are fee-based or even fee-only.


The typical RIA firm is built to address varied client priorities. An independent RIA firm is usually owned and operated by a highly experienced financial professional with prestigious designations (such as the CHARTERED RETIREMENT PLANS SPECIALIST(R) designation). That individual does not usually work alone. Often, the RIA firm employs or retains a “team” of professionals skilled in complimentary disciplines.  These individuals are usually financial professionals who have spent significant time in the industry, and who have committed themselves to continuing education.2


Standards matter in life, and they especially matter in workplace retirement plans.  As you want guidance with high standards, a Registered Investment Advisor is the clear choice.




This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.



1 - sfchronicle.com/business/networth/article/Proposed-rule-would-lead-to-better-advice-on-6207776.php [4/17/15]

2 - nerdwallet.com/finance/question/what-s-the-difference-between-a-registered-investment-advisor-and-the-traditional-advisor-working-at-a-large-bank-or-brokerage-f-521 [8/13/13]

3 - forbes.com/sites/halahtouryalai/2014/04/16/still-booming-top-rias-keep-getting-bigger/ [4/16/14]






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