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What is an Investment Advisor?


Clients work with two of the most common types of advisors when dealing with there finances, and they are; Investment advisors and Financial advisors. Whether you simply want to transform your wealth with financial plan or invest in mutual funds, you may be considering working with a financial advisor.

An Investment Advisor is a person or group that makes recommendations or conduct securities analysis in return for a fee. They either carry out their jobs through direct management of clients’ assets or by way of written publications.

The precise definition for the Investment advisor is established through the Investment Advisers Act of 1940. When an investment advisor has sufficient assets and is registered with the Securities and Exchange Commission (SEC), it is known as a Registered Investment Adviser (RIA).

An Investment advisor can alternatively be spelled as ‘Investment adviser’. If you’re finding it difficult to manage your investment portfolio or in need of assistance on how to get started, a registered investment advisor could really be what you need.


An Investment advisor pick, manage and recommend investments for their clients. Investment advisors and financial planners have similar roles in that they both help their clients with the managing of assets, but the services they provide also have some notable difference.

An Investment advisor is a person or firm that gives investment advice or generates reports or analysis of investment securities for compensation. From the above definition many professionals could be classified as Investment advisers. Financial planners, money managers and investment consultants can all be registered as investment advisers.

Exceptions are not been made by SEC on certain professionals such as, lawyers, engineers, accountants and teachers who may incidentally find themselves providing investment advice as part of their business practice.

Even brokers are allowed by SEC to advise without the needful registration as Investment advisers but hence the advice they give is solely incidental to their work as a broker and they do not receive special compensation for the service.


An Investment advisor is engaged to provide financial advice and guidance to their clients who are individual investors. They act more like Financial advisors. Some of the advises they provide ranges from portfolio management or they could advise you on how to choose other advisors to work with.

Some Investment advisers prefer a more back-end-like role, as working directly with individual investors is the most recognized function of Investment advisors. They might decide to manage the investments in their client portfolios while allowing the face-to-face guidance and advice to other advisors to handle.

They might also decide to focus on financial analysis by carrying out researches and writing industry reports on investments or market trends.


Let’s make a distinction between the individual and firms Investment advisers before we go further to discuss how to become an investment advisor. Investment advisor representative (IAR), that’s technically the name given to individuals who are accommodated in the definition of investment advisor. On the other hand, the firm they work for becomes the Investment advisor.

The above explanation shows that as a sole proprietor, you could be an Investment advisor and at the same time be an IAR. The firm needs to be registered with the SEC as an Investment advisor (if it has a minimum of $110 million in assets under its management) or the state (if less than $100 million to $110 million in assets under management) at same time register with your state as an IRA.

It should also be noted that not every state licenses investment advisor representatives. For states that issue the license, they require individuals to pass the Series 65 Uniform Investment Advisor Law Examination, or its equivalent exam. Even for states that do not require a license, your employer may require that you obtain the license.

After two years of passing the examination, you can start operating as an investment advisor representative. Waiting longer than the two years window period given might attract a retake of the exam. Also the exam is a three hour, 140-question exam, so avoiding retake is ideal.


The Financial Industry Regulatory Authority (FINRA) and the Security Exchange Commission (SEC) have clear definition that distinguishes the investment advisors from the financial advisors.

The term Financial advisor is a catch-all phrase referring to several kinds of financial professionals. An Investment advisor is a legally regulated term for individuals or firms that are registered with the SEC or a state regulator.

Registered Investment Advisers have a fiduciary duty to their clients, which means that they are entitled to act in their clients’ best interest rather than theirs.




A firm or financial professional that offers data, analysis or advice to enable clients select and manage investments.

Insurance agents, accountants, brokers and other qualified professionals who generally assess the financial situation of clients and then generate a plan to assist them gain financial goals. Some also offer investment management.

They are obligated to put the financial interests of their clients at the most priority.

The free-only planners have a fiduciary duty to their clients. While the free-based planners receive additional compensation from commissions. For those who are commission based are required to follow a suitability role.

The investment advisor must register with the state and the SEC (Security Exchange Commission) if the manage more than $100 million in assets.

The financial planning is regulated by the Financial Industry Regulatory Authority (FINRA), and Securities and Exchange Commission (SEC) if they manage clients with above $100 million in assets.

Advisors working with clients must pass the Series 65 Uniform Investment Advisor Law Examination, or its equivalent exam to obtain the license.

The financial planner could have multiple securities licenses to sell investment products, including series 3, series 6, and series 7 exams.

In conclusion, as pointed out in the table above, Investment advisors assists you with handling your investments and securities to enable you have a very strong investment portfolio.

The primary purpose of the whole activity is to help you meet your goals effectively. You can also permit them to purchase investments for you.

Investment advisers typically have a wealth of knowledge about market patterns, such that if you’re planning on investing in stocks, mutual funds or any other security, they can be able to propose the most reliable or reasonable strategy that relates to your personal financial situation.