State Registered Investment Advisor

What is a Registered Investment Advisor and why is it important to you?

A Registered Investment Advisor (RIA) is an advisor who is registered with the state in which they do business, or with the Securities and Exchange Commission (SEC).  But, not all “advisors” are registered, or are even required to be registered.  In fact, the majority aren’t.  You should know there are several important distinctions between advisors who are registered and those who are not.  And, these differences could be a big deal to you!  Suffice it to say that RIAs are held to the highest standards in the investment advisory industry.

  1. RIAs owe a “fiduciary duty” to their clients.  When an advisor is held to a fiduciary duty, they are obligated to put the needs of their clients BEFORE their own.  Most advisors are held to a much lower standard, termed the “suitability” standard.  Why is that important?  Let’s say there are 10,000 investments in this world.  An advisor with a suitability standard might determine that 5,000 of those investments were suitable and would be free to select any one of those to recommend to you.  A registered advisor (RIA) would have to further eliminate any of those investments that were better for the advisor than for the client.  So, from the 5,000 suitable investments the RIA would find that only a much smaller group of investments met the test of being better for you.  To be clear, if you know a lot about investing, having an advisor who has to put your interests first is not so important, as youcan determine if the suggestions are in your best interest.  If you aren’t so knowledgeable, you should find comfort in the fact that RIAs have to put your interest before theirs.
  2. RIAs must minimize and clearly disclose conflicts of interest.  As an investor, it should be important to you to know how your advisor is compensated and if they are involved in arrangements which might impact their loyalty to you.  After all, if they are being compensated for referrals to a particular person, or if they are paying someone else to get referrals, wouldn’t you want to know?  This information is clearly spelled out in the ADV which all RIAs must file with the regulatory agencies.
  3. RIAs must provide complete fee transparency.  Again, the fees are clearly identified and discussed in the ADV.  If your advisor is not required to provide you with an ADV document, they are not a Registered Investment Advisor.

Our firm is specifically structured as a Registered Investment Advisor because we want you to know as much as you need to know about us before and while we are working together.  In fact, we encourage you to review our Form ADV (SEC required disclosure for all RIAs) which describes our firm and how we do business. When working with Personal Asset Management you establish a relationship with a Registered Investment Advisor whose fiduciary responsibility requires prudent management — and that your interests come first.  And, we put it in writing!