What’s the Difference?

When choosing a financial advisor, it is important to do your due diligence. Among the many factors you may wish to consider is whether your financial advisor is affiliated with a broker-dealer or an independent registered investment adviser (RIA). These important distinctions hinge on one word that can be very subtle yet different: fee-based versus fee-only.

What’s the Difference?

The Securities and Exchange Commission directly regulates RIAs. The law requires RIAs to put your interests ahead of their own, throughout the duration of your relationship. This legally binding fiduciary duty requirement is perhaps the biggest point of differentiation between RIAs and broker dealers.

Broker-dealers are required to act in the clients’ best interest at the time of taking action. However, RIAs are required to act in that manner all the time.

How RIAs and broker-dealers charge their fees also differs. RIAs charge an ongoing fee and always look at the account on a regular basis. They are more relationship focused. The broker-dealer is more transactional.

Finally, broker-dealers often are given a limited choice of product companies that have a contractual relationship with the broker-dealer platform. While this list can seem extensive, these brokers do not have access to everything available like you may think. Rather, the broker-dealer determines through its own due- diligence process and relationships what their broker can buy inside a client’s account. Under the RIA model, an adviser can choose from the entire universe of available, regulated products without the confines of what any broker-dealer has excluded.

As is with any business model, one bad apple can ruin the whole bunch. I know great financial advisors on both ends of the spectrum. Also, there are other nuances about what broker-dealers and RIAs can and cannot do, but the main distinction is where we first started: is your advisor fee-based or fee-only? It’s a simple question that can lead to more complex questions, but this is a good starting point when doing your due diligence on any advisor.

Modera is an RIA

Modera Wealth Management LLC and our Atlanta advisors have been fee-only registered investment advisors

since our inception in 1983. Creating a fee-only RIA was a rarity at the time, but we are proud to have been an early adopter of this business model. Throughout our history, we have never accepted commissions or referral fees from the sale of financial products. We remain committed to this approach, as we firmly believe it is in your best interests to serve you as a fiduciary throughout our relationship.

Modera Wealth Management, LLC (“Modera”) is an SEC-registered investment advisor with places of business in Massachusetts, New Jersey, North Carolina, Georgia and Florida. SEC registration does not imply any level of skill or training. Modera may only transact business in those states in which it is registered or qualifies for an exemption or exclusion from registration requirements. SEC registration does not imply any level of skill or training. For information pertaining to our registration status, fees and services, please contact us or refer to the Investment Adviser Public Disclosure web site

(w   ww.adviserinfo.sec.gov) to obtain a copy of our disclosure statement set forth in Form ADV Part

2A. Please read the disclosure statement carefully before you invest or send money.

This article is limited to the dissemination of general information about Modera’s investment advisory and financial planning services that is not suitable for everyone. Nothing herein should be interpreted or construed as investment advice nor as legal, tax or accounting advice nor as personalized financial planning, tax planning or wealth management advice. For legal, tax and accounting-related matters, we recommend you seek the advice of a qualified attorney or accountant. This article is not a substitute for personalized investment or financial planning from Modera. There is no guarantee that the views and opinions expressed herein will come to pass, and the information herein should not be considered a solicitation to engage in a particular investment or financial planning strategy. The statements and opinions expressed in this article are subject to change without notice based on changes in the law and other conditions.

Investing in the markets involves gains and losses and may not be suitable for all investors. Information herein is subject to change without notice and should not be considered a solicitation to buy or sell any security or to engage in a particular investment or financial planning strategy.

Individual client asset allocations and investment strategies differ based on varying degrees of diversification and other factors. Diversification does not guarantee a profit or guarantee against a loss.