Investment advisory representatives (IARs) are licensed professionals who work for investment advisory firms and are qualified to assist clients with financial advice and planning. These advisors play a crucial role in guiding individuals through investment decisions and helping them achieve financial goals.
Key Takeaways
- Role: IARs make recommendations and provide financial or investment advice.
- Compensation: They may be compensated through commissions, flat fees, hourly rates, or a percentage of assets under management (AUM).
- Credentialing: IARs must be properly registered and complete exams certified by regulatory agencies such as FINRA.
- Exams: Commonly required exams include Series 63 and Series 65, though state requirements may vary.
- Responsibilities: Roles include making financial recommendations, managing client accounts, offering advisory services, and supervising other IARs.
Understanding Investment Advisory Representatives (IARs)
An IAR is defined by the Uniform Securities Act as an individual employed by or associated with investment advisors. They offer investment advice, manage client accounts, and oversee other advisory activities. Simply put, IARs act as the intermediaries between clients and investment advisory firms.
IAR Activities:
- Make Recommendations: Utilize skill and judgment to advise on securities. For example, making a buy recommendation based on thorough analysis of research data.
- Manage Client Accounts: Oversee discretionary accounts and handle administrative tasks, like requesting additional funds to settle trades.
- Advisory Services: Provide general investment advice through various platforms such as TV presentations or newspaper columns.
- Supervise Other IARs: Ensure compliance with regulatory requirements and provide training to junior advisors.
Employees in supportive roles who do not directly engage in financial advice do not need to register as an IAR. The distinction between “registered investment advisor” (RIA)—the firm—and the IAR— the individual—sets the foundation for regulatory compliance.
IAR Registration Requirements
Proper registration is critical to avoid heavy penalties. Here’s the process:
- Create an Account: Set up an Investment Adviser Registration Depository (IARD) account, managed by FINRA for SEC and state use.
- Obtain CRD Number: FINRA will provide a Central Registration Depository (CRD) number and ID.
- File Forms ADV and U4: Submit necessary forms based on state or SEC specifications.
- Pass Examinations: IARs must pass required exams before offering investment advice. These include Series 63 and Series 65, or Series 66 and Series 7—with potential credentialing substitutions like the CFP designation.
Registration deviates slightly by state, but the core procedure remains standardized. Keeping knowledge up-to-date with continuing education is a staple of maintaining registration and proficiency.
What Does an IAR Do?
An IAR is dedicated to rendering high-quality financial advice, managing various client accounts, and sometimes offering public advisory services. They might also be responsible for supervising other advisors in the firm.
How Do I Become an IAR?
Message of adaptability and procedural follow-through is integral. Starting with the setup of an IARD account and obtaining necessary IDs from FINRA. Following up with submission of registration forms like Form ADV and U4 correctly aligned with either state or SEC protocols successfully marks the transition to a full-fledged IAR.
What Are the Benefits of Becoming an IAR?
Earning the IAR title provides official recognition of your expertise and solid understanding of financial markets. This credential helps you garner trust and compliance credibility, enhancing career opportunities and professional stature in the financial industry.
Related Terms: Financial Advisor, Registered Investment Advisor, Series 63, Series 65.
References
- Uniform Law Commission. “Uniform Securities Act”, Pages 15-16.
- Kaplan Financial. “RIA vs IAR: What Is The Difference”.
- Investment Adviser Registration Depository. “Welcome to the Investment Adviser Registration Depository”.
- North American Securities Administrators Association. “Investment Adviser: FAQS”.
- Financial Industry Regulatory Authority. “Series 65 – Uniform Investment Adviser Law Exam”.
