How to become and profit as a fee-based registered investment advisor
Registered investment advisors (RIA) manage portfolios on a fee basis or give advice for fees; they do not charge commissions. Typically, RIAs start out as stock brokers and eventually seek greater independence. These are the more entrepreneurial registered reps as most cling to the security of the wirehouse or FINRA firm. It's also true that the better financial advisors go the RIA route out of a desire to provide excellent service and not be in the position of selling the product du jour. http://www.registered-investment-advisor.com/ria.htm.
Does the registered investment advisor need a broker dealer? No, not in the capacity of an overseer. Every RIA needs a broker dealer to custodian their client portfolios. The most well known custodians are Schwab Institutional (http://www.registered-investment-advisor.com/schwab_institutional.htm), TD Waterhouse (www.advisorservices.com), Ameritrade Institutional (http://www.ameritradeinstitutional.com/ria-home.html), Fidelity Investment Advisor Group (www.ibg.fidelity.com). In order to sign on as an RIA with these firms, you need a clean ADV and typically at least $5 million in clients assets (although Ameritrade will take less).
The primary disclosure tool that the financial advisor must prepare and give to each client is form ADV. This contains information about the advisor's background for the past 10 years, how they manage portfolios, services they provide and fees they charge. This is now all maintained on line through the IARD system maintained by the FINRA. http://www.registered-investment-advisor.com/form_adv.htm.
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