What is a Registered Investment Adviser?
A Registered Investment Adviser (RIA) is a person or firm which advises individuals and families regarding their investments and manages their portfolios. Depending upon the size of the assets and/or the size of the firm, an RIA will be required to register with the state securities division and/or the Securities and Exchange Commission (SEC).
Under the Investment Advisers Act of 1940, RIAs are held to the fiduciary standard. This means is that an RIA can only provide investment advice in their client’s best interest.
Let’s say an adviser has the option of two recommendations in which to provide their client. The first option will create an average return for the client of 8% per year. The second option will also create an average return of 8% per year, but realistically is only 4% per year due to all the fees and commissions that the adviser will receive by recommending the second option. If the adviser recommends the second option, this adviser MAY have violated their fiduciary duty and could be subject to action by the client. It is also possible that they suffer regulatory investigations by the state securities division, the SEC, and the Financial Industry Regulatory Authority (FINRA).
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There are several regulatory issues involved in becoming and operating as an RIA. If you are an RIA, or you are considering becoming an RIA, it may be beneficial to hire a General Compliance Counsel. If you have a legal or compliance question regarding your investment adviser business, please contact our office at (513) 241-0400 or visit our website. We look forward to hearing from you!