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).
Often, people refer to registered investment advisors as investment advisors or investment managers or money managers. It really is a different position than selling stocks, bonds and mutual funds. http://www.registered-investment-advisor.com/money_manager.htm. The fee-based advisor looks after the investment portfolio and has two objectives: to retain the client and have the client's portfolio grow. Only by fulfilling these two objectives will the advisor see his income rise. The broker on the other hand, seeks typically to generate "gross" this month and may not have the same long term view. http://www.registered-investment-advisor.com/investment_advisor.htm.
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