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WEALTH MANAGEMENT

The Vagaries of Investment Advisory Industry

The Vagaries of Investment Advisory Industry

Only an RIA(Registered Investment Advisors) is authorized to provide investment advice for a fee.

The world of wealth management brings its own challenges this year, to keep up with market forces, polices of Washington, technological innovations and new client demands. Independent Broker Dealers (IBD) are the new wave of breakaways to the Registered Investment Advisors (RIA) Channel.  Lot of Banks, insurance companies and brokerage firms that dominated the market for financial advice have now disappeared or become discredited due to the latest financial downturn. Some of them even had to be sold to bigger banks even before they failed. Due to these developments people are asking one common question “If these firms cannot manage their own affairs and need to be bailed out, how they can give advice to our money”. It is clearly evident that some of the wealth management advisory firms have started to put their own profits ahead of their client’s obligations and goals. These self proclaimed insurance companies and Wall Street firms continue to spend billions of dollars on marketing campaigns and advertisement to pull more clients for providing advisory services. RIA’s have the responsibility of determining whether an investment is suitable for a client or not. They need to offer independent advice and not offer advice based upon the commissions they receive from the products they sell it to their clients. Most investors assume that all financial advisors are required by law to act in the best interest of the investor. This also gives opportunities to unethical RIA’s to put their financial interests ahead of their clients by selling products which give them huge commissions but sparse returns to the investors. This also gives room to individuals to decide whether they have to be with a broker/dealer or an RIA. There are several questions to be addressed before you chose the right wealth management services.

  • Do you have the desire to become a business owner?
  • Can you handle your own compliance matters, even that of huge volumes?
  • Do you need a third party influencing your business and financial decisions?

Regulation and Registration of RIA

RIA’s who wish to provide investment advice or asset management services, as a primary business in the United States of America,  have to register with the SEC (Securities and the Exchange Commission) or the state in which they intend to practice. However, registration is not required if investment advisory services part of your services. Firms or individuals who manage more than $ 100 million in assets are required to file with the SEC, those with smaller asset base need to register them under the respective states.

The vast majority of people would normally believe that a “financial advisor” is a representative of a broker or dealer. The first kind is known as broker or dealer. A broker cannot charge the client for the investment advisory services; he can make money only on the investments they sell it to you. The second category is known as Registered Investment Advisors (RIA). The RIA will charge a fee to manage your money or services to provide financial planning advice. An RIA gets paid for giving advice to selling certain products which are best suited to their clients. Only an RIA is authorized to provide investment advice for a fee. Qualified RIA’s streamline your operational processes with tailored solutions from the industry’s largest provider of operational support.  They offer high net worth and ultra high net worth clients access to an array of wealth management solutions which includes private banking, cash management and private banking.


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