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The importance of aligned interest

Registered Investment Advisers (RIA) are fiduciaries, and don't get paid commissions or 12B-1 fees. A broker has a fiduciary responsibility to his employer. At the end of the day their compensation is based on some kind of commission or back-end fees. Whereas a Registered Investment Adviser is not permitted to take commissions. RIAs only make money as a percentage of their clients' Assets Under Managment (AUM). That's important because it results in an RIA's interest being better aligned with their client's interest than a broker.

Often an RIA's management will invest their money in the exact same portfolio as their clients'. This is perhaps the best case scenario for retail investors with respect to alignment of interest. So, how can an investor know if their adviser's interest is aligned with theirs. ASK THEM how they are compensated!

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About the Author

Vern Bell, Texas Elite Advisory, LLC
101 E. Park Blvd, Suite 600
Plano, TX 75074

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