RIA operations glossary: 60 terms in plain English
This glossary defines the operations terms small registered investment advisers use every day, in plain English: billing terms such as billing in arrears and proration, compliance terms such as access person and brochure supplement, portfolio terms such as drift and strategy of record, and custody terms such as custodian and fee deduction. Each definition is short, and many link to a full guide.
Every industry has its shorthand. In a small RIA, the same person often moves between billing, compliance and portfolio work in one morning, and the terms blur. This glossary gives a short, plain definition for each, so a new hire, a client or a busy adviser can check what a word means without reading a rulebook.
Billing and fees
| Term | Plain definition |
|---|---|
| Advisory fee | What the client pays the adviser for advice and management, often a percentage of assets. |
| Billing in arrears | Charging for a period after it ends. See billing in arrears. |
| Billing in advance | Charging for a period at its start. |
| Billable balance | The account value the fee is charged on, after any exclusions the agreement names. |
| Exclusion | An asset or account the agreement says is not billed. |
| Proration | Charging only for the part of a period an account was managed. See prorating fees. |
| Tiered fee | Each slice of the balance billed at its own rate. See tiered, breakpoint or flat. |
| Breakpoint fee | One rate on the whole balance once it crosses a threshold. |
| Householding | Combining related accounts so the fee schedule applies to the combined balance. See household billing. |
| Fee deduction | The custodian taking the advisory fee directly from the client's account, using a file the adviser sends. |
| Fee exception | A client whose fee differs from the standard schedule: a negotiated rate, a cap or a waiver, recorded with its reason and dates. See negotiated fees and exceptions. |
| Client minimum | The smallest relationship a firm takes on, usually measured in household assets or annual fee. See client minimums. |
Compliance records
| Term | Plain definition |
|---|---|
| Books and records | The records an adviser must make and keep, and be able to produce. See books and records. |
| Form ADV | The adviser's registration form. Part 2A is the brochure; Part 2B is the brochure supplement. |
| Brochure | Form ADV Part 2A: a plain-language description of the firm, its services, fees and conflicts. |
| Brochure supplement | Form ADV Part 2B: information about the individuals who advise a client. See brochure supplements. |
| Chief compliance officer (CCO) | The person named to administer the firm's compliance policies. |
| Written policies and procedures | The firm's documented rules for how its work is done. See written procedures. |
| Annual review | The yearly check of whether those policies are adequate and followed. See the annual compliance review. |
| Code of ethics | The firm's standards of conduct, including rules on personal trading. |
| Access person | Under the SEC code of ethics rule, a supervised person with access to certain non-public information or involved in recommendations; access persons report their personal securities. |
| Personal securities reporting | Access persons reporting their own holdings and transactions. See personal securities reporting. |
| Complaints and incidents log | A dated record of client complaints and operational incidents and how each was handled. See the log. |
| Audit-ready | Records kept as the work happens, so they can be produced quickly. See what audit-ready means. |
| Regulation S-P | The SEC rule on protecting customer information. See Regulation S-P. |
| Proxy voting | Voting shares in client accounts on shareholder matters. See proxy voting. |
| Records-request drill | A practice run where the firm times how long it takes to produce a set of records for one client and one period. See the records drill. |
| Annual updating amendment | The yearly update to Form ADV, due within 90 days of fiscal year end for SEC-registered advisers. See preparing your ADV amendment. |
Portfolios and trading
| Term | Plain definition |
|---|---|
| Model portfolio | A target allocation the firm applies to accounts that follow it. |
| Strategy of record | The dated record of which strategy each account followed, and when. See strategy of record. |
| Model version | A dated revision of a model, kept so past decisions can be checked. |
| Benchmark | The index or blend a model is measured against. See benchmarks. |
| Drift | How far an account has moved from its target allocation. |
| Rebalancing | Trading an account back toward its target. See calendar or drift. |
| Concentrated position | A single holding that makes up a large share of an account or household. See monitoring concentration. |
| Discretionary account | An account where the adviser can trade without asking the client first. See the discretionary list. |
| Trade blotter | A record of trades: what, for whom, when and why. See the trade blotter. |
| Trade error | A trade that didn't match the instruction. See trade errors. |
| Time-weighted return | A return that removes the effect of deposits and withdrawals. See TWR vs MWR. |
| Money-weighted return | A return that reflects the timing and size of cash flows. |
| Trade hold | A flag on an account that pauses trading, with the reason, who placed it and what has to happen before it is lifted. See trade holds. |
| Non-discretionary account | An account where the client approves each trade before it is placed. See non-discretionary approvals. |
| Held-away account | An account held somewhere other than the firm's custodian, such as an employer retirement plan. See held-away accounts. |
| Investment restriction | A limit a client places on their account, such as excluding a company or keeping a holding. See client restrictions. |
| Uninvested cash | Cash sitting in an account above its target, often from deposits, transfers or maturities. See uninvested cash. |
| Backtest | A look at how a model would have behaved over a past period if held as designed. See backtesting. |
| Investment committee | The people who review the firm's models and make investment decisions on a schedule. See a lighter investment committee. |
Clients, custody and operations
| Term | Plain definition |
|---|---|
| Investment policy statement (IPS) | The document that sets out a client's objectives, constraints and how the portfolio is managed. See writing an IPS. |
| Suitability review | A periodic check that the strategy still fits the client. See suitability reviews. |
| Household | Related clients and their accounts, treated together for service and often billing. |
| Custodian | The firm that holds client assets and executes trades. See practice software vs custodian. |
| Reconciliation | Matching your records to the custodian's. See reconciling custodian data. |
| Advisory agreement | The signed contract setting the services and terms. See the agreement, read by operations. |
| Continuity plan | What happens if the adviser suddenly can't work. See continuity plans. |
| Practice management software | The system a firm uses to run its own operating records. See what it is. |
| NIGO | "Not in good order": paperwork a custodian can't process as submitted. See avoiding NIGO paperwork. |
| Incoming transfer | A new client's account moving to the firm's custodian from another firm. See tracking transfers. |
| Trustee | The person or people with authority over a trust account, as the trust document sets out. See trust accounts. |
| Required minimum distribution (RMD) | The amount certain retirement account owners must withdraw each year under IRS rules. See tracking RMDs. |
| Service request | Anything a client asks the firm to do outside normal management, tracked with an owner and a due date. See service requests. |
How Advorra fits
Advorra is practice software for independent RIAs, built by The CollabHub. Many of the records defined here, from the strategy of record and versioned models to IPS documents, billing runs and compliance logs, are kept in one place on top of the custodian you already use. See the product page, or the full operations guide. There's also a free printable Small RIA Operations Toolkit.
Plain-English working definitions, not legal or compliance advice. The rules themselves and your compliance consultant decide how each term applies to your firm.
Questions advisors ask
What is an RIA?
A registered investment adviser: a firm registered with the SEC or a state securities regulator to give investment advice for a fee.
What is the difference between an adviser and a custodian?
The adviser gives advice and manages the portfolio. The custodian holds the client's assets and executes trades.
What does audit-ready mean?
That the records an examiner or auditor would ask for are kept as the work happens and can be produced quickly, rather than assembled when someone asks.
Is this legal advice?
No. These are plain-English working definitions. The rules themselves, and your compliance consultant, decide how each term applies to your firm.
See it on a demo firm
Advorra is practice software for independent RIAs: clients, models, IPS, billing and compliance records in one place, on top of the custodian you already use. Built by The CollabHub.
Get in touch