The world of investment advice isn’t always easy to navigate. The jargon can be tough to crack, and there are new terms appearing and shifting meaning on a daily basis. Yet one term that everyone who is concerned about their personal finances must know is FIDUCIARY and RIA.
RIA is an acronym for Registered Investment Advisor. An RIA is a “Fiduciary” that manages money for the benefit of another called a “Beneficiary”. A fiduciary is bound by law to place the interests of its beneficiary first, in all matters, before the fiduciary’s own interests (this is known as the trust standard – the highest recognized by law).
Stockbrokers or other financial representatives employed by a broker-dealer are not fiduciaries. Even if these advisors want to follow the trust standard and serve as fiduciaries to their clients they cannot because of the contracts they have with their broker-dealer. Such contracts require they place the interests of their firm before the interests of their clients.
An RIA owes fiduciary duties only to its clients because it does not have a broker dealer.