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What Are the Differences Between RIAs and IARs?


When it comes to managing your hard-earned money, would you rather entrust it to a registered investment advisor (RIA) or an investment adviser representative (IAR)? An RIA often refers to a firm that is registered with the SEC or their state’s securities agency while an IAR refers to individuals working at the RIA, who provide you guidance.

You may seek an IAR who works for an RIA when looking for a financial advisor who can best serve your needs

What Is a Registered Investment Advisor (RIA)? 

Registered investment advisors (RIAs) are individual investment advisors or full firms registered either with the Securities and Exchange Commission (SEC) or a state’s securities agency. With a fiduciary responsibility to clients, RIAs are legally committed to acting in their client’s best interests, offering impartial advice, revealing any conflicts of interest and striving to make superior investment decisions

Each advisor under the umbrella of an RIA is bound by a fiduciary duty to each individual client. Any RIA is required to make sure all investment advice provided by any advisor working at the firm is as accurate as possible with the information available to its advisors. The Investment Advisers Act prohibits RIAs from misstatements or making misleading omissions of material facts in connection with their investment advisory business.

What Is an Investment Adviser Representative (IAR)?

By contrast, investment adviser representatives (IARs) are professionals who operate under an RIA and provide advice to clients on behalf of a RIA. Like RIAs, they are registered with the state’s securities agency and dispense investment-related advice or analyses. 

Though bound by a fiduciary standard, the jurisdiction of IARs is slightly more confined, given they work within an RIA’s purview. Thus, the choice between RIA and IAR might alter your financial outcomes, prompting the need to consult a financial advisor. However, it is often that you may be choosing both. 

Identifying the Differences Between RIAs and IARs

Clients meeting with a RIA advisor

Although RIAs and IARs share the mutual responsibility of providing financial advice, they distinctly differ. RIAs assume a more comprehensive set of responsibilities and a higher fiduciary commitment due to their extensive expertise and broader authority over larger portfolios. Their fees are typically asset-based.

IARs operate within an RIA’s remit and might experience different compensation structures, such as commission-based rewards for selling several financial products. This raises a potential conflict of interest—an IAR could theoretically endorse a product that bags them a substantial commission, regardless of its fit for the client. Therefore, consulting a financial advisor could prove beneficial to navigate potential conflict and ensure the appropriateness of financial advice.

Types of Financial Advisor Certifications

Your choices aren’t limited when looking at what specialties or certifications you could look for in a financial advisor. A wealth of other financial advisor certifications are worth considering, depending on what your needs are. Each certification comes with unique qualifications, distinctive areas of expertise and attached benefits.

  • Certified Financial Planner (CFP) professionals excel at comprehensive financial planning, covering realms such as retirement, tax, estate and investment planning.
  • Chartered Financial Analysts (CFAs) specialize in investment management, analyzing a broad spectrum of investments.  
  • Certified Public Accountants (CPAs) aren’t quintessential financial advisors, their tax-related financial advice often proves invaluable. 
  • A Chartered Financial Consultant (ChFC) professional is similar to a CFP but they often focus on retirement accounts.
  • A Certified Financial Fiduciary (CFF) is a fairly new designation that is obtained mostly by CPAs or brokers to show their willingness and understanding of the DOL fiduciary rules. 
  • A Retirement Income Certified Professional (RICP) is a credential that focuses on retirement income.  

This is not an exhaustive list of all the certifications available to financial advisors, but it does cover the most popular ones you’re likely to encounter as you do your own search. Finding the right one for you will depend on your individual needs. 

Choosing the Right Financial Advisor for Your Needs

For instance, those with a complex financial scenario, encompassing estate planning, tax strategies and intricate investment management, might prefer an RIA, given their expansive expertise and broad scope of responsibilities. Conversely, an IAR or individual certification could be a suitable choice for someone seeking basic investment advice and comfortable with the idea of being introduced to specific financial products. 

However, it’s crucial to approach this decision without bias, ensuring you focus on alignment with your personal financial needs rather than promises or implications of certain outcomes. You might find that the advisor who has the knowledge you need holds a certification that you aren’t necessarily looking for but you may be happy they have it later. 

Bottom Line

An IAR who works at a RIA advising a financial client

Navigating the intricate world of financial management might seem overwhelming, but making a well-informed choice aided by a professional financial advisor can positively impact your financial health. Remember, selecting between an RIA, an IAR or another type of financial advisor largely rests upon your unique financial situation and objectives.  Regardless of whether you need overarching financial planning or basic investment advice, recognizing your options and verifying an advisor’s qualifications, compensation model and fiduciary duty can help you tailor the best financial strategy. 

Tips for Finding a Financial Advisor

  • Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now
  • If you’re still looking for the right advisor, you can use SmartAsset’s free investment calculator to see how your investments could grow over time. This can be used to help you find the right investment mix for your portfolio until you can get the expert advice you need. 

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