What Is an Investment Adviser Representative (IAR)?
Explore the Investment Adviser Representative (IAR) profession: understanding their client-facing role and the framework that shapes their practice.
An Investment Adviser Representative (IAR) is an individual who works for an investment advisory firm, providing investment advice to clients for compensation. These licensed professionals help individuals and businesses manage their investments and financial planning needs. IARs are employed by or associated with a Registered Investment Adviser (RIA) firm, the entity registered with securities regulators.
Understanding the IAR Role
An Investment Adviser Representative (IAR) works directly with clients to offer personalized financial and investment guidance. Their core function involves providing advice or analysis about securities, from recommending specific investments to developing comprehensive financial plans. IARs help clients navigate the complexities of the investment world, acting on behalf of their employing investment adviser firm.
They often manage client accounts, overseeing discretionary accounts where they make investment decisions on behalf of the client. IARs also address administrative issues like funding trades and provide general investment advice, such as market insights or economic outlooks. They may offer financial planning services covering retirement, estate planning, and tax considerations.
IARs analyze research from their firm and apply judgment to suggest suitable securities for clients. This includes comparing investment products like stocks, bonds, and mutual funds, and making recommendations tailored to a client’s financial goals and risk tolerance. Their daily activities involve direct interaction with clients.
For example, an IAR might work with a client to establish an investment portfolio designed to fund a child’s college education or to provide income during retirement. They continuously monitor these portfolios, making adjustments as needed to align with the client’s evolving circumstances or market changes.
Becoming an IAR
Becoming an Investment Adviser Representative involves meeting specific qualification requirements and associating with a registered investment adviser firm. A primary step is typically passing a competency examination to ensure individuals possess the necessary knowledge of investment principles and regulations. The most common examination is the Uniform Investment Adviser Law Examination, known as the Series 65 exam.
The Series 65 exam, administered by FINRA on behalf of the North American Securities Administrators Association (NASAA), consists of 130 multiple-choice questions. Candidates have 180 minutes to complete the exam and must correctly answer at least 92 questions to pass. Topics covered include economic factors, investment vehicle characteristics, client investment recommendations, portfolio management, and relevant laws and regulations, including fiduciary duties.
Alternatively, some individuals may satisfy the examination requirement by passing both the Series 7 (General Securities Representative) and Series 66 (Uniform Combined State Law) exams. Certain professional designations can also waive the Series 65 exam requirement, such as Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Chartered Financial Consultant (ChFC), or Personal Financial Specialist (PFS).
While a bachelor’s degree in finance, business, or economics is commonly preferred, formal educational requirements can vary. All prospective IARs must undergo background checks. An individual must be employed by or associated with a registered investment adviser (RIA) firm to operate as an IAR; an individual cannot be an RIA firm themselves, but rather represents one.
Regulatory Framework for IARs
Investment Adviser Representatives operate within a regulatory environment designed to protect investors. The primary regulatory bodies overseeing IARs are state securities administrators and, in certain circumstances, the U.S. Securities and Exchange Commission (SEC). Jurisdiction often depends on the size of the investment adviser firm with which the IAR is associated.
State securities regulators generally oversee IARs whose employing investment adviser firms manage less than $100 million in client assets. If a firm manages $100 million or more in assets under management (AUM), it typically registers with the SEC and is considered a federally covered adviser. Even with SEC-registered firms, IARs themselves are usually registered at the state level where they conduct business.
IARs have a fiduciary duty to clients, meaning they must always act in the client’s best interest, placing the client’s financial well-being above their own or their firm’s interests. This duty requires IARs to provide advice that is suitable for the client’s specific situation, disclose any potential conflicts of interest, and maintain confidentiality.
IARs are also subject to ongoing supervision by their employing investment adviser firm. Firms must establish and maintain written procedures to supervise IAR activities, ensuring compliance with securities laws, regulations, and ethical guidelines. This supervision includes monitoring electronic communications, reviewing client accounts, and overseeing outside business activities.