Financial advisor talking with clients

What is an Investment Advisor

A Registered Investment Advisor (RIA) is a person or group that makes investment recommendations or conducts securities analysis in return for a fee, whether through direct management of client assets or via written publications. They manage assets of high net-worth individuals and institutional investors, and sit on the buy side of the investment field. He or she must register with the Securities and Exchange Commission and any states in which he or she operates.

The next question is what does an RIA do? RIA’s earn their revenue through a management fee comprised of a percentage of assets held for a client. There is a fluctuation of fes but the average is around 1%. Typically, the more assets a client has, the lower the fee he or she can negotiate, sometimes as little as 0.35%. This will help align the best interests of the client with those of the RIA.

Registered investment advisors can be managing thousands of unique portfolios. This is because their high-net-worth individuals and institutional investors are groups with unique needs. The advising firm will work with the clients to design a portfolio that suits the client’s situation. An RIA can create portfolios using individual stocks, bonds and mutual funds. RIA firms can cover the spectrum as far as what goes into their clients portfolios. They could use a mix of funds and individual issues or only funds as a way to streamline asset allocation and cut down on commission costs.