Investment Advisers
“Investment adviser” is a legal term that refers to an individual or company that in most cases is registered with either the Securities and Exchange Commission (SEC) or a state securities regulator.
Common names for investment advisers include asset managers, investment counselors, investment managers, investment advisors, portfolio managers, financial planners and wealth managers.
Who They Are
A registered investment adviser (RIA) is an individual or company that provides investment advice to clients for a fee. In most cases, this fee is generally based on the value of the assets held in the account, although some RIAs charge a flat or hourly fee for their advice. Both the fee and the scope of the advisory services will vary according to the contract signed with the adviser.
Investment adviser representatives are registered financial professionals that provide advisory services to clients on behalf of an RIA. Investment adviser representatives’ services primarily include providing investment advice and managing client portfolios on an ongoing basis.
Who Regulates Them
Generally, the SEC regulates RIAs that manage $100 million or more in client assets, also known as assets under management (AUM). There are certain exemptions to this rule that allow for SEC registration even if the assets threshold hasn’t been met. For example, internet advisers, also known as robo-advisers and digital advisers, that leverage technology to provide investment advice through a website or app may register with the SEC without managing $100 million or more in AUM. In instances where SEC registration requirements aren’t met, RIAs with less than $100 million in AUM are generally regulated by the state regulator for the state where the adviser has its principal place of business.
You can get background information on both SEC- and state-registered investment advisers using the SEC Action Lookup – Individuals (SALI) tool and Investment Adviser Public Disclosure database. If you have concerns about possible misconduct by an investment adviser, you can file a complaint online or call the SEC’s toll-free investor assistance line at (800) 732-0330. Learn more from the SEC about reporting concerns and the complaint process.
What They Offer
In addition to providing investment advice, investment advisers may open client accounts with broker-dealers to safeguard and keep custody of client assets as part of their services. Investment advisers use broker-dealers to keep client assets safe, to execute securities transactions (e.g., buy or sell stock) on behalf of the investment adviser and its clients, and to send clients account statements on at least a quarterly basis.
Some investment adviser representatives are separately registered with a broker-dealer and provide brokerage services in such capacity. In some cases, the RIA itself is also registered as a broker-dealer. An individual registered with a broker-dealer is a FINRA-registered financial professional, also commonly referred to as a broker or stockbroker.
When working with a dually registered financial professional, it’s important to find out which hat the financial professional is wearing (investment adviser representative or registered representative) to better understand exactly which services they’re providing and how much it will cost you. Both SEC-registered RIAs and broker-dealers are required to furnish you with a customer relationship summary form (Form CRS). Form CRS helps you compare services offered and costs of these services between the different entities.
Learn more about working with an investment professional.
