Fiduciary
Most importantly, RIAs are legally required to act as fiduciaries for their clients. This means they must always act in the best interest of their clients and put their clients’ interests above their own.
Registration
Firms with more than $100 million in assets under management (AUM) must register with the Securities Exchange Commission (SEC). The SEC is responsible for enforcing federal securities laws and regulating the securities industry.
Form ADV
Firms must file a Form ADV with their state and/or the SEC. This form details the services provided by the firm, how advisors are compensated, possible conflicts of interest, the firm’s code of ethics, and advisors’ educational backgrounds. RIAs are required to provide this document to all new clients, so if you don’t receive this form ask your advisor why. You can find PVI’s latest Form ADV - here.
Exam
Advisors employed by an RIA must pass the Series 65 exam which tests examinees on federal securities laws and topics related to investment advice. Advisors who hold a CFP or CFA designation can receive an exemption from taking the Series 65 exam.
Why Choose a Registered Investment Advisor?
As you are choosing which advisor to partner with, it’s important that your advisor registers with the appropriate regulatory body and submits the right paperwork. However, arguably more important is whether they are legally required to put your best interests first.
​
Generally speaking, advisors fall into two categories: Registered Investment Advisors and broker-dealers. As mentioned previously, Registered Investment Advisors are held to the fiduciary standard and obligated to act in your best interest at all times, while broker-dealers are not.
​
Personal Capital, an online wealth manager, polled Americans and found that almost half falsely believed that all advisors are required to always act in the best interest of their clients. Unfortunately, this is not the case.
​
Broker-dealers are instead held to the suitability standard, which requires a broker-dealer advisor to make a reasonable effort to ensure the advice they provide is suitable for their clients. This vague definition gives broker-dealers ample room to provide advice that is not in the best interest of their clients.
Would you rather receive advice that is always in your best interest or advice that may be influenced by an advisor’s incentive to sell certain financial products or the interests of the advisor’s firm?
Ask your potential advisor whether they are held to the fiduciary standard or not, and accept nothing less than a “yes” or “no” answer.
Pine Valley Investments RIA
At Pine Valley Investments, all of our advisors, operations specialists, and investment team members hold either the Series 65, Series 7 & 66, the CFP®, or the CFA designation. Collectively, Pine Valley Investments has 150+ years of financial services experience. As fiduciaries, we are always required to put your best interests first.