Definition: A registered investment adviser (RIA) is an adviser firm registered with the SEC or a state. The Investment Advisers Act defines investment advisers as persons who advise others as a business, for compensation, on securities' value or whether to invest in, buy or sell them, or issue securities analyses or reports for compensation as a regular business.

How does an RIA register?

An adviser registers on Form ADV, either with the SEC or with its state. Section 203A of the Advisers Act decides which: in general, larger advisers register with the SEC and smaller ones with the state where they have their principal office and any other state whose law requires it. Under SEC Rule 203A-1, an adviser may register with the SEC at $100 million of regulatory assets under management, must apply at $110 million, and may stay registered while it reports $90 million or more. According to NASAA, an SEC-registered adviser must still make a notice filing with a state if it has a place of business there or six or more clients in that state in a twelve-month period.

The Act's definition excludes, among others, banks; lawyers, accountants, engineers and teachers whose advice is solely incidental to their profession; and family offices. It also excludes broker-dealers whose advice is solely incidental to their brokerage business and who receive no special compensation for it. Publishers of bona fide newspapers and business or financial publications of general and regular circulation are also excluded.

The Act spells the word "adviser". "Advisor" is the common spelling and means the same thing.

What does the registration carry?

The SEC's 2019 interpretation of the standard of conduct for investment advisers states that under federal law an investment adviser is a fiduciary, and that the fiduciary duty it owes its clients comprises a duty of care and a duty of loyalty. A firm registered only as an investment adviser is not a FINRA member and is examined by the SEC or its state regulator. A firm that is also a broker-dealer is a FINRA member, and FINRA examines its brokerage business.

RIA vs IAR

An RIA is the firm. The individuals who give advice for it are its investment adviser representatives (IARs). When an advisor leaves, the RIA keeps its own registration, and the advisor's IAR registration ends there and begins at the new firm.

"Hybrid RIA" is an industry label, not a regulatory category. It usually describes advisors who use an RIA for advisory business and a broker-dealer affiliation for brokerage business.

Where it shows up in our data

Continuum's channel data separates RIA firms from hybrid RIAs. In Advisor Channel Flow, the RIA channel is registered investment adviser firms with no broker-dealer affiliation, and the hybrid RIA channel is firms that operate both an RIA and a broker-dealer affiliation. Moves in either channel are counted as investment adviser representatives (IARs). Those channels are Continuum's classification, not SEC categories. AdvisorWire lets you filter moves by channel.

Sources

  1. Rule textInvestment Advisers Act of 1940, Section 202(a)(11) U.S. Government Publishing Office
  2. Rule textCommission Interpretation Regarding Standard of Conduct for Investment Advisers (2019) SEC
  3. Rule textForm ADV: General Instructions and Glossary SEC
  4. Public recordInvestment Adviser Public Disclosure (IAPD) SEC
  5. Continuum dataAdvisor Channel Flow by Business Model Continuum
  6. ReferenceInvestment Adviser Guide NASAA

Editorial standard: Continuum publishes education for financial advisors. It is general information, not legal, tax, or compliance advice.