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BT Wealth Management – RIA vs. Broker-Dealer

It is important for an investor to know the differences between a Registered Investment Advisor (RIA) and a Broker-Dealer, or at least know the right questions to ask. The major difference has to do with the fiduciary duty of the advisor. Does your advisor put your best interests first all the time? RIAs have a fiduciary duty to their clients and are regulated by the SEC. On the other hand, bank, broker and insurance company representatives typically have a fiduciary duty to their employer and merely a suitability standard to their clients. The suitability standard simply requires an investment be suitable at the time of the purchase, or what the advisor deems is appropriate for the client, and ongoing suitability is not required.

Fiduciaries are required to act in their client’s best interests at all times. Transparency of fees and performance are key tenets of a fiduciary. Those operating under the suitability standard are not required to reveal any of this information. A reasonable advisory fee should range somewhere between 0.5% and 1% depending on the size of the account. However, there could be other fees that may not be obvious. Do your holdings include A, B or C share class mutual funds? If so, then additional management and marketing fees are embedded in the form of loads and 12b-1 fees rebated back to advisors. The I-share (Institutional) class of mutual funds typically has the lowest fees and no rebates to the advisor. Clients should always ask their investment/financial advisor which share classes are included in their portfolio.

BT Wealth, as an RIA, has a fiduciary responsibility to act in the best interests of our clients at all times. We are aligned with our clients on investment selection and fees and have every incentive to select the best investments for our clients. Click here for an article that gives a good, quick overview of the different types of money managers out there.

For more information on the differences between RIAs and Broker-Dealers, or about BT Wealth Management, please contact Scott Craig or call 770.790.3721.