Registered Investment Advisor or Broker-Dealer: Which is Right for You?

  • Personal finance
  • 7/19/2019
Happy Couple Meeting with Advisor

You have financial goals for yourself, your family, and your business. The advisor you choose — RIA or broker-dealer — can make a difference in getting you where you want to be.

Often times, the most challenging part of managing your finances is finding someone you trust. Someone who can help you with planning for all aspects of your finances, from how much Social Security you will receive and your insurance coverage, to guidance on how to sell or exit your business.

What you want most from a good financial advisor is someone who knows you and helps. It’s true that some are opting for the unemotional insight of so-called “robo-advisors,” and replacing face-to-face meetings with computer screens and algorithms. But what good is an application’s promise to deliver high returns if it doesn’t really know you and what’s important to you and your family?

Even if you’ve dismissed robo-advisors, you still have to choose between two types of advisor: registered investment advisors (RIA) and broker-dealers. They may look the same, but knowing the role and responsibilities of each is extremely important in managing expectations and knowing who is obligated to always work in your best interests.

Registered investment advisor

RIAs are registered with the Securities and Exchange Commission (SEC), a self-governing organization created by Congress following the stock market crash of 1929. Its primary mission is to protect investors and maintain fair and efficient markets.

RIAs maintain a fiduciary obligation to their clients on an ongoing basis. This means that, when providing investment advice, they are required to always act in your best interests. RIAs are also required to disclose any potential conflicts of interest and they must act ethically in all of their interactions. Typically, RIAs are paid through a management fee in the form of a percentage of the assets they manage for a client.


Broker-dealers, on the other hand, are registered with the Financial Industry Regulatory Authority (FINRA), a nonprofit organization (not affiliated with the government) that is overseen by the SEC. It is responsible for protecting investors and overseeing stockbrokers and brokerage firms.

Unlike RIAs, representatives working for large broker-dealers may be told what products to sell or what stocks they should recommend. An advisor acting as a broker-dealer does not maintain a fiduciary obligation on an ongoing basis; instead he or she is only required to provide advice or recommendations that are suitable at that time. Advisors who work for a broker-dealer are often paid a commission based on the products and services they sell — certain products are favored because they produce higher commissions. And although they also work within a strong ethical framework, broker-dealers are not obligated to act in a fiduciary capacity.

Registered Investment Advisors Broker-Dealers
Acts as a fiduciary on managed accounts Does not act in a fiduciary capacity
Typically paid through an asset management fee Typically paid through commissions
Oversight provided by Securities and Exchange Commission (SEC) Oversight provided by Financial Industry Regulatory Authority (FINRA)

Work with a team of investment, tax, and business succession professionals

Many financial advisors work independently, but for you and your family, it may be beneficial to find an organization that works hand in hand with your attorneys, tax consultants, and other business professionals to strengthen your overall financial plan and help improve your tax position.

If you are a business owner or have ownership interest in a commercial enterprise, there can also be value in working with professionals who are experienced with business succession and leadership transition. In many cases, the majority of an owner’s assets are tied up in the business, so it is especially important to maximize the value of those assets as you prepare for the next phase of your life.

How we can help

The most important criteria for a financial advisor is knowing that he or she knows you on a personal level and is looking out for your best interest. Whether that’s planning for retirement, managing investments, leaving a legacy for those you care about, or even planning an exit from your business, CLA wealth advisory professionals are ready sit down with you to find out your goals and discover what is truly important to you and your family.

Christopher Wiethe is employed by CliftonLarsonAllen Wealth Advisors, LLC, which is an SEC-registered investment advisor and a member of FINRA and SIPC.

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