What is a RIA?
A Registered Investment Advisor (RIA) is an informal designation describing a person or firm in the United States who has registered with the U.S. Securities and Exchange Commission or state regulatory agency in connection with the management of the investments of others. The proper designation for a person so registered would be "An Investment Advisor registered with the SEC" (or state).
An Investment Advisor is considered to be acting in a fiduciary capacity on behalf of clients with a higher standard of disclosure and due care, a commitment to disclose, minimize and resolve conflicts of interest than would be found in a traditional securities brokerage environment. In addition, most Investment Advisers are compensated on a fee basis (usually as a percentage of assets under management) rather than a commission basis.
In general Investment Advisers managing assets totaling less than $25 million must register with each state in which they have more than 5 clients. Firms managing more assets can register nationally with the Securities and Exchange Commission. Registration can be a complex process, taking longer than a month and costing several hundred dollars in filing fees, depending on the state or SEC. Registration requires that all employees of the Investment Advisers pass the FINRA Series 65 exam or have completed an approved professional designation.
Registration does, however, cause one to become legally responsible for the investment advice given, requiring more disclosure to existing and potential clients, and filing of periodic reports with various regulatory bodies and to keep longer, more accurate records of the financial advice given to clients.