Understanding Investment Advisory Representatives (IARs)
I'm here to explain what Investment Advisory Representatives, or IARs, really are. These are licensed professionals who work for investment advisory companies, delivering personalized investment advice and financial planning to individuals and businesses. You should know they play a key role in guiding clients through the complexities of investing.
To get started as an IAR, you need to pass specific licensing exams that cover investment strategies, risk management, and ethical practices. After that, registration with the SEC or state regulators is required. Let me walk you through the regulations and duties that apply to these professionals.
Key Responsibilities of IARs
As an IAR, you're associated with a registered investment adviser (RIA) firm, providing financial or investment advice and making recommendations to clients. You earn fees through commissions, flat or hourly rates, or a percentage of assets under management. Registration and passing exams certified by FINRA, like Series 63 and Series 65, are mandatory, though requirements can vary by state.
Your duties include making financial recommendations, managing client accounts, providing advisory services to external parties, and possibly overseeing other IARs. You analyze firm research and use your judgment to suggest securities. You handle account management, from discretionary oversight to administrative tasks like requesting funds for trades. You also offer general advice, such as market reports in media, and supervise junior team members to ensure regulatory compliance.
Distinguishing RIA from IAR
Don't get confused like many do online—the registered investment advisor (RIA) is the firm, not the person. The IAR is the individual who represents that firm to clients and the public. Only in cases where an RIA is a one-person operation might the terms overlap.
An RIA is a firm registered with the SEC or state administrators to provide advisory services. The IARs are the people executing those services. Note that the number of IARs has more than doubled since 2000, showing growth in this field.
Requirements for IARs
To maintain industry integrity and avoid fines, you as an IAR must meet several requirements. Registration involves filing Form U4 through the CRD system with state authorities where you provide advice. You can only advise on topics for which you've passed relevant exams, like Series 65 or Series 66.
You must work with a registered RIA firm, depending on its assets under management and client base. Fiduciary duties from the Investment Advisers Act of 1940 require you to prioritize client interests with loyalty and care. You have to disclose risks and conflicts of interest, and maintain detailed records for SEC compliance, creating a clear audit trail.
Qualifications and Becoming an IAR
Many IARs pursue designations like certified financial planner or chartered financial analyst for deeper knowledge and career growth, though these aren't required. In most states, you need to pass Series 63 and/or Series 65 exams, which are 130 questions in 180 minutes, administered by FINRA. Alternatives include Series 66 and Series 7, and some states allow substitutions like a CFP designation. Continuing education may also be required based on your jurisdiction.
What does an IAR do? You provide general advice, oversee accounts, and offer services to external parties. To become one, create an account with the IARD, then have your firm submit Forms ADV and U4 to the SEC and states. The benefits include legitimizing your expertise as a financial advisor and enabling work with an RIA.
The Bottom Line
In summary, IARs are financial advisors specializing in investment matters, offering advice for a fee on behalf of an RIA. You can make recommendations, build portfolios, and manage accounts, but only after passing exams and obtaining credentials. Remember, you can only advise on examined topics.
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