RIA vs. Financial Advisor: Key Differences and Industry Insights

The financial advisory industry is experiencing massive growth and change, but compliance remains one of the biggest headaches for marketing teams in this space. And understanding the differences between RIAs and other financial advisors is also about knowing which regulatory standards apply to your content.

Bottom line up front: RIAs operate under stricter fiduciary standards and different marketing rules than traditional financial advisors, and this affects everything from the language you can use to the claims you can make in your campaigns.

Introduction to RIA vs. Financial Advisor

The numbers tell a pretty compelling story about where this industry is headed. Registered Investment Adviser firms have become the fastest-growing segment in wealth management, and by the end of 2023, RIAs accounted for nearly 30% of all financial advisors in the U.S.

Almost one-third of independent advisors surveyed had considered opening their own RIA firm in the past year. That's a massive shift that reflects rising interest in the independent, fiduciary-oriented RIA model.

On the client side, the story is equally telling. Over the past five years, 22 million+ additional individuals turned to investment advisers for asset management, with the number of clients and assets growing about 12% annually. Industry leaders attribute this growth to investors' increasing trust in advisors who put clients' interests first under fiduciary duty.

The demand for advice is rising even as the overall advisor headcount remains relatively flat (growing only about 0.2% per year over the last decade), signaling a consolidation toward fiduciary advisors.

What Are the Key Differences Between an RIA and a Financial Advisor?

The term "financial advisor" is a broad umbrella that can include brokers, insurance representatives, planners, or RIAs. But RIAs operate under distinct regulations that set them apart in important ways.

RIAs must register with the SEC (if managing over $100 million) or state regulators and are legally obligated to act as fiduciaries under the Investment Advisers Act of 1940.

In contrast, many non-RIA financial advisors (like broker-dealer representatives) are overseen by FINRA and historically followed a suitability standard. Now they follow Regulation Best Interest (Reg BI), which requires best-interest recommendations but not a continuous fiduciary duty.

This means RIAs are held to a higher duty of loyalty and care, always putting client interests first, whereas brokers' obligations apply transaction by transaction.

Compensation models create another key difference. RIAs typically use fee-based compensation, aligning their revenue with client portfolio growth. Many RIAs are fee-only, avoiding commissions on product sales to minimize conflicts.

The industry is clearly shifting toward the RIA approach. Asset-based fees now make up about 72% of the average advisor's revenue, while commissions have fallen to just 23%. By 2026, over 77% of advisors plan to primarily use fee-based models.

Most RIAs are small businesses as well. About 91.7% of SEC-registered advisory firms have 100 or fewer employees, and about 70% manage under $1 billion AUM, reflecting a boutique, client-focused approach.

Role of a Registered Investment Advisor

RIAs are investment professionals or firms that provide ongoing investment advice and portfolio management with a fiduciary obligation. There were 15,114 SEC-registered RIA firms in 2022, an all-time high, collectively managing $114.1 trillion in assets for about 61.9 million clients.

RIAs continuously monitor client portfolios and often have discretionary authority to trade on clients' behalf. But the most important distinction is that RIAs must mitigate conflicts of interest and act in the client's best interest at all times.

An RIA's income is typically fee-based. For example, an advisor might charge about 1% of assets under management annually. This structure aligns the advisor's success with the client's success, as opposed to earning commissions for product sales.

Many RIAs go beyond investments into holistic financial planning. According to Cerulli data, 52% of RIA firms provide ongoing financial planning (projected to reach 55% by 2026) and 91% offer retirement income planning, often alongside tax or estate planning for clients.

The RIA's role is as a trusted, fiduciary wealth manager, typically operating as an independent small business, and paid via transparent fees for advice.

Types of Financial Advisors and Their Responsibilities

The term "financial advisor" encompasses multiple categories - from independent RIAs and wealth managers, to broker-dealer representatives, insurance or annuity advisors, and wirehouse advisors at big firms.

Wirehouse advisors (at firms like Morgan Stanley or Merrill Lynch) still manage over one-third of all client assets, but they represent a shrinking segment. Their headcount share is projected to slip from 15% to 14% in the next five years as independents gain ground.

Meanwhile, independent advisors and hybrids (including independent broker-dealer reps and RIAs) have grown their market share. Independent RIAs now manage about 16% of industry assets, up from 12% a decade ago.

Despite their different titles, many financial advisors are expanding their responsibilities beyond stock picking. On average, an advisor today offers 7.1 distinct services to clients - ranging from investment portfolio management and retirement planning to insurance, college planning, and tax-efficient strategies.

The industry is clearly moving toward comprehensive financial planning. Currently about 48% of all advisors provide holistic financial plans for clients, and this is expected to rise to 55% by 2026. The share of clients receiving no financial planning is dropping (from 30% in 2024 to a projected 23% by 2026).

Comparing RIA vs. Broker: What Sets Them Apart?

A Registered Investment Advisor operates independently (or in an independent RIA firm) and must adhere to a fiduciary standard by law. A broker (registered representative of a broker-dealer), on the other hand, typically works under FINRA rules and Reg BI.

The practical difference is that RIAs continuously put client interests first, whereas brokers are required to recommend suitable or "best interest" products at the time of sale but can have ongoing conflicts (like commissions).

This gap is driving many brokers to "break away" and become RIAs. Between 2022 and 2023, 3,382 dually-registered advisors gave up their brokerage licenses to operate solely as RIAs, while only 1,065 advisors went the opposite direction. This net migration reflects how many financial advisors perceive the RIA model as offering more client-focused freedom and less conflict.

Broker-dealer firms vs. RIA firms also differ in their business models. Brokers often have access to proprietary products and earn transaction-based revenue, whereas RIAs are fee-only or fee-based, selling advice rather than products.

By 2026, 84% of independent RIA firms say they'll be using asset-based fees, with almost 0% relying on commissions. Wirehouse brokerage firms will also be predominantly fee-based but still expect around 15% of their advisors to use commissions in 2026.

At wirehouses, only 3% of advisors charge standalone fees for financial plans, whereas in independent broker-dealer channels around 35-38% do.

RIAs vs. brokers can both help you invest, but RIAs operate as fiduciary advisers paid for advice, while brokers function as intermediaries paid via investments sold. By 2027, RIAs are projected to control about one-third of all advised assets (up from about 27% today), largely at the expense of traditional brokerage channels.

How Do RIAs and Financial Advisors Work in the Investment Landscape?

Financial advisors in aggregate manage an enormous share of household wealth. In the U.S. retail market, adviser-managed assets reached $31.3 trillion in 2023, a new high.

This growth has come even as advisor headcount stagnated, meaning advisors are handling more assets per advisor (through efficiency, technology, and teaming). Advisor practices are consolidating - for example, large teams ($500M+ AUM) now control 67% of industry assets, and nearly half of advisors work in teams.

A recent trend is the rise of retail direct investing platforms (DIY channels), which is reshaping how advisors position their value. According to Cerulli, direct-to-investor platforms (like Vanguard, Fidelity, Schwab retail) grew faster than all advisor-mediated channels from 2022 to 2023, partly because they successfully retain assets when investors roll over 401(k)s and IRAs into their platforms.

In response, financial advisors (RIAs and others) are changing their work to emphasize services beyond investment selection. Advisors are focusing on holistic wealth management - things like comprehensive financial planning, tax strategy, behavioral coaching, estate and legacy planning - which automated platforms don't fully offer.

RIAs and financial advisors are carving out their place by offering personalized advice and complex planning, and by partnering with fintech solutions rather than only competing with them.

The Investment Adviser's Approach to Wealth Management

RIAs typically take a holistic approach to managing wealth. Freed from product sales quotas or proprietary funds, independent RIAs can build highly personalized strategies.

Statistics show that many RIA firms integrate comprehensive financial planning into their service model. 52% of RIAs already offer ongoing, comprehensive financial planning relationships (and this is expected to rise to 55% by 2026). Nearly all provide core retirement planning (91%), and about half offer advanced planning like tax and estate planning for clients.

This broad suite of services illustrates the RIA philosophy: treat the client's financial life as a whole, from investments to retirement income, tax efficiency, risk management, and legacy goals. The fiduciary duty underpins this approach - RIA advisors are legally and ethically bound to make decisions in the client's best interest, which naturally aligns with a long-term, goals-based planning mindset.

Because RIAs are obligated to put clients first, they often build deep trust and long-term relationships. This fiduciary ethos has tangible benefits. The Investment Adviser Association notes that investors are increasingly engaging fiduciary advisors because they trust that their advisor will continuously prioritize their needs.

Over the past five years, the number of individuals served by RIAs jumped by 22 million (about 12% annual increase), indicating that investors gravitate to the client-first, advisory model for wealth management.

In one survey, 80% of clients said they were content with their advisor, citing trustworthiness and quality of service as top reasons.

How Do Financial Advisors Provide Investment Advice?

The industry has been shifting strongly toward advice delivered via fee-based accounts rather than one-off transactions. Currently, asset-based fees comprise about 72.4% of the average financial advisor's compensation, whereas commissions account for only about 23%.

A Cerulli survey of advisors found that over 77% of advisors plan to chiefly use asset-based fees by 2026, up from about 72% in 2024, while those relying on commission-only arrangements will drop to roughly 16%.

Investment advice today is usually an ongoing service, with advisors often acting as fiduciaries or at least quasi-fiduciaries via advisory accounts, as opposed to the purely transactional stockbroker of the past.

Financial advisors provide advice in various forms - from building an asset allocation strategy to selecting specific investments to giving behavioral coaching during market swings. Many advisors utilize model portfolios and research tools to inform their investment advice. (96% of RIAs reported using centrally managed model portfolios for consistency in 2023.)

Advisors also increasingly incorporate financial planning software, risk assessment questionnaires, and tax analysis as part of delivering advice. The role has expanded: beyond picking stocks or funds, advisors educate clients, develop customized financial plans, and adjust those plans as life events occur.

Surveys show advisors typically offer around 7 different services to clients. By bundling multiple advice areas, advisors can address a client's full financial picture.

Modern financial advisors provide investment advice not as an isolated recommendation, but as part of an ongoing advisory partnership - usually for a fee, with a broad toolkit to help clients reach their goals.

The Role of Broker-Dealers in Investment Management

Broker-dealers are firms that execute trades and sell securities, and they play a crucial infrastructure role in investment management. Many financial advisors (especially those called "financial consultants" at banks or wirehouses) are registered representatives of broker-dealers.

There are approximately 3,298 FINRA-member broker-dealer firms as of the end of 2023, a number which has been declining about 2% annually as the industry consolidates. These firms collectively oversee a huge sales force: about 628,000 registered representatives are licensed with FINRA to sell securities.

In the investment management process, broker-dealers are responsible for trade execution, custody of client assets (in many cases), and product distribution. Unlike RIAs who charge fees for advice, broker-dealers earn most of their money through transaction revenues and commissions.

Because of this commission-based model, managing conflicts of interest is a key part of broker-dealer regulation. FINRA and SEC rules (like Reg BI) require B/Ds to disclose and mitigate conflicts, but brokers do not have to eliminate them as RIAs must.

Broker-dealers also provide the compliance and supervision framework for their representatives - every trade and recommendation goes through supervision to ensure it meets suitability/best-interest standards.

Many broker-dealers today have both a brokerage and an advisory business (dually registered), enabling their advisors to charge fees on some accounts and commissions on others (often called a hybrid model).

Broker-dealers remain critical for certain investment products - for instance, new stock or bond issues, options and margin trading, and alternative investments often require a B/D for access. They also often provide research, trading platforms, and liquidity that independent RIAs obtain by affiliating with custodian or B/D partners.

Which Option Is in Your Best Interest?

When choosing between different types of financial professionals, a key question is: who will act in your best interest? Surveys show that consumers overwhelmingly expect and want advice that puts them first.

A 2024 CFP Board study found 97% of Americans agree that any financial professional giving retirement investment advice should be required to act in their client's best interest.

In reality, RIAs are obligated to do this (fiduciary duty), whereas non-RIA financial advisors (like brokers) are held to Reg BI's best-interest standard for specific recommendations but not a blanket fiduciary obligation.

Data suggests that working with a fiduciary-aligned advisor can improve financial outcomes and confidence. For instance, three-quarters (75%) of Americans who have a financial advisor believe they will be financially prepared for retirement, versus just 45% of those without an advisor.

Those with advisors also tend to accumulate more assets and retire earlier on average than those going it alone.

In a recent survey, 89% of consumers said they prefer to work with a financial professional who has a respected certification like CFP®, which requires a fiduciary standard of conduct.

Ultimately, the "best" option depends on your needs: if you prefer a commission-based arrangement for occasional stock trades, a broker might suffice; but if you want comprehensive, unbiased planning, an RIA or fee-based financial advisor who pledges fiduciary duty is probably the better choice.

Assessing the Fiduciary Duty of RIAs Versus Financial Advisors

RIAs are fiduciaries by law - under the U.S. Investment Advisers Act and state regulations, an RIA must uphold a fiduciary duty of loyalty and care toward clients. This means avoiding or disclosing all conflicts of interest and always putting the client's interests ahead of their own.

By contrast, not all "financial advisors" are fiduciaries. Broker-dealers and their representatives follow Regulation Best Interest (since 2020), which raises the bar above the old suitability standard but still is not as stringent as a fiduciary duty.

Under Reg BI, brokers must recommend investments that are in a client's best interest at the time of recommendation and cannot put their own interests ahead of the client's when making that recommendation. However, Reg BI does not require ongoing duty after the transaction or a duty to monitor - nor does it outright prohibit commissions or proprietary products.

In practical terms, this means a client might receive similar advice from a broker and an RIA most of the time, but the RIA is continuously accountable as a fiduciary throughout the advisory relationship. A broker's fiduciary-like responsibility is episodic (per transaction).

The fiduciary distinction can affect what products are recommended and how transparently an advisor behaves. RIAs must provide full disclosure via Form ADV about their fees, any conflicts (like if they get third-party referral payments), and disciplinary history.

CFP® professionals (though not a license type, it's a certification) voluntarily agree to a fiduciary standard when providing financial advice to clients. After expanding its fiduciary requirement in 2019, 90% of CFP advisors did not raise their minimum account requirements - evidence that acting as a fiduciary did not limit access to advice for smaller clients.

RIAs unequivocally owe fiduciary duty; brokers and some other financial advisors do not, except in specific contexts. As an investor, you should understand which standard your advisor is held to.

Conflicts of Interest and Commission Structures

How an advisor is paid can create potential conflicts of interest. Commission-based compensation (common in broker-dealer settings) inherently incentivizes sales: for example, a broker might earn a 5% commission for selling you a certain mutual fund or annuity.

A telling perspective from an RIA who formerly worked under commissions: "In my opinion, the commission-based dynamic shouldn't exist in the room... The entire reason we have two standards of care is because the conflict is so massive."

Many advisors feel the same, which is why the industry has shifted toward fee-based models to reduce conflicts. Today, the majority of financial advisors' revenue (around 77%) comes from asset-based or fixed fees rather than commissions.

Fee-based advisors typically charge a percentage of AUM or a flat/retainer fee, which aligns more closely with the client's interests (portfolio grows, advisor earns more; portfolio falls, advisor earns less). Still, conflicts can exist even with fees (like an advisor might be tempted to keep a client's mortgage to invest more), but these are generally less direct than product sales conflicts.

Interestingly, not all investors view commissions as negative - about 23% of affluent investors say they actually prefer paying per transaction (commission) for advice. These tend to be investors with more limited advice needs or those making one-off trades, who feel a commission is cheaper than an ongoing fee. Meanwhile, 36% prefer a fee-based arrangement and 25% prefer purely self-directed platforms.

For conflicts of interest, the key is managing and disclosing them. RIAs mitigate conflicts by disclosing them in Form ADV and often by adopting a fee-only stance (no commissions at all) - for example, 100% of an RIA's compensation might come from client fees, eliminating the incentive to recommend any particular product.

About 21% of advisors charge standalone fees for financial plans, which can be a way to get unbiased planning advice. However, at wirehouses only 3% of advisors charge such fees (meaning planning is often an add-on to product sales), versus 38% in insurance B/Ds and 35% in independent B/Ds who charge planning fees.

Commission structures can create conflicts, but regulators and firms have taken steps to lessen their influence. As a client, understanding how your advisor gets paid is crucial to spotting conflicts. A fiduciary, fee-only RIA has fewer obvious conflicts than a commissioned broker, but both types owe you transparency.

What Are the SEC Regulations for RIAs and Financial Advisors?

The SEC is the primary regulator for RIAs managing over $100 million in assets (smaller advisers are under state jurisdiction). Key SEC rules that govern RIAs include the Investment Advisers Act of 1940 and its associated regulations. This act establishes the fiduciary duty and requires advisers to register by filing Form ADV, which discloses their services, fees, disciplinary history, conflicts, and more.

One major new rule was the SEC Marketing Rule (Rule 206(4)-1), implemented in November 2022, which overhauled how RIAs can advertise and solicit clients. Under this rule, advisors can use testimonials and performance figures in marketing but must follow strict conditions and disclosures. By mid-2023, about 40% of RIAs reported including performance results in their advertising under the new rule.

Another significant regulation in the works is the SEC's proposed "Safeguarding" (Custody) Rule update. In 2023, the SEC proposed expanding custody requirements to more types of assets and advisors - an estimated 5,000 additional advisors (over one-third of the industry) would be subject to custody rules if the proposal is enacted.

Financial advisors who are brokers are regulated under the Securities Exchange Act of 1934 and rules enforced by both the SEC and FINRA. A landmark recent regulation is Regulation Best Interest (Reg BI), which took effect June 2020 for broker-dealers. Reg BI requires brokers to act in the best interest of retail customers when making a recommendation of a security or investment strategy.

Another important regulation for brokers is the Client Relationship Summary (Form CRS) - both broker-dealers and RIAs must provide this short plain-English brochure to retail clients, summarizing services, fees, standards of conduct, conflicts, and any reportable legal history.

How Does the Securities and Exchange Commission Oversees RIAs?

The SEC's Division of Examinations is tasked with inspecting registered investment advisers to ensure they comply with laws and rules. Due to resource constraints, the SEC examines only about 15% of all RIAs per year on average. This implies that any given advisor might be examined roughly once every 6-7 years (though higher-risk firms are targeted more frequently).

The SEC has acknowledged that the growing number of RIA registrants strains its capacity - the Division of Exams noted that increases in exam coverage would require significant investments in personnel or potentially a self-regulatory organization for RIAs to augment oversight.

When RIAs are examined, the SEC typically reviews areas like fiduciary duty (are there undisclosed conflicts?), custody of client assets, compliance with new rules, and issues like fee billing and best execution. In FY 2023, the SEC brought 784 enforcement actions across the securities industry and obtained nearly $5 billion in financial remedies.

The SEC also prioritizes oversight where investor harm could be significant. One notable focus is RIAs to private funds (hedge funds, private equity, etc.). Private fund advisers represent over 35% of all RIAs, managing $21+ trillion in assets.

State Securities Regulations and Their Impact on Financial Professionals

Financial advisors who manage smaller amounts (generally under $100 million in AUM) are typically regulated by state securities authorities rather than the SEC. There is a huge population of these state-level advisers - as of 2024, state regulators oversee approximately 16,897 state-registered investment advisers.

These tend to be very small practices (often solo advisors or small partnerships). The impact of state regulation is that these advisors must comply with Blue Sky laws of their home state and any state where they have clients.

States can be innovators or interpreters of standards that go beyond federal requirements. A prime example is the fiduciary duty for broker-dealers: In 2020, Massachusetts implemented a state regulation imposing a fiduciary duty on broker-dealers and their reps when dealing with clients, effectively holding them to a higher standard than Reg BI. In August 2023 the Massachusetts Supreme Judicial Court upheld it, validating the state's authority to enforce a stricter standard for brokers operating in MA.

How to Select the Right Financial Advisor or RIA for Your Investment Needs?

Start by clarifying what help you need - is it a comprehensive financial plan for retirement, or just investment management for a portfolio, or perhaps specialized advice (like tax or estate planning)? Your needs will guide the type of advisor best suited for you.

If you need holistic planning and ongoing guidance, an RIA or CFP® professional who offers comprehensive financial planning would be a good match. 89% of consumers say they prefer to work with a financial advisor who has a certification like the CFP®, which also implies a commitment to high ethical and fiduciary standards.

One of the most effective ways to find a trustworthy advisor is through referrals. Over 55% of new clients of advisors come via referrals from existing clients, and another about 13% come from referrals by other professionals.

Interview multiple advisors if possible. Key questions to ask include: Are you a fiduciary 100% of the time? How do you get paid (fees, commissions, or both)? What services are included? What are your areas of specialization and typical client profile?

Check regulatory records for any red flags. A study found about 1 in 12 financial advisors have a history of misconduct on their record. Look up your prospective advisor on BrokerCheck (for brokers) or the SEC IAPD database (for investment advisers) to see if they've had any disciplinary issues.

Identifying Your Financial Goals and Retirement Planning Needs

An important step in the advisory process is to clearly identify your financial goals - whether it's planning for a comfortable retirement by a certain age, saving for children's college, buying a home, or leaving a legacy.

In a Northwestern Mutual study, only 34% of people without a financial advisor said they know how much they need to save to retire comfortably, whereas 62% of those working with an advisor knew their retirement "number."

Surveys indicate a gap in readiness - only about 49% of Baby Boomers and 48% of Gen Xers believe they will be financially prepared for retirement when the time comes.

In 2024, the average U.S. adult said they need about $1.46 million to retire comfortably (up 15% from the year before). While that's a rough benchmark (everyone's number will differ), it indicates people are becoming aware of increasing longevity and costs.

Evaluating Fiduciary Standards and Qualified Financial Advisors

You can evaluate an advisor's fiduciary status by asking directly if they will act as a fiduciary for you and by checking their registrations (RIAs and CFP® practitioners are bound by fiduciary standards when delivering advice).

The CFP Board implemented a stringent Code of Ethics in 2019 requiring fiduciary duty whenever a CFP professional gives financial advice. The result has been positive growth in the ranks of qualified, fiduciary advisors: in 2024, the CFP Board reported a record 103,093 CFP® professionals in the U.S., a 4.3% increase from the previous year.

Besides credentials, evaluate the advisor's experience and disciplinary history. A study by university researchers found that approximately 8% of advisors have been disciplined for misconduct at least once in their career. That means 92% have clean records - and you probably want to stick with that 92%.

Questions to Ask When Working with a Financial Advisor or RIA Firm

These are perhaps the two most revealing questions. Ask your advisor plainly, "Will you act as a fiduciary in all aspects of our relationship?" A trustworthy advisor will gladly say yes and explain what that means.

Astonishingly, investors often assume the best: in one survey, 92% of Americans who rolled over a 401(k) thought the financial professional advising them was required to act in their best interest - whereas in reality, many rollovers are handled by non-fiduciary brokers. So, never assume - always verify fiduciary commitment.

Equally important, ask "How do you get compensated?" Have them break down the fee schedule and any other sources of compensation (trails, incentives, etc.). If an advisor is evasive or uses jargon to obscure costs, that's a red flag.

Ask the advisor to describe their investment philosophy and planning process. Also inquire about how they measure success - is it beating a benchmark, achieving a target return, meeting the client's goal, or something else?

Final Thoughts

The regulatory differences between RIAs, broker-dealers, and other financial professionals create a complex compliance environment for marketing teams. We understand the nuances of each channel's requirements and can help you develop content that works across all advisor segments while meeting the specific regulatory standards that apply. And if you are RIA, request demo access to see how we can help you automate compliance reviews and reduce the risk of regulatory issues in your financial services marketing.