Become A Registered Investment Advisor

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March 14, 2010

A registered investment advisor competes against wire-houses, stock brokers, mutual funds, hedge funds and the do-it-yourself types to provide clients with investment advice and assistance. Privately owned RIA firms are an excellent place for personal financial advisors to begin or expand their careers, since the industry is rapidly growing. Many clients are making the switch from the old model of advisory services (which paid advisors by commission) to the new model, which pays a set rate/fee. Many individual investors report greater satisfaction with an RIA firm because they feel their interests are better valued.

A registered investment advisor will meet with clients to determine their personal financial goals and risk tolerance. The RIA will then manage the individual’s assets carefully, as the client requested. The RIA will then assess the returns and provide clients with quarterly results, occasionally making recommendations or suggestions based on performance. Ultimately, the tasks of a personal financial advisor are three-fold: sell investments/stocks, maintain client relationships and learn about new investment products.

More and more Americans are moving away from wire-houses to independent financial advisors, according to a June 2009 TD Ameritrade survey of registered and independent investment advisor professionals. Over 80% of RIAs surveyed reported an increased influx of clients over the last six months. The top three reasons why new clients transferred to the RIA advisory services include dissatisfaction with service, advice performance or fees at full-service brokerage firms (34%); to receive better advice that is in their best interest, rather than the broker’s best interest (21%); or to receive more personalized service with a more competitive fee structure (17%).

If you’re looking for a registered investment advisor, you should decide what your goals and expectations are beforehand. In other words, know exactly how much money you intend to make over the course of your investment. You should decide whether you’re a risky or a close-to-the-vest type of investor too. Next, you should arrange to meet several independent financial advisors fact-to-face. You should feel comfortable with the investor and have all your questions answered. Look at your advisor’s educational background, licensing, experience and products offered. Don’t be afraid to outright ask if your advisor has ever been suspended, sued or disciplined for performance.

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