Definition
A registered investment advisor is a person or firm registered under the Investment Advisers Act of 1940, either with the Securities and Exchange Commission or with a state securities regulator, to provide advice about securities for compensation subject to a fiduciary duty to clients.
Why it matters
The registered investment advisor is the category of person or firm whose conduct standard for securities-related advice is the fiduciary standard under the Investment Advisers Act of 1940. Identifying whether the person recommending a lifetime income product is a registered investment advisor, a broker-dealer representative, or an insurance producer (or some combination) determines which conduct standard applies to the recommendation, what disclosures the individual is entitled to receive, and what remedies exist if the recommendation was flawed.
How it works
A registered investment advisor is a person or firm that has registered under the Investment Advisers Act of 1940 by filing Form ADV with either the SEC or a state securities regulator, depending on regulatory assets under management and other criteria. The advisor operates under a fiduciary duty running to each client (a duty of care and a duty of loyalty), delivers Form ADV Part 2A and Part 2B at or before entering into the advisory relationship, and is subject to periodic amendment of Form ADV and ongoing recordkeeping and compliance requirements. Individuals who provide advice on behalf of the firm are typically registered as investment advisor representatives with the applicable state or states. The firm's compensation is typically an asset-based fee, a flat or hourly fee, or a performance-based fee (the last restricted to qualified clients); commissions from the sale of securities or insurance products create a conflict of interest that must be disclosed and, in many cases, addressed by policy.
In practice
When you engage a registered investment advisor, the substantive documents to review are Form ADV Part 2A (the brochure describing the firm) and Part 2B (the brochure supplement describing the individuals who will advise you). Together they disclose the firm's services, fee structure, methods of analysis, conflicts of interest, disciplinary history, and the education and experience of the advisory personnel. The operational questions include which registration the advisor holds (SEC or state), how the adviser is compensated for the advice (fee-only, fee-and-commission, or commission-only through affiliations), whether the firm holds custody of client assets or uses a third-party custodian, and whether the firm or its personnel are dually registered as broker-dealer representatives or licensed as insurance producers. A registered investment advisor recommending a lifetime income product may or may not have the specific expertise to evaluate the product's actuarial and structural features; the fiduciary standard governs the advice but does not by itself guarantee product-specific competence.
In the Longevity Standard Framework
Registered investment advisor enters the Longevity Standard framework as the adviser category whose conduct standard for securities-related advice is the fiduciary standard, distinguishing it from the broker-dealer registered representative operating under Regulation Best Interest and from the insurance producer operating under state suitability and best-interest-in-annuity-transactions rules. Where lifetime income planning involves securities (including variable annuities and registered index-linked annuities), the fiduciary standard applied to that advice bears on the interpretive layer around what the advisor must consider, disclose, and document. Where the arrangement is a non-security (a SPIA, DIA, MYGA, or traditional fixed annuity), state insurance conduct rules govern the transaction even if the client's broader relationship with the advisor is fiduciary in character.
Section 6 — Related terms
- Investment Advisers Act of 1940
- Fiduciary standard
- Investment advice fiduciary
- Broker-dealer regulation
- Regulation Best Interest
- Best interest standard
- Suitability in annuity transactions
- Best interest in annuity transactions