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Definition of Ria : What Is a Registered Investment Advisor



Definition of Ria : A Registered Financial Advisor (RIA) is a person or firm that provides investment advice and portfolio management to high-net-worth people.

RIAs owe their clients a fiduciary duty, which means they are obligated to give investment advice that is always in their clients’ best interests.

What Is a Registered Investment Advisor (RIA) and How Does It Work?

Definition of RiaRIAs must register with the Securities and Exchange Commission (SEC) or state securities administrators, as the first word of their name implies.

Individual and institutional investors’ assets are managed by a registered investment advisor (RIA).


RIAs must register with the SEC and state regulatory agencies as a buy-side investment provider and fiduciary.

RIAs are paid in the same way as portfolio managers are paid: they charge a management fee based on a percentage of the assets they manage for a client (typically 1 percent per year of AUM).

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Recognizing RIAs

RIAs are regulated directly by the Securities and Exchange Commission (SEC) and are held to a higher level of behaviour than registered representatives since they serve in a fiduciary capacity.


This fiduciary standard states that, regardless of the circumstances, an RIA must always put the client’s best interests ahead of their own.

RIAs must also disclose any potential conflicts of interest to their clients and conduct themselves ethically in all business dealings.

Clients pay a percentage of their assets under management to some RIAs, while others charge an hourly or flat fee to provide advice.

A Series 65 licence is required for advisors who chose the latter model for their practises.


RIAs are paid in the same way that mutual fund managers are paid: they charge a management fee based on a percentage of the assets they manage for a customer.

Fees vary, but on average, they are roughly 1%. The more assets a client has, the lower the charge they can negotiate—as low as 0.35 percent in some cases.

Because the adviser cannot make any more money on the account unless the customer raises their asset base, this aligns the client’s best interests with those of the RIA (AUM).

Who Should Become a Registered Investment Advisor (RIA)?

\An RIA is defined by the Investment Advisers Act of 1940 as a “person or firm engaged in the act of providing advice, making recommendations, producing reports, or furnishing analysis on securities, either directly or via publications, for remuneration.”


Which regulators advisers must register with is largely determined by the value of the assets they manage, as well as whether they advise corporate or individual clients.

Generally, advisers with at least $25 million in assets under management or who provide advice to investment businesses must register with the Securities and Exchange Commission (SEC).

Advisors who manage smaller sums of money are usually required to register with state securities regulators. 2

Registration as an RIA does not imply that the SEC or state securities regulators have recommended or endorsed you.


It simply indicates that the financial advisor has met all of the registration criteria.

The required information for advisers who register with the SEC includes the advisor’s investment approach, assets under management (AUM), fees, any disciplinary actions, and, in the case of a firm, the main officers.

Other responsibilities include the RIA notifying the SEC of any potential conflicts of interest that have developed or may arise in the future as a result of their work.

The filing, which is made using Form ADV, must be amended every year to include information such as any new disciplinary rulings against the RIA.


As a public record, the form must be made available.

Some detractors argue that becoming an RIA is too simple compared to the responsibilities of other professionals.

The entrance criteria for becoming an RIA, according to Investopedia writer Mark Cussen, are “only a blip on the radar screen compared to those of more prestigious careers such as law, medicine, or accountancy.”

Cussen is a proponent of rigorous exams and curriculum, such as those required for the Certified Financial Planner (CFP®) title.


“These could help to raise the level of service that [RIAs] deliver to the public,” he argues.

Ongoing Responsibilities of the RIA

RIAs must follow particular policies and processes while providing advice to their clients, in addition to merely registering to earn their accreditation.

These include disclosing any risks or potential conflicts of interest associated with the deals they promote and ensuring that the client is aware of them.

If a customer questions an advisor’s suitability of an investment, the advisor must show that all reasonable steps were taken to communicate the risk and determine suitability.


Documentation is crucial in the eyes of the Securities and Exchange Commission.

If the SEC were to become involved in an investor complaint inquiry, it would demand complete evidence of the investment strategy adopted, as well as client records demonstrating awareness of the client’s investment profile and risk tolerance.

Competitors in the RIA

For the provision of investment services, RIAs compete with the following groups:

  • Mutual funds are a type of investment that allows you
  • Hedge funds are a type of mutual fund that invests
  • Wire house firms (for example, investment banks) – through wrap programmes for individual brokers.
  • Brokers who cater to do-it-yourself investors via the internet or at a discount.

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