What is a Registered Investment Adviser (RIA)?
A Registered Investment Adviser (RIA) is a firm or individual registered with the Securities and Exchange Commission (SEC) or state securities regulators that provides investment advice to clients for compensation. RIAs are held to a fiduciary standard, meaning they must act in their clients' best interests at all times.
Registration Requirements
SEC Registration (Federal):
- Required if AUM exceeds $110 million
- Permitted if AUM between $100-110 million
- File Form ADV with SEC
State Registration:
- Required if AUM under $100 million
- Register in states where conducting business
- Varying state requirements
RIA Structure Options
| Structure | Description | Considerations |
|---|---|---|
| Solo RIA | Individual advisor/owner | Full control, full responsibility |
| Multi-advisor RIA | Multiple advisors under one firm | Shared compliance, varied ownership |
| RIA Aggregator | Platform supporting multiple practices | Compliance support, shared services |
| Hybrid RIA | Also affiliated with broker-dealer | Dual registration complexity |
Starting an RIA
Key Steps:
- Develop business plan
- Choose custodian(s)
- Establish compliance program
- File Form ADV
- Obtain E&O insurance
- Set up technology infrastructure
- Create client agreements
Typical Startup Costs:
- Legal and registration: $5,000-$15,000
- Technology: $5,000-$20,000
- Compliance: $3,000-$10,000
- Insurance: $2,000-$5,000 annually
- Marketing: $5,000-$25,000
RIA vs. Broker-Dealer
| Aspect | RIA | Broker-Dealer |
|---|---|---|
| Standard | Fiduciary | Suitability/Reg BI |
| Compensation | Advisory fees | Commissions |
| Regulation | SEC/States | FINRA/SEC |
| Supervision | Compliance focus | Heavy supervision |
