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RIA vs broker

An RIA is a firm registered to give investment advice. A broker-dealer is registered to trade securities. One person can be both. Check the account.

The short answer

An RIA is a registered investment adviser. That is a firm registered to give investment advice for pay. A broker is a broker-dealer, or a person licensed through one, registered to buy and sell securities.

People say "my advisor" for both. The files, the pay, and the legal rule are different. One person can hold both licenses. Before you move money, ask which firm, which account, and which fee apply.

RIA (the firm)Broker-dealer
What the registration allowsInvestment advice for payBuying and selling securities
Where you look it upForm ADV on IAPDBrokerCheck
Pay you will usually seeA percent of assets, hourly, or a set feeA commission, a markup, or a sales load
The ruleFiduciary duty to advice clientsRegulation Best Interest on a recommendation to a retail customer
Who often holds the securitiesA separate custodianThe broker-dealer or the firm that clears its trades

The person you meet is not "an RIA." The firm is the RIA. That person is an adviser at the firm, a broker, or both.

What to do

  1. Open Search and start with the firm page.
  2. On the ADV panel, write down every Yes for Item 5E (how they get paid), Item 6A (other businesses), and Item 9A (who can control client money).
  3. Open 6A(1) broker-dealer and 5B(2). Item 5B(2) counts employees who are also registered brokers. A Yes, or a count above zero, means brokerage work sits next to the advice.
  4. Look up the same firm CRD on IAPD. The CRD is the ID number. Then look up the person on BrokerCheck. You need both. One clean search does not clear the other file.
  5. Read Form CRS. It is the short summary that says broker, adviser, or both, and it describes fees and conflicts.
  6. Before you move a 401(k) or open an account, email: "Will this account be an advice account with the RIA, a brokerage account, or both? Who holds the securities? What do I pay, in dollars, per year?" Keep the answer. Hiring steps are in how to hire a financial advisor.

What to look for on Best Investors

  • Firm versus person. Firm pages carry Form ADV. Person pages carry jobs and exams. The RIA is the firm. Open the firm when you want Item 5E, Item 6A, and Item 9A.
  • Item 6A(1) and Item 5B(2). These are the clues, on the advice filing, that brokerage work is also going on. They do not list every product the person can sell. BrokerCheck is the broker file.
  • Item 9A. Custody means the adviser, or a related person, has a defined kind of control over client money or securities. Match the Yes or No to the name on the statement you actually get.
  • Item 5E(5) commissions. A Yes means the firm reports commission pay. It is not a full product list. See fee-only vs fee-based.
  • Claim badge. Someone took control of the listing. That does not tell you RIA versus broker.

Common mistakes

  • Using the business card as the registration. "Wealth manager" can be either license, or both.
  • Assuming a small office is an RIA and a national brand is a broker. Big firms have advice affiliates. Small offices can be brokers.
  • Calling the person an RIA. The firm is the RIA. Then check that person's BrokerCheck record anyway.
  • Skipping who holds the shares. That is the practical difference when something goes wrong. Read Item 9A.
  • Skipping Form CRS because the ADV panel was long. Form CRS is the short page that says which business you are about to hire.

Related questions

Is an RIA the same thing as a fiduciary?

The advice relationship comes with a fiduciary duty. The letters on the door do not tell you that the person across the table is acting as an adviser on the account you will open. Confirm the account type. Fiduciary vs financial advisor is the duty question. This page is the registration question.

Can my broker also be part of an RIA?

Yes. Holding both licenses is common. You may get an advice agreement and a brokerage agreement from related firms. Ask which document covers the recommendation in front of you, especially a rollover.

Which site do I open first?

If you are paying for advice, start with the firm's Form ADV here and on IAPD. If someone is selling you a product, open BrokerCheck on that person before you write a check. Do both before you fund the account.

Does "independent" mean RIA?

No. Independent describes a business setup, not a license. An independent office can be an RIA, a broker, or both. Read Item 6A and BrokerCheck.

Limits

Best Investors is not a regulator, and this page is not legal or investment advice. BrokerCheck is FINRA's site. We do not replace it.

The firm filled out Form ADV. We do not audit assets, fees, or Item 11. If our page and IAPD disagree, use IAPD.

This page does not list every product a person with both licenses can sell. Item 6A and Item 5E are categories. The brochure and BrokerCheck fill in the rest.

Sources

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