Name That Acronym

By HMA Team on November 26, 2019

As you’ve probably noticed, the financial industry is rife with acronyms. They follow practitioner’s names, are used to identify stock exchanges, and differentiate types of products. Acronyms are also used to describe types of firms. But what does this mean to you? Well, there is a lot of useful information which can be gleaned from the way an organization self identifies. The implications of these organizational structures are far reaching and can even affect the standard of care received by the client.

Broker-Dealer (B/D)

A broker-dealer employs registered representatives (RR) to sell its products. Large B/Ds are often called wire houses. Wells Fargo is an example of a wire house. However, there are also smaller independent B/Ds. Examples of independent B/Ds include LPL Financial and Commonwealth. The important thing to note is that a RR employed by a B/D is not automatically held to a fiduciary standard. These advisors are held to a “suitability” standard, which essentially states that the individual must recommend something to the client that is considered suitable for the client’s needs. The suitability standard does not require the RR to place the client’s interests above their own. It is also important to note that some B/Ds are limited in what products they can offer to those created and managed by their own company.

Registered Investment Advisor (RIA)

A registered investment advisor (RIA) is an organization or person- if a solo practitioner- regulated by the Securities Exchange Commission (SEC). The SEC oversees federally registered RIAs while states oversee smaller RIAs.  An RIA is held to a fiduciary standard, which means the advisor must place the interests of the client above their own at all times. They are also required to disclose any conflicts of interest that may arise while conducting business. An RIA also generally has access to a wide range of products and is often not limited to the offerings of their parent company, as can be the case at some wirehouses.

Investment Advisory Representative (IAR)

An investment advisory representative (IAR) works for an RIA. At HMA, we are IARs associated with HighTower, our RIA. As IARs under an RIA, we are fiduciaries, held to the highest industry standards of client care. We place our clients’ needs above our own interests and disclose conflicts of interest should they ever arise. As individuals, we actively seek opportunities for professional enrichment, as it allows us to keep our knowledge current, which in turn benefits our clients.

Fiduciary standards. IARs within an RIA. LMNOP.  That’s HMA.