Investment Advisers (IA) are individuals or firms that receive compensation for giving advice on investing in securities such as stocks, bonds, mutual funds, or exchange-traded funds. IA’s are subject to regulatory authority depending on their classification. An Investment Adviser who registers with the Securities and Exchange Commission (SEC) must adhere to a fiduciary standard which acts in the client’s best interest. An adviser registered with the SEC is known as a Registered Investment Adviser (RIA).
Although many individuals who are employed by advisers fall within the definition of “investment adviser”, the SEC generally does not require those individuals to register as advisers with the SEC. Instead, the advisory firm must register with the SEC. The adviser’s registration covers its employees and other persons under its control, provided that their advisory activities are undertaken on the adviser’s behalf. Therefore, only firms can be Registered Investment Advisers (RIA), while its employees can only be Investment Adviser Representatives (IAR).
Registered Investment Advisers are not permitted to use the term “registered investment adviser””” unless they are registered, nor should this term be used to imply a level of professional competence, education or special training. The term “RIA” should not be used after a person’s name because using initials after a name usually indicates a degree or a licensed professional position for which there are certain qualifications; however, there are no federal qualifications for becoming an SEC-registered adviser. For example, it is not permitted to use “RIA” on a business card.
Investment advisers who manage less than $100 million in assets must be registered with the state securities agency in the state where they have their principal place of business.
Anyone registered with the Account typically makes commissions and fees from the products they sell (brokerage or mutual fund company). They must provide to their clients products that are “suitable” (the suitability standard), but not necessarily the cheapest or the best.
