Registered Investment Advisor Custodial Accounts


Registered Investment Advisors (RIAs) provide investment advice on a fee-basis for assets held in custodial accounts for the benefit of investor clients. Full-service brokerage firms offer traditional brokerage accounts to customers as non-discretionary accounts which require prior approval before trades can be executed. Fee-based asset managers provide investment advice as a registered investment advisor with full discretion granted by the customers over all investment decisions. RIAs are required to act on the behalf of its customers as a fiduciary. As a fiduciary, RIAs are required to act in their client’s best interests, they must avoid any conflicts of interest and provide full disclosure of any affiliated relationships which represent potential conflicts.

RIAs are either owned by a brokerage firm where investment funds are held in custody, or the RIA is independent and establishes a custodian for the customer assets they manage. The custodial brokerage firms that hold the securities in customer accounts provide an array of investment services including, trade execution, clearing, market maker, cashiering and portfolio accounting. Many independent Registered Investment Advisors establish custodial brokerage firm relationships with many of the following financial institutions:

The growth in the amount of assets managed by registered investment advisors on a fee-basis has grown steadily for decades as the result of investor’s desire for competent, unbiased investment advice. Before selecting a Registered Investment Adviser you should consider the following:

  • what financial advisory services do you need,
  • what financial advisory services can RIA deliver,
  • any limitations on what products RIA can recommend,
  • what exact services are you paying for,
  • how much those services cost,
  • how does RIA get paid, and
  • Any conflicts of interest the RIA may have when giving you investment advice.

Check for customer complaints and RIA background information. RIA are required to provide information about his firm and its employees. If you currently utilize a RIA, review the firm’s brochure and when it is updated by the firm there is important information available. You can also find the brochure on the SEC’s Investment Adviser Public Disclosure (IAPD) website.

The required disclosure contained in the brochure include, among other things:

  • Any material changes that the firm has experienced either recently or during the past year;
  • A description of the firm’s advisory business;
  • The firm’s fees and compensation;
  • Any conflicts of interest that the firm has or may have in representing you;
  • The types of clients that the firm has;
  • The firm’s methods of analysis, investment strategies, and risk of loss;
  • Disciplinary information, if any, about the firm and its employees;
  • The firm’s other financial industry activities and affiliations;
  • The firm’s brokerage arrangements;
  • When and how the firm reviews client accounts;
  • Client referrals and other compensation that the firm receives; and
  • Financial information about the firm.

For purposes of regulatory oversight, recent rule changes has divided RIAs into two categories based on the amount of assets under management (AUM) to determine whether they are regulated by state securities regulators or the Securities Exchange Commission (SEC):

  • Under $100 Million – State securities regulation
  • Over $100 Million – SEC regulation.

It is important to determine whether your investment portfolio has been properly managed by your registered investment advisor held in a custodial account based on your investment objectives, risk tolerances and investment time horizon.

Investors are advised to seek competent financial, tax and legal advice concerning the decisions they make with their investments. Klayman & Toskes, P.A. can provide you with a free consultation concerning any securities industry violations related to the handling of your investments accounts by a full-service brokerage firm or registered investment advisor.

Information contained on this webpage is for educational purposes only
and should not be considered legal advice.
No Information contained on this website creates an attorney-client relationship.