Wirehouse vs RIA vs Broker Dealer

Wirehouse

A Wirehouse is a large integrated broker with a national, as opposed to regional business.  Wirehouses once collected trade orders from branch offices in distant cities using dedicated telegraph lines, hence the term wirehouse .

Wirehouse now typically refer to full-service brokerages that offer investment advice, trading services and research all under one roof..

Examples of wirehouses include Morgan Stanley Smith Barney, Bank of America Merrill Lynch, Wells Fargo Advisors, UBS Wealth Management and Charles Schwab.

RIA (Registered Investment Adviser) and Broker-Dealers

All financial advisors fall into one of two broad categories: Registered Investment Advisors (RIAs) and broker-dealers. RIAs are fiduciaries, while broker-dealers aren’t.

Although it sounds like an individual job title, a Registered Investment Adviser (RIA) refers to a firm that is registered with the Securities and Exchange Commission (SEC) or a state’s securities agency. Now, an individual who works for a RIA is an Investment Advisor Representative (IAR).

Broker-dealers are held to what’s referred to as a suitability standard when offering financial and investment advice, rather than a fiduciary standard. This means that their advice must be “suitable” for the client’s needs at that particular time. The suitability standard is less stringent than the fiduciary standard in terms of the advisor’s obligation to make recommendations that are in the client’s best interest.

In addition to the fiduciary obligation, the other main difference between an RIA and a broker-dealer is in the way they are compensated. RIAs either charge their clients a percentage of assets under management or a fixed or hourly fee. Broker-dealers, in contrast, receive most of their compensation through commissions based on the investment products they recommend and sell.

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WealthTech - Industry Trends

While the largest RIA custodians - SEI, Charles Schwab, TD Ameritrade, Interactive brokers and Fidelity - dwarf the smaller custodians by size, smaller custodians are targeting new market opportunities with specialized offerings such as alternative investments or targeting specific markets such as start-up RIAs.

#Wealth

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