RIA vs. BrokerRIA vs. Broker

RIA vs. Broker is a common dispute in the investment community. They have some similarities and differences. In this article, we will go over the differences between the two to help you determine which will be a better fit for you as a client.

What is a Broker?

A broker is essentially an intermediary. They will act on your behalf and arrange transactions between you as the client and the investments you would like to purchase. They charge a commission to make trades for you. The commission is the fee they charge for their services.

What is an RIA?

RIA stands for Registered Investment Advisor. RIAs use a fee-based system for both managing client investment accounts and giving out personalized investment advice. RIAs tend to take a more holistic approach to investment management that takes into consideration tax planning, estate planning, and retirement planning.

Ethical Standards

RIAs and brokers have different ethical standards they are held to. The Investment Advisors Act of 1940 required RIAs to operate under fiduciary duty. Fiduciary duty requires such advisors to make recommendations and decisions for the benefit of their clients, even if it means taking a loss. The client’s interests must always be placed ahead of the advisors. They are also required to fully disclose all fees in a transparent way.

On the other hand, brokers are held to the suitability standard. This simply means that the advice they give must be suitable for their need at the time being. It does not require them to consider future goals or consequences. The suitability standard is much less stringent than fiduciary duty.


There is a significant difference in the way RIAs and brokers receive compensation. Typically, brokers charge a commission for each transaction that they make in your account. Every time they buy or sell a stock for you; they charge you add on fees to make their commission. They often hide these fees deep in the client statements. These add up quickly over time.

Conversely, RIAs generally take a fee-based approach. They typically charge a yearly fee based on the value of the accounts managed. This covers all transactions and is straight forward and easy to understand.

RIA vs. Broker-What Should You Choose?

RIA vs. broker-what is the best choice for you? The answer will be different for everyone. It will depend on both personal preference and circumstances. The best approach is to meet with different advisors to see who will offer the services that fit your needs best.

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