What does an investment advisor representative do?
Rebecca Lake
An investment advisor representative (IAR) helps advisory firms offer financial advice to investors. If you’re looking for assistance with your investments, you may consider working with an IA. Here are the services investment advisor representatives offer and their fee structure.
An RIA is different from a broker-dealer, a company that buys or sells investments on behalf of clients. These organizations are regulated by the Securities and Exchange Act of 1934. Additionally, an RIA is a fiduciary while a broker-dealer is not. Having fiduciary status means that an RIA — and those who work for them — are obligated to act in their clients’ best interests.
What an Investment Advisor Representative Does
What does an investment advisor representative do?
Typically, an investment advisor representative helps clients build investment portfolios. Also, they design portfolios that help clients reach financial goals.
An investment advisor representative’s main tasks include:
Offering advice about different securities. IARs research and compare investments for their clients. As fiduciaries, they make recommendations with the clients’ interests in mind.
Overseeing investment accounts. An investment advisor representative may also handle the day-to-day management of client accounts. That includes properly funding trades and handling any administrative issues that arise.
Advising clients on investment strategy. An IAR can provide advice about specific securities. However, an IAR can also offer more general investment advice to clients. The advice offered depends on the licenses or certifications an IAR holds.
An investment advisor representative may also supervise employees doing any of the above tasks at a registered investment advisory firm.
IAR vs. Financial Advisor
Investment advisor representatives and financial advisors aren’t necessarily the same thing. For example, they may offer different services, follow different fiduciary standards and get different compensation. The term “financial advisor” can be used to describe someone who offers general financial advisory services. Meanwhile, an investment advisor representative focuses specifically on securities. Those include stocks, bonds, mutual funds and other investment vehicles.
Additionally, financial advisors may aspire to the suitability standard rather than the fiduciary standard. As a result, a financial advisor isn’t necessarily required to act in their clients’ best interests when making investment recommendations.
Investment advisor representatives and financial advisors also differ in their education and training. Finally, there are differences in how investment advisor representatives and financial advisors structure the fees they charge for their services.
A fee-only advisor only earns money through the fees their clients pay. Fees can be assessed as a percentage of assets under management. However, advisors may chage an hourly fee or as a flat fee for specific services. Their typical fee range is 1% to 2% of assets under management.
A fee-based investment advisor also makes money in other ways. Specifically, they earn commissions for recommending certain investment products or trading certain investments in your portfolio. If an investment advisor representative works for an RIA and registers with the SEC, they can earn commissions. However, their recommendations must fit within the fiduciary standard.
Paying higher fees basically trades away more of your investment earnings for professional financial advice.
Investment Advisor Representative Certifications
A prospective investment advisor representative must obtain a college degree and register with the Investment Advisor Representative Depository or IARD. From there, advisors can register with the SEC and file their Form ADV. That document a public disclosure detailing services offered, payment, and past or ongoing legal or disciplinary actions. Advisors also must register in the state where they’ll conduct business.
An investment advisor representative must pass the Series 65 exam,a comprehensive exam administered by the Financial Industry Regulatory Authority (FINRA). Alternately, an advisor may become an IAR by passing the Series 66 and the Series 7 exams. When registering at the state level, advisors must submit Form U4 showing that they’ve successfully passed their exams. Depending on the state, advisors may be able to sidestep these exams if they hold other professional credentials. For example, they may be able to opt-out of taking the exams if they already hold a Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA) designation.
The Bottom Line
What does an investment advisor representative do?
Whether an IAR is the appropriate financial professional to manage your investments depends largely on your goals and what you’re comfortable paying in fees. If you specifically need investment advice, then an investment advisor representative may help. On the other hand, if you want an advisor who can speak to things beyond investing, such as debt management, budgeting or estate planning, then you might be better off with another type of advisor instead.
When vetting investment advisor representatives, ask about their fees and pay structure. Take time to review their public disclosures and also use FINRA’s BrokeCheck tool to see what other financial designations they might hold and what type of advice they’re qualified to offer. This can help you decide whether an investment advisor representative is what you need to manage your portfolio.
Investment Tips
If you have a financial advisor you’re working with, consider talking to them about what an investment advisor representative would (or wouldn’t) be able to do for you. A financial advisor may be able to shed more light on what it is an IAR does and what type of investor they’re suitable for. If you don’t have a financial advisor yet, finding one doesn’t have to be difficult. SmartAsset’s free tool matches you with financial advisors in your area in 5 minutes. If you’re looking local advisors to help you achieve your financial goals, start now.
Aside from discussing fees with an investment advisor representative, it’s also helpful to ask about their overall investment strategy as well as how they prefer to communicate with clients. Ideally, you should be working with an advisor that has experience working with clients who have a financial situation that’s similar to yours and who will be responsive when you have questions or want to make changes to your account.
