In the advisory world, the firm and the person are two different things with two different registrations. A Registered Investment Advisor (RIA) is the business entity licensed to give investment advice for a fee. An Investment Adviser Representative (IAR) is the individual who works for that firm and actually delivers the advice to you. When comparing an RIA vs an IAR, you’re comparing the company on the contract to the human being across the table, and both have separate filings, separate records, and separate things you can verify before handing over your money.
The RIA Is the Firm
A Registered Investment Advisor is a business, not a person. Federal law defines an investment adviser as anyone who, for compensation, advises others about securities as part of a regular business.1Office of the Law Revision Counsel. 15 U.S.C. Chapter 2D Subchapter II – Investment Advisers – Section 80b-2 Definitions In practice, the RIA is typically an LLC, corporation, or partnership that holds the registration. It signs the advisory contract with you, sets the fee schedule, and bears legal responsibility for the advice given under its name.
RIA firms earn revenue primarily by charging fees, most commonly a percentage of the assets they manage for you. A typical range runs between 0.25% and 1.5% of assets under management annually, though some firms charge flat fees or hourly rates instead. The firm hires, supervises, and is accountable for every adviser working under its registration. When something goes wrong, the RIA is on the hook alongside the individual who made the mistake.
Where the Firm Registers
Whether an RIA registers with the SEC or with state regulators depends mostly on how much money it manages.2Office of the Law Revision Counsel. 15 U.S. Code 80b-3a – State and Federal Responsibilities Firms with under $100 million in assets generally register with the state where they have their principal office. Between $100 million and $110 million, SEC registration becomes optional. At $110 million and above, SEC registration is mandatory unless an exemption applies. If an SEC-registered firm later drops below $90 million, it must withdraw from federal registration and return to state oversight.3U.S. Securities and Exchange Commission. Transition of Mid-Sized Investment Advisers from Federal to State Registration
Whichever regulator oversees it, every RIA must file Form ADV, a detailed disclosure of its business practices, fee structures, disciplinary history, and conflicts of interest. Firms also have to deliver a written brochure (Form ADV Part 2A) to every client or prospective client at or before the time an advisory contract is signed.4eCFR. 17 CFR 275.204-3 – Delivery of Brochures and Brochure Supplements If anything material changes later, the firm has to send you an updated version or a summary of changes within 120 days of its fiscal year-end. Firms serving retail investors also provide Form CRS, a two-page relationship summary in plain English covering services, fees, and conflicts.5U.S. Securities and Exchange Commission. Form ADV, Part 3 – Instructions to Form CRS If an adviser hasn’t given you these documents, ask. They’re required to provide them at no charge.
The IAR Is the Person
The IAR is the human being who meets with you. Federal regulations define an investment adviser representative as a supervised person of an advisory firm who regularly communicates with individual clients and has more than five natural-person clients.6eCFR. 17 CFR 275.203A-3 – Definitions Someone at an RIA firm who only writes research or handles back-office work without meeting clients generally doesn’t qualify as an IAR under this definition.
IARs do the day-to-day work clients actually see: recommending specific investments, building financial plans, rebalancing portfolios, and answering questions when the market drops 400 points on a Tuesday. They act as agents of the RIA firm, so their advice carries the firm’s legal authority and the firm’s fiduciary obligations. You’re never just hiring a person when you work with an IAR; you’re engaging the registered firm that stands behind them.
How an IAR Gets Registered
Individuals carry their own registration, separate from the firm’s filing. Every state requires IARs doing business within its borders to register with the state securities regulator, even when the firm itself is SEC-registered.7NASAA. State Investment Adviser Registration Information An IAR at a large, federally registered firm still needs a state license in each state where they have clients.
Registration happens through Form U4 filed in the Central Registration Depository system. The form tracks employment history, education, and any past legal or regulatory problems. Annual state registration fees are modest, typically $35 to $150 depending on the state.
The Exam, and Who Can Skip It
Before registering, most states require an IAR to pass a competency exam. Under the NASAA model rule adopted by the vast majority of states, an applicant must pass either the Series 65 exam on its own, or the combination of the SIE, Series 7, and Series 66 exams.8NASAA. NASAA Model Rule 204(b)(6)-1 – Examination Requirements for Investment Adviser Representatives The Series 65 covers securities laws, ethics, and investment principles as a standalone test; the Series 66 paired with the Series 7 covers the same ground split across two exams.
Six professional designations qualify for a Series 65 waiver under the model rule: Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Chartered Financial Consultant (ChFC), Personal Financial Specialist (PFS), Chartered Investment Counselor (CIC), and Certified Investment Management Analyst (CIMA). The designation has to be in good standing, and the waiver gets noted on Form U4. Even with a waiver, the applicant still goes through a background check and pays the state fees. Because states adopt model rules individually, it’s worth confirming with your state regulator that a specific designation qualifies.
Fiduciary Duty Applies to Both
The legal standard that gives the RIA/IAR structure its weight is fiduciary duty. Section 206 of the Investment Advisers Act prohibits advisers from engaging in fraud or deceit against clients,9Office of the Law Revision Counsel. 15 U.S. Code 80b-6 – Prohibited Transactions by Investment Advisers and the SEC has long interpreted that section as imposing a fiduciary duty with two parts: a duty of care and a duty of loyalty.10Securities and Exchange Commission. Commission Interpretation Regarding Standard of Conduct for Investment Advisers
The duty of loyalty requires the adviser to put your interests ahead of its own. The duty of care requires the adviser to investigate investments before recommending them. Together, these obligations require the firm and the IAR to disclose all material conflicts of interest, not just the ones that reflect well on them. That includes revenue-sharing arrangements with custodians, incentives to recommend proprietary products, and fee structures that pay the adviser more for steering you toward particular investments.
Willful violations of the Investment Advisers Act carry criminal penalties of up to $10,000 in fines and up to five years in prison.11Office of the Law Revision Counsel. 15 U.S.C. 80b-17 – Penalties SEC civil enforcement can add disgorgement of profits and substantial additional monetary penalties.
The Firm Doesn’t Hold Your Money
Here is a point where the firm/person distinction matters practically: neither one actually holds your assets. SEC rules require advisory firms to keep client funds and securities with a “qualified custodian,” which is typically a bank or a registered broker-dealer, not the advisory firm itself.12eCFR. 17 CFR 275.206(4)-2 – Custody of Funds or Securities of Clients by Investment Advisers The custodian holds assets in separate accounts under each client’s name or in pooled accounts clearly identified as belonging to clients.
The RIA can direct trades and manage your portfolio, but it can’t withdraw your money for its own purposes. The custodian sends account statements directly to you, so you can match what your adviser reports against what the custodian actually holds. If an adviser resists telling you who the custodian is or insists on holding assets directly, treat it as a serious warning sign.
How to Check Both Before You Hire Anyone
Two free government databases let you research the firm and the individual separately. The SEC’s Investment Adviser Public Disclosure site lets you pull up any RIA firm and view its Form ADV, including business operations, fee schedules, and disciplinary history for the firm and its key personnel.13Investment Adviser Public Disclosure. Investment Adviser Public Disclosure – Homepage The same site lets you search individual IARs and see their professional background, employment history, and any disciplinary disclosures.
FINRA’s BrokerCheck does something similar and integrates with the IAPD system. It shows an individual’s employment history, regulatory actions, licensing information, and any arbitrations or complaints.14FINRA. BrokerCheck If your adviser is dual-registered as both an IAR and a broker-dealer representative, BrokerCheck surfaces both records.
Checking both databases takes about five minutes and costs nothing. You’ll see whether the firm is actually registered, how long the individual has been in the industry, how many times they’ve changed firms, and whether clients or regulators have filed complaints. A clean record doesn’t guarantee good advice, but a record full of complaints and regulatory actions tells you something important before you sign anything.