Working with a Registered Investment Advisor (RIA) firm gives you the best opportunity to effectively develop your investment strategy and manage your assets. But not all investment advisors are RIAs—and it does make a difference. McGowenGroup is a Dallas/Fort Worth-based RIA firm with dedicated advisors ready to create a customized strategy to meet all your financial goals. But what is an RIA and is there really a difference between a financial advisor and an RIA? Read on for answers to those questions and more!
What is an RIA?
First off, RIAs are registered with the Securities and Exchange Commission (SEC)
Choosing a financial services firm to manage your assets and reach your financial and retirement goals is a high-stakes decision. Ensuring your firm is an RIA investment firm is guaranteeing that the people handling your assets have your best interest at heart.
- Fiduciary responsibility. RIAs have a legal obligation of fiduciary responsibility to their clients. What does that mean? It means that they are required to act entirely on the behalf of their clients. While other financial advisors may give advice based partially on the commission they may receive from selling particular financial products or are under pressure from their employer, shareholders, or other entities to make particular investment recommendations, an RIA acts without bias, making decisions and giving advice with only one priority—your financial well-being.
- Transparency. RIAs are required to maintain public business records and you can search their registration forms through the SEC. You can even see if they have been subject to any disciplinary actions.
McGowan Group is a Dallas/Fort Worth-based RIA whose advisors offer personalized service to our clients—ensuring we go above and beyond our fiduciary responsibility obligations.
What is the difference between an RIA and a financial advisor?
A Registered Investment Advisor (RIA) is registered with the Securities and Exchange Commission (SEC) which give them a legal obligation to act solely in the best interests of their clients. Other financial advisors have no such legal obligation towards their clients, meaning their advice may be biased. Non-registered financial advisors act within a “suitability standard” that requires their advice to be appropriate to their client’s circumstances but allows them the flexibility to make a recommendation that benefits the advisor (perhaps a larger commission) over a recommendation that may be better for the client as long as the recommendation is suitable for the client’s circumstances.
Is an IAR the same as an RIA?
An Investment Advisor Representative (IAR) is an individual who provides investment advice whereas a Registered Investment Advisor (RIA) is a legal entity registered with the SEC. The staff of an RIA will include IARs.
What about a “broker-dealer”? What’s the difference between an RIA and broker-dealer?
Technically, a broker-dealer is an entity that buys and sells securities, like stocks, bods, or mutual funds. Many broker-deals are also investment advisors—for instance, they offer their clients recommendations and advice on what stocks to buy and sell as well as carrying out the trades themselves. Broker-dealers are also held only to a suitability standard instead of the fiduciary duty standard that RIAs are held to.
Do I need an RIA?
If you’re looking for a firm that will always have your best financial interests in mind, unconditionally, under all circumstances, an RIA is your best bet. While many terms and acronyms are thrown around interchangeably, the distinctions do matter, and using an RIA to manage your wealth is the only option that gives you the peace of mind that they are legally bound to always put your best interests first.