Requirements to Register as an Investment Advisor

If you’re a financial professional looking to help individuals manage their investments or provide financial advice, you’ll likely need to become an Investment Adviser Representative (IAR) at a Registered Investment Adviser (RIA) firm. This requires registering with the right regulatory authorities, such as the Securities and Exchange Commission (SEC) or state securities agencies, depending on the firm’s assets under management.

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Who Needs to Register as an Investment Advisor?

Registered investment advisors (RIAs) must register with either the Securities and Exchange Commission (SEC) or state securities regulators, depending on the amount of assets under management (AUM), and adhere to regulatory requirements including filing Form ADV, maintaining accurate records and upholding fiduciary standards.

The SEC generally requires investment advisors with AUM of $110 million or more to register with the SEC. Advisors with AUM below this threshold may need to register with the state securities authorities in the states where they operate.

In the United States, registration as an investment advisor becomes a legal requirement under certain conditions, primarily governed by the Investment Advisers Act of 1940. This piece of legislation defines an investment advisor as any person or entity that, for compensation, advises others on the merits of securities investments or the purchase or sale of securities.

The SEC supervises advisors who manage $110 million or more in client assets. Advisors with a smaller asset base, typically under $100 million, are subject to the regulatory purview of state securities authorities. Both the SEC and state regulators aim to protect investors and ensure that advisors adhere to the law, though their specific focuses and methods may differ.

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Types of Registrations for RIAs

Registration types for RIAs include federal registration with the SEC and state registration with state securities regulators, depending on the total value of assets under management. Here are the two types of registration that you need to understand:

1. Federal Registration

Firms that manage assets exceeding $100 million are required to register with the Securities and Exchange Commission (SEC) and are referred to as federal advisors. The $100 million AUM threshold is significant because it serves as the dividing line between federal and state jurisdiction.

This threshold was established to help allocate regulatory resources more effectively, ensuring that the SEC oversees the larger advisors that have the potential to impact a greater number of investors and the wider economy. Federal advisors are subject to SEC regulations and reporting requirements, which include periodic disclosures and adherence to compliance programs.

2. State Registration

Firms with an AUM below a certain threshold typically register with state securities authorities in the state where their principal office is located. For firms managing between $90 million and $110 million, known as mid-sized advisors, the choice to register with the SEC or state securities authorities is at their discretion. This flexibility allows mid-sized firms to choose the regulator that best aligns with their business model and client base.

The National Securities Markets Improvement Act of 1996 (NSMIA) played a pivotal role in the historical development of the registration process. It eliminated certain state registration requirements, thereby facilitating a more streamlined regulatory process for advisory firms operating across multiple states.

Enhancing Expertise Through Licensing and Certification

Beyond the basic registration requirements, individual advisors often seek further licensing and certifications to distinguish themselves and enhance their expertise. The Series 65 and Series 7 licenses for advisors who are also registered as brokers, for example, are indicative of an advisor’s comprehensive understanding of securities and the marketplace. Such licenses require advisors to demonstrate a rigorous understanding of financial instruments and a dedication to industry standards.

Professional designations like the Certified Financial Planner™ (CFP®) or Chartered Financial Analyst (CFA) also demonstrate an advisor’s commitment to furthering their knowledge and skill set.

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What Advisors Need to Know About Form ADV

An investment advisor looking up compliance requirements.

Form ADV is the cornerstone of the investment advisor registration process and a primary disclosure document for clients and regulators. It provides a detailed overview of an advisor’s business, including services offered, fee structures, conflicts of interest and disciplinary history. Regulators use it to evaluate compliance, while clients rely on it to understand how an advisor operates.

The form is divided into multiple parts, each serving a different purpose. Part 1 focuses on firm-level information such as ownership, assets under management and registration status, and is filed electronically with regulators. Part 2, often called the brochure, is written in plain language and must be delivered to clients, explaining services, fees and potential conflicts in a clear, accessible way.

Accuracy and consistency are critical when completing Form ADV. Information must align with actual business practices, marketing materials and client agreements. Inconsistencies or outdated disclosures are common exam deficiencies and can raise red flags with regulators.

Form ADV is not a one-time filing. Advisors are required to update it at least annually and promptly amend it when material changes occur, such as fee updates, new services or ownership changes. Understanding how Form ADV works, and keeping it current, is essential for maintaining registration and building transparency and trust with clients.

Who Is Bound By Fiduciary Duty?

Registered investment advisors are legally bound by a fiduciary duty to act in their clients’ best interests. This obligation comes from the Investment Advisers Act of 1940 and applies to RIAs and their supervised persons when providing investment advice. Fiduciary duty requires advisors to put clients’ interests ahead of their own, disclose conflicts and seek best execution.

The fiduciary standard applies to a wide range of professionals and entities in finance. RIAs are bound by this standard, and obligated to prioritize their clients’ financial interests above their own. Trustees, who hold assets in trust for beneficiaries, are also fiduciaries, as they must manage these assets with due care and loyalty.

Individuals who provide advice on behalf of an RIA are also subject to this standard. This includes investment adviser representatives and other employees who make recommendations or manage client assets. The duty applies across the entire advisory relationship, not just at the moment advice is given.

By contrast, professionals operating under different regulatory frameworks may be held to different standards. Understanding who is bound by fiduciary duty, and when it applies, is essential for advisors navigating registration, disclosures and ongoing compliance obligations.

Bottom Line

Investment advisors reviewing registration requirements.

To register as an investment advisor, individuals or firms must complete and file Form ADV Part 1 and Part 2 with the appropriate regulatory body, which is the SEC or state securities regulators for those managing a certain level of assets. Additionally, RIAs must adhere to specific recordkeeping, advertising and custody regulations, among other requirements. All RIAs must also uphold fiduciary standards, prioritizing the best interests of their clients.

Tips for Growing Your Firm

Once you’ve registered as an advisor and your RIA is taken care of, the next best thing you can do is find ways to grow your firm. One option you might consider is using an online lead generation service. SmartAsset AMP (Advisor Marketing Platform) is our holistic marketing service that financial advisors can use for client lead generation and automated marketing. Sign up for a free demo to explore how SmartAsset AMP can help you expand your practice’s marketing operation. Get started today.
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