Understanding and working with an Independent RIA

Understanding and working with an Independent RIA

Understanding and working with an Independent RIA

Financial advice comes in all shapes and sizes and from all sorts of industry professionals.  For those of you not in the financial industry, you probably aren’t aware of the momentum of advisors who are leaving the large Wall Street broker-dealers in search for a more independent firm to conduct their business.  Our founder, Tyler Vernon left Merrill Lynch World Headquarters in 2007 for this very same reason which is catching on in the industry today.  We want to better educate our readers on the difference between a broker-dealer and an SEC Registered Investment Advisor so you can be more educated.

What is an Independent “RIA”?

Independent Registered Investment Advisors (RIA) are professional advisory firms that operate much different than the broker/dealer model.  They are generally not tied to any particular investment product or family of funds. Large brokerage house advisors at firms such as UBS, Morgan Stanley or Merrill Lynch may be incentivized or instructed to choose only in house products run by Merrill Lynch or Bank of America themselves. This may not always be what is best for the client.  Additionally, Investment Advisors who work for RIA’s, cannot by law receive any commission or kickback on any product that they recommend for their clients.  This type of commission structure is looked at as a conflict of interest.

As fiduciaries, Independent RIA’s are held to the highest standard of care and are required to act in the best interest of their clients at all times. RIA’s must register with either the Securities and Exchange Commission (SEC) or state securities regulators.

Why should my RIA be Independent?

A large amount of independent advisory firms are owned by one or multiple advisors who run them. This creates a strong sense of accountability to their clients and helps develop strong personal relationships.

More investors and retirees are increasingly seeking out personalized financial advice since each person has different goals and objectives. One way to ensure you’re getting the attention you deserve with a personalized touch is to work with an independent financial advisor.

RIA’s are not tied to any particular funds or investment products. They have the freedom to choose from a wide range of investment products and options in order to tailor their advice based on your risk tolerance investment goals and objectives.

Independent advisors typically use separate custodians, such as Charles Schwab or TD Ameritrade to hold and safeguard client assets. This provides a reassuring system of checks and balances. With the ability to use independent custodians, RIA’s are often able to negotiate lower borrowing rates and fees for their client base. This helps lower overall fees and potentially increasing the net return as these savings are passed down to the end client.

What services do Independent Advisors Offer?

Independent RIA’s can help investors with a variety of complex financial needs. RIA’s are often described as financial quarterbacks focused on your financial picture. Some RIA’s create customized models according to your risk tolerance. Often advisors can assist you with comprehensive services, such as estate planning, financial planning, borrowing, sale of a business, tax-management within your portfolio, trusts, and intergenerational wealth transfer as well as a variety of other types of services.

We encourage you to ask your financial advisor how they operate.  Let’s peel back the onion on this fee conversation and be open about how much financial advice is costing you.  If you have any questions, Biltmore Capital Advisors would be happy to do a review of your portfolio to determine if there are commission based products there, the type of fees you are paying, and if the underlying portfolio looks right for you.

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