What You Should Know Before Working With RIA Advisor Agents

TL;DR: Not all financial advisors are created equal, and titles can be misleading. This blog explains what sets RIA advisor agents apart, why their fiduciary duty matters, and how their fee-only structure helps ensure neutral financial guidance.

• RIA advisor agents are registered with the SEC or state regulators and operate on a fee-only model.
• They are legally bound as fiduciaries to put client interests first.
• Unlike general “financial advisors,” RIAs cannot earn commissions or referral fees.
• Services often go beyond investments, including retirement, tax, and long-term planning.
• Typical fees are around 1% of assets under management, though structures vary.

This guide helps you understand the differences between RIAs and other advisors so you can make informed choices about your financial future.

It may be surprising to learn that titles like “financial advisor” are not regulated. In practice, this means anyone can call themselves a financial advisor, regardless of knowledge, experience, or potential conflicts of interest.

To be clear, that does not mean everyone who calls themselves a financial advisor is unskilled, inexperienced, or holds conflicts of interest. For individuals and families seeking financial guidance, the point is that it’s important to look more closely at the titles and qualifications financial professionals hold.

Keep reading to learn more about registered investment advisors, who are often (although somewhat redundantly) called RIA advisors. This article reviews their qualifications and duties, and answers frequently asked questions about their role.

RIA Investment Advisor Agents: The Basics

An RIA, or registered investment advisor, is a professional or company that provides guidance, suggestions, and information to clients related to investments for a fee, as the Financial Industry Regulatory Authority explains. That fee is often based on the total value of assets in a client’s account, but may be an hourly rate or flat fee.

This exclusively fee-based structure is a key part of why RIAs are neutral providers of financial advice. They do not earn commissions based on the sales of specific products. That means they’re free from the potential or actual influence of securities firms, broker-dealers, shareholders, and other sources of possible conflict.

RIAs are registered with either the Securities and Exchange Commission (SEC) or a similar regulatory body at the state level, depending on the volume of client assets they manage.

Fiduciary Status of RIA Advisor Agents

RIA financial advisor agents are the only type of financial advisors with a legal obligation to serve as fiduciaries. This means they are bound to put their clients’ interests first. Fiduciary financial advisors are obligated to:

• Act transparently, honestly, and in good faith.
• Refuse any compensation for referrals.
• Immediately alert clients about any potential conflicts of interest that may arise.
• Only recommend products and services that align with a client’s financial goals, needs, and overall position.

Trusting an advisor to manage your finances is a substantial commitment. Working with a fiduciary financial advisor means you can count on neutral and sound advice.

Scope of RIAA Practice

All registered investment advisors provide investment advice, and many of these professionals also offer broader financial guidance and support.

It’s important to clarify that a specific RIA advisor agents offers the services you want before forming a relationship with them. However, many RIA advisor agents provide a range of financial services, such as long-term financial planning, money management, tax management, retirement planning, and more, as Investopedia explains.

RIAs can serve as general providers of financial guidance, and many do.

FAQs and Answers About RIA Advisor Agents

What is an RIA Advisor Agent?

An RIA, or registered investment advisor, is an individual or organization that provides fee-based investment advice and is registered with the Securities and Exchange Commission (SEC) or a similar state-level organization. They do not accept commissions or other sale-based income for specific financial products and services.

These advisors have a fiduciary duty to their clients, meaning a moral and legal obligation to put client interests first, avoid conflicts of interest, and clearly disclose conflicts of interest when they can’t be avoided. They must offer neutral advice that is geared toward and suitable for their clients’ financial goals, needs, and circumstances.

RIAA vs Financial Advisor: What’s the Difference?

An RIA is a registered investment advisor, a specific and regulated title that indicates the professional does not accept commissions or other incentives and is held to the fiduciary standard in their professional work. A financial advisor is not a regulated title. Technically, anyone can call themselves a financial advisor.

In other words, not all financial advisors are RIA advisor agents. However, it is common for RIAs to refer to themselves as financial advisors, at least in certain casual or marketing contexts. It’s important to look for specific statements from potential advisors, such as clear indications of RIAA or fiduciary status, to determine if a financial advisor is an RIA.

How Do RIA Advisor Agents Get Paid?

RIA advisor agents operate on a fee-only payment model, meaning they do not earn a commission or other types of incentive-based income for the sale of any financial products or services. Instead, these advisors charge a fee, often based on a percentage of the value of a client’s managed assets. Some RIAs charge a flat or hourly fee instead, but their income is fee-only.

The lack of commission and other incentives in RIA advisor agent pay is an example of the fiduciary standard to which these professionals are held. Commissions for the sale of specific products or services can create substantial conflicts of interest, which RIA advisor agents are bound by law to avoid or mitigate.

What is the Average RIAA Fee?

RIAs often charge a fee of 1% of the total value of assets under management, although this percentage can range from 0.5% to 1.5% and beyond. Annual flat fees vary, as do hourly fees. RIAs are fee-only advisors, but the exact structure of their fees varies from one professional or organization to the next.

What is the Difference Between an RIAA and an Independent Advisor?

The terms RIAA and independent advisor are very different. RIAA is a regulated title that is held by a fee-only fiduciary financial professional. Independent advisor simply describes how a financial professional operates, often but not only meaning they’re affiliated with an independent broker-dealer.

The most important practical takeaways in this comparison are that RIAs have a fiduciary duty to put client interests first and do not earn commission, while independent advisors do not have a fiduciary duty and can earn commission.

Fiduciary Financial Advisors Focused on Your Goals & Needs

Dechtman Wealth Management takes a holistic approach to financial management. Our team offers a broad range of services, is required to follow the fiduciary standard, and does not earn commissions or other incentives for the sale of specific products. Schedule a complimentary assessment to learn more.