If you have ever seen one of the many sensationalist movies based on the topic of greed on Wall Street, you may think of all financial services professionals as salespeople. However, the current reality is that the old business model of brokers/agents selling their companies' proprietary investment products to high-net worth clients is dying out.
RIA firms act as a fiduciary in their relationships with their clients. Basically speaking, a fiduciary is someone who acts on behalf of someone else. In the world of investments, a fiduciary is someone who makes investment decisions on behalf of another person. Being a fiduciary means putting the client’s best interests first and above all else.
As a fiduciary, RIAs can provide you with objective advice on your total financial picture. They will provide feedback on overall goals and objectives and review these with you in regular intervals. They are focused on your unique situation. Not every financial service professional is a fiduciary, so it is important to check that your advisor is one.
There are three broad categories of money management amongst RIA firms: wealth managers, financial planners, and investment managers:
RIAs that focus primarily on providing wealth management and financial planning services typically select passive investments for their clients like ETFs, index funds, open end and closed end mutual funds, because they do not want to be involved in the time and effort required to research, purchase, and track an active portfolio of individual stocks and bonds. Also, mutual fund assets are pooled funds with no consideration given to an individual shareholder’s personal or tax circumstances.
RIAs, which have an investment management focus, can create a personalized active portfolio in holdings of individual common stocks and bonds. As active managers, they may have the time, talent, and the right temperament to invest in individual securities. Their portfolios can be customized to account for a client’s unique personal or tax circumstances. RIAs that are investment managers can achieve higher (or lower) investment returns for their clients by concentrating their clients’ investments in fewer investment holdings than are held in a typical broadly diversified mutual fund. Also, they can create portfolios of “ESG” (environmental, social, and corporate governance) holdings, if their client prefers to invest in environmentally friendly stocks or companies whose managements are sensitive to social and corporate governance issues.
There is an additional benefit when the RIA offers other financial services in-house, such as financial planning. All in all, hiring a RIA to manage your investments is an excellent way to create wealth and have a savvy, objective financial resource with you to guide you along the path towards financial success and freedom.
Only 17% of Americans say they work with a financial advisor. If you are one of the 83% and would like to learn more about our investment management and financial planning services, please contact us at 515-557-1860 or email us at firstname.lastname@example.org. We are a fiduciary based in Des Moines, IA, serving clients from across the U.S. We look forward to cultivating a positive and rewarding relationship with you.