I'm Brad Wales with Transition To RIA. This is video #3 of the Transition To RIA video series where I answer RIA related questions I get from advisors just like you. On today's video I explain what the difference is between a Registered Investment Advisor (RIA) and an Investment Advisor Representative (IAR).
What I do: At Transition To RIA I help financial advisors understand everything there is to know about WHY and HOW to transition their practice to the Registered Investment Advisor (RIA) model.
RESOURCES & LINKS
___________________________________________
🔹 Website: TransitionToRIA.com/
🔹 Contact Me: transitiontoria.com/contact/
🔹 List of all questions I've answered: transitiontoria.com/videos/
🔹 Whitepaper ("11 Ways The Economics Of The RIA Model Are Superior To Other Advisor Affiliation Options"): transitiontoria.com/whitepapers/
🔹 Transcription of video:
What is the difference between an RIA and IAR? That is the subject of today’s video which is question #3 on the Transition to RIA video series.
Hi, I’m Brad Wales from Transition to RIA. I help advisors like you learn about the RIA model. How the economics work, how the flexibility works, the pros, the cons, the different ways to go about transitioning into the model. And if you were to decide to do it what are the steps of actually making that transition?
Head on over to TransitionToRIA.com if you’re not already there, to learn all kinds of additional things.
On today’s video we’re going to talk again about the difference between an RIA and an IAR. And just to complicate things of course in our industry, we also have the IRA, the Individual Retirement Account. Which we all know what that is.
But the question is what is the difference between an RIA and an IAR?
At its core, an RIA, Registered Investment Advisor is an entity. So a common thing I hear the owners/principals of an existing RIA say is “I am an RIA.” And that’s a commonly accepted or commonly used phrase and everyone understands what it means. But technically, an RIA is an entity. So as that owner or advisor yourself, you’re not really the RIA. That’s like owning a McDonald’s and saying “I’m a McDonald’s”. You might own a McDonald’s, you might run a McDonald’s, but you yourself are not a McDonald’s. So technically the RIA, Registered Investment Advisor is an entity. A legal entity that has to be setup and established from a regulatory standpoint.
Underneath the RIA, the individuals that are providing the advice are IARs, Investment Advisor Representatives. You more than likely right now are already an IAR at your existing firm. So if you’re at one of the traditional firms, if you’re providing fee-based accounts, you are an IAR under, as they say, the corporate RIA of that firm.
Now, you’re most likely wearing two hats if you’re at one of the more traditional firms out there. You’re probably wearing the hat of an IAR under the corporate RIA and you’re wearing your Series 7 registered rep hat under the corporate broker-dealer. So you’re kind of wearing both of those hats.
The reason I point this out is you’re already an IAR, you’re already working underneath an RIA, so that is nothing new. This is all assuming you’re providing fee-based accounts currently. The only difference would be if you were to start your own RIA…..again, you would set that up as a legal entity, there’s absolutely steps involved with how that gets set up, I’ll do future videos on it as well or you can jump over to my website, reach out to me, I’m happy to explain it whenever you’d like……but you set up that RIA and then underneath it you have to be registered as an IAR and there is a process to register.
It is the same process you go through generally at the end of every year. Your firm does this for you to make sure your IAR license carries over to that following year. Same thing would happen under your own RIA, again, it’s just it would be your RIA that you own at that point.
Final two things I’ll talk about are again it’s just different tasks. Keep in mind you will be using what’s called a compliance consultant to do these tasks. I’ll walk you through all that again in a future video. But setting up the RIA is one task and setting up each individual that’s going to be providing advisory services under that RIA is a separate task onto itself. Neither one is overly complicated by any stretch of the imagination but just to point out it is two steps that must be performed separately.
The last point I’ll make is keep in mind none of this has anything to do with the custodian you use to hold your assets. Con't....
See remainder of transcription here: transitiontoria.com/what-is-t...
Disclaimer: transitiontoria.com/terms/