What is an RIA?

Hi there, money experts in the making. There are too many acronyms in the world of personal finance and investing. And if you’re trying to figure out what RIA stands for, you’ve come to the right place. Today we’ll dive into:

• What is an RIA in plain English?

• What does fiduciary mean?

• What are RIAs required to do?

• How do RIAs make money?

• Who uses RIAs to manage their investments?

What does RIA stand for and what does it mean?

RIA stands for registered investment advisor. Think of RIAs as financial player-coaches, pros who specialize in managing other people's money and teaching you right now. Plenty is an RIA and although we don’t wear capes, you can trust that we’ve got your back.

At its core, an RIA is a government-regulated firm tasked with providing investment advice and managing client portfolios. These firms can be as small as a one-man band or a large entity with thousands of employees.

RIAs must be registered with either federal and/or state authorities, adhere to SEC regulations, and operate under a fiduciary standard (more on that fancy word below).

Historically, RIA clients were typically just high-net worth individuals. The fee structure didn’t make sense otherwise. Fortunately, new pricing models and service options have expanded the outreach and client base of many RIAs.

How many RIAs are there?

Hold onto your hats. There are over 451,000 registered RIA firms in the US according to the Investment Adviser Association.

What does fiduciary mean?

Fiduciary simply means that RIAs are obligated to act in their client’s best financial interests and not maximize their own profits. Fiduciary responsibility is a good thing--like having a money superhero who's always got your back.

What does that involve? To act in their client’s best financial interests at all times, RIAs need to make decisions that are as accurate as possible based on available data and are aligned with the clients’ agreed-upon objectives. They also have to disclose any conflicts of interest upfront and maintain a reasonable basis for advice.

Also, if an RIA ever fails to adhere to its fiduciary duty, the SEC can take enforcement actions against it.

How and where are RIAs registered?

RIAs have to register with either the Securities and Exchange Commission (SEC) or their local state authority. During this process, an RIA has to document details on their investment styles, past disclosures, client assets under management, fee structures, and any potential conflicts of interest.

RIAs who manage $100 million or more or do business in 15 or more states must register with the SEC. Smaller RIAs only have to register with their local state agency.

What’s great for investors is that these government agencies regularly examine RIAs to make sure they’re following all the rules and meeting their fiduciary duties.

You can also search for RIAs by name on the SEC website. Check us out here.

How do RIAs make money?

RIAs primarily earn money with the management of their clients’ investment portfolios.

Usually, they earn fees that are based on a percentage of the money they're managing for you. And guess what? There are no sneaky commissions or transaction fees to worry about. RIAs align their success with that of their clients like you. It's a win-win.

While the average RIA fee hovers around 1.17% of AUM, the range is usually between 1% to 3% (Source: Forbes Advisor, 2023). 

Recently, alternative fee structures have been offered by more RIA firms to make their services more affordable to a broader range of people. Some examples of newer pricing models include fixed fees for specific services, hourly rates, or charging an annual retainer. Greater flexibility makes partnering with an RIA easier than ever.

At Plenty, we believe building wealth shouldn't be a luxury that only the already wealthy can afford. The Plenty investment platform brings affordable access to everyday households.

Plenty charges an annual membership subscription fee of $200 per couple and an investment management fee of 0.2%.

What are RIAs required to do?

RIAs need to stay in compliance with all of the regulations of the SEC or their state agency.

This includes the registration process, transparent disclosure of conflicts of interest, being able to prove investments were suitable and risk was disclosed, and more. 

Who uses RIAs to manage their investments?

At first, RIAs were just for the wealthy. But as startups take on the industry, services are becoming increasingly affordable for everyday families. So, whether you've got a mountain of cash or a molehill, there’s likely an RIA able to help.

If you want personalized and comprehensive financial advice for your investments, an RIA could be just what you’re looking for. 

They can help you create custom portfolios with anything from single-name stocks, to bonds, ETFs, and mutual funds. Interested in eco-investing or crypto stocks? An RIA can help you find investments that best suit all of your financial goals and interests.

How is an RIA different from a financial planner?

While both RIAs and financial planners operate in the financial advisory sphere, there are some differences between the two. 

Think of RIAs as investment gurus who want to help you grow your wealth. They’re focused on managing your money, investment portfolios, and asset growth. RIAs specialize in investment management, but some also offer advice in broader personal finance areas such as retirement planning and estate planning.

Financial planners are like your financial BFFs. They cover everything from planning your retirement to saving for your kid's college fund. Financial planners who are not RIAs, can help you create a plan, but won’t help you actually invest. In other words, RIAs can do both financial planning and investment management, but planners can’t do both–they can only do financial planning.

How Plenty can help

And there you have it. Registered Investment Advisors are like the financial wizards you never knew you needed. They're on a mission to help you grow your cash, and with their fiduciary magic, you can trust they’ll have your back.

Whether you're a finance novice or a seasoned investor, we here at Plenty are here to help you on your journey to financial awesomeness.

Plenty has all the tools you need to plan, invest, and track your savings. We help you achieve your goals as quickly and easily as possible, so you’ll be ready for anything life has in store. 

About Plenty

Plenty is a wealth management platform designed specifically for couples. We go beyond budgeting, making it simple to invest, save, and grow toward your future goals by unlocking access to the financial strategies of the wealthy. Ready to get started? Sign up for free today.

Enjoying the blog? Sign up for our newsletter for the latest news and expert advice about money, relationships, and everything in between. 

——

The information provided herein is for general informational purposes only and should not be considered individualized recommendations or personalized investment advice. The type of strategies mentioned may not be suitable for everyone. Each investor should evaluate an investment strategy based on their unique circumstances before making any investment decisions.

Investing involves risk, including risk of loss. Past performance may not be indicative of future results. Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets. Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

Tax-loss harvesting involves certain risks, including, among others, the risk that the new investment could have higher costs than the original investment and could introduce portfolio tracking error into your accounts. There may also be unintended tax implications. We recommend that you consult a tax professional before taking action.

Plenty does not provide legal or tax advice. Where specific advice is necessary or appropriate, individuals should contact their own professional tax and investment advisors or other professionals (CPA, Financial Planner, Investment Manager) to help answer questions about specific situations or needs prior to taking any action based upon this information.

All expressions of opinion are subject to change without notice in reaction to shifting market, economic, and geo-political conditions