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What Is an Investment Advisor Representative (IAR)?

Investment advisor representatives work for large advisory firms and help you build and manage your portfolio. Learn more about them here.

Professionals who are in the business of offering investment advice must have the proper credentials to do so. One type is an investment advisor representative (IAR). In short, this is someone who works for a financial advisory firm.

Becoming an IAR requires adherence to strict standards and various qualifications. In this article, we’ll help you understand what they do, how to become one, and how you can find one.

What an IAR Does

An investment advisor representative (IAR) is an individual who works directly with clients on behalf of a registered investment advisor (RIA). The latter is an organization that registers with the U.S. Securities and Exchange Commission (SEC) and agrees to follow the Investment Advisers Act of 1940, abiding by a strict fiduciary duty. While these experts need not register with the SEC, they still must act with the same fiduciary responsibility their firm agrees to.

IARs assist clients with several investment management tasks. This includes the following:

  • Investment planning. IARs can work with you to develop a strategy for choosing assets based on your goals, risk tolerance, and interests.
  • Risk management. Because risk is a reality for any type of investment, your IAR will help you figure out how to mitigate it as much as possible. This includes techniques like diversification, position sizing, and standard deviation.
  • Asset allocation and diversification. A major part of protecting your portfolio from changing market conditions is by ensuring you have a proper blend of risk and reward. An IAR can help you allocate funds to various asset classes, as well as choose different securities within each one.
  • Portfolio management. Once you have an investing plan in place, your advisor can help you adjust and rebalance your portfolio as time goes on. They may look at factors like expense ratio, risk exposure, and your portfolio’s overall performance to make decisions.

Difference Between an IAR and RIA

An IAR is a bit different than an RIA. The former refers to someone who is a representative or employee of a larger firm. The RIA designation (which the SEC gives out) typically applies to the organization in which a professional works.

In rare cases, an RIA can be a person, but it’s typically a corporation or partnership. Most often, an RIA will employ several IARs to work directly with clients.

Requirements and Certifications They Must Have

IARs must meet certain requirements to effectively and legally do their job. First, they need to register with the Investment Adviser Registration Depository (IARD), which is sponsored by the SEC and maintains records on each of its members. The Financial Industry Regulatory Authority (FINRA) manages these accounts. It’ll give both the RIA and representative a Central Regulation Depository (CRD) number, which allows the former to file a Form ADV and U4 form. These documents provide information to the public, such as how an advisor earns compensation.

It’s also very important that IARs have the right experience and qualifications to do their job. There isn’t a specific designation or credential that all advisor representatives must have. However, common prerequisite credentials include:

  • Chartered Financial Analyst (CFA)
  • Certified Financial Planner (CFP)
  • Chartered Financial Consultant (ChFC)
  • Accredited Investor
  • FINRA’s Series 7 certification (may be required by FINRA depending on the state)
  • FINRA’s Series 63/65 certification (may be required by FINRA depending on the state)

FINRA also has specific criteria one must fit to register as an IAR. Applicants must be 18 years or older and have a high school diploma or GED. They must also be fluent in English. Finally, the organization requires prospective representatives to pass the Series 7 or 65 exam.

How an IAR Makes Money

Because IARs work for RIAs, they must follow a fiduciary standard. This duty means they can only charge on a fee-only basis. Most commonly, this means you’ll pay one of a few ways:

  • Assets under management (AUM) percentage. Often, advisors will charge you a small percentage of the assets they’re managing (typically around 1%).
  • Hourly. You may also pay an IAR for their time. What you pay depends largely on the firm you’re employing.
  • Flat-fee. If you have a specific project for an IAR to work on, you may be able to pay a flat fee for it.
  • Retainer. In some cases, you can pay an advisor in advance for services they’ll do later on. If they end up doing less than what you pay for, you should receive a refund.

Who Should Hire an IAR

With their qualifications, IARs can help you plan and make wise investments as you build your portfolio. However, their services can be expensive, especially when they have several credentials to their name. With this in mind, you’ll have to carefully consider whether you should hire one or not.

The help of a professional is extremely valuable, but some need it more than others. One factor to consider is the complexity of your finances. If you have ambitious goals or a significant net worth, it may be smart to employ an advisor. An IAR can also help companies, large or small, with their investments. With their qualifications and adherence to a fiduciary standard, you’ll undoubtedly get benefit from hiring one of these experts if you need help managing your portfolio.

How to Find an IAR

If you want to hire an IAR, there are a few ways you can go about finding one. They work as employees of both large and small firms. So, you’ll need to think about evaluating both the company they work for, as well as the quality of the expert. In 2023, Barron’s top RIA advisory firms were:

Firm NameNumber of Clients
Edelman Financial Engines1,300,000
Creative Planning67,338
Mariner Wealth Advisors79,767
Wealth Enhancement Advisory Services50,761
CIBC Private Wealth9,442
Private Advisor Group45,822
Cresset Capital2,900
Mercer Global Advisors25,539
Note: data above is from Barrons’ advisor ranking.

If you’d like to narrow your search to individuals or want to find someone who has sufficient qualifications, we recommend using a matching tool. All you need to do is fill out a short quiz regarding your financial situation and goals, then it’ll connect you with up to three vetted fiduciary advisors in your area.

Keep in mind that all IARs must have Form ADV on file with the SEC. You can verify if a professional has this by using FINRA’s BrokerCheck system, which allows you to search for firms and individuals alike.

Frequently Asked Questions

Is an investment advisor representative a fiduciary?

Yes, IARs are fiduciaries. This is because they work for RIA firms that must practice this standard per the SEC’s rules.

Do investment advisor representatives have to register with the SEC?

Not exactly. IARs themselves don’t register with the SEC, but they work for advisory firms that do. Because these individuals represent RIA firms, they must follow the same standards that the government holds their place of work to.

IARs must also have a Form ADV, which provides public information about them. Additionally, they’ll need to register with FINRA, another regulatory authority in the industry.

What is the difference between a financial advisor and an investment representative?

The key difference is that the term, “financial advisor” refers to a wide array of professionals who give financial advice to clients, whereas IARs are simply one type of these people. Represenatives specialize in providing investment advice, as well as portfolio management services.

Be aware that not all advisors follow the fiduciary standard as well. Some, such as broker-dealers, follow FINRA’s less restrictive suitability standard, in which they can recommend products that are “suitable” for clients. IARs, on the other hand, must act as fiduciaries because the firms that employ them are RIAs that register with the SEC.

How can I tell if my advisor is an investment representative?

All IARs must file a Form ADV with the SEC. You can verify their credentials or those of the firm they work for by using the SEC’s BrokerCheck search tool.

Is a robo-advisor an IAR?

Robo-advisors in the United States must register with the SEC as an RIA. This also binds them to follow a fiduciary standard.