A registered investment advisor (RIA), in very simplistic terms, is an investment advisory firm that provides individuals (typically the ‘mass affluent’ segment with an AUM of $100k-$1mm) with advice and recommendations on financial planning and wealth and investment management. RIAs are required to register either with the US Securities and Exchange Commission (SEC) or with state securities administrators, depending on the size and AUM of the firm. Since they fall under the purview of the SEC, they are expected to act in a fiduciary capacity, which means they must always act in the best interests of clients while conducting business.

As fiduciaries, RIAs have a responsibility to maintain efficiency and costs while executing trades for clients and also have an obligation to disclose any potential conflicts of interest at all times. Unlike the traditional financial advisor (FA) that operates a commission-based business, RIAs generally run a fee-based business, which means they collect a percentage fee on the total assets under management (AUM) for clients.