What is a RIA?
A registered investment advisor is someone who has completed the qualifications to be registered with the SEC and with applicable state agencies. Often, a RIA works with high net worth clients to help them manage their assets. A RIA often charges based on the percentage of assets that are under management, although there are also some that charge fixed rates, or charge hourly. A RIA can make trades on your behalf, and aid in transactions.
The most important thing to remember about a RIA is that he or she is required by law to act as a fiduciary to clients. This means that the client's benefit is the most important thing to be considered when making recommendations. RIAs are required to meet certain standards, and this is enforced by law. When you receive advice from a RIA, you can be reasonably sure that the recommendation is what he or she thinks is really best for your situation.
The Paladin Registry is a great resource for finding an IRA. The service will match you with five star-rated advisors in your area.
What is a broker dealer?
A broker dealer is someone who facilitates investment transactions. Many broker dealers also have representatives that can act as advisors to help you decide which investments to purchase, and which to sell. In many cases, a broker dealer receives his or her compensation through commissions. These commissions are based on investment transactions made on your behalf.
However, you have to be aware that a broker dealer isn't required to meet fiduciary standards. The broker dealer can recommend investments that give him or her a bigger commission, even if there is a product that might actually be better for your situation. Broker dealers aren't supposed to just mess you over, though. The SEC requires broker dealers to make “suitable” recommendations, as well as let you know if there are any conflicts of interest.
Which approach Is best for you?
In the end, it's up to you to decide which approach is best for you. Look at your needs, and consider who you are more likely to trust. The reality is that, no matter whether you go with a RIA or a broker dealer, no one is going to look after your money as well as you will.
However, if you want a better chance of ensuring that most decisions are to your advantage, a RIA is bound by law to adhere to your best interests. On the other hand, most of the recommendations by a broker dealer are likely to be just fine, even if they aren't the best fit. If you want to spend less, a broker dealer can work.
Consider your investment needs and preferences, and then make a decision based on what works best for you.