A registered investment advisor is an individual who is registered with the Securities and Exchange Commission, and whose main job is to provide investment advice and manage investment funds for others. In order to be an RIA, the personal financial advisor must manage over $25 million worth of investment assets to be able to register with the SEC. Otherwise, the advisors can only register at the state level. Unlike other types of financial advisors, an RIA gets paid based on a fee (for instance, 1% of the money you invest), rather than by commission. Some have argued that the commission-based salary model causes conflicts of interest and may present some detriment to the consumer.

There are many reasons why a registered investment advisor excels over a mutual funds manager. First, many clients want a person who can paint their financial portraits, who can speak to them concerning goals and objectives and who is really looking out for their best interests. Secondly, clients want options, easy access and direct access to the manager of their accounts. Annual reports and performance attribution can help clients keep better track of their performance as well. At the end of the day, an RIA is paid more like a mutual fund manager than a stock broker, bringing home a low fee (sometimes just 0.35% of what you’ve invested).

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%).

The career path of a registered investment advisor usually begins with a Bachelor’s Degree in business, finance, accounting or economics. Many RIAs then go on to work for a wire-house or large investment/stock products firm. After a few years of experiencing the burn-out firsthand, these workers will transfer over to a RIA advisory services firm like Schwab, Ameritrade or Fidelity. To make the switch, workers will need to obtain an RIA certificate from the state. Next, they usually have to take an exam and pay the $150 fee. To grow one’s business, a financial advisor usually holds lunches with prospective clients and conducts many meetings to get the business going. According to www.payscale.com, the average salary for an RIA is around $60,000, although portfolio managers can make over $80,000.

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