FAQs

Q. What is a Registered Investment Advisor (RIA)?

A. A Registered Investment Adviser ("RIA") is an entity who, for compensation (in any form), engages in the business of advising others, either directly or indirectly, of the value of securities or of the advisability of investing in securities. They receive a management fees and do not receive commissions ("RIAs receive fees, stockbrokers receive commissions"). Incentive fees can be charged if certain conditions are met.To become a Registered Investment Adviser you must register with the Securities and Exchange Commission (SEC), if you manage $25 million or more. If you manage less than $25 million you are still under the regulatory control of the Securities and Exchange Commission but you must register with the State Securities Commission (or other regulatory agency) in your state of domicile and with each state where you will solicit business.

Q. What is Form ADV Part II

A. Part II of Form ADV, often called the "brochure," is a disclosure document that describes a firm’s business and the methods used to charge clients. Firms must give it to prospective clients. Much of the information is in narrative format. Some states allow the Part II to be filed electronically through WebIARD while other states mandate electronic filing.

Q. Why are Filings and Form ADV Important?

A. RIAs are required to file a registration statement, known as Form ADV, annually with the SEC. The registration statement is the primary compliance document in the plan asset investment business, wherein an RIA discloses to clients its business organization, services, basic fee schedule, and, most important, potential conflicts of interest.The SEC’s general instructions for revising the registration statement (Form ADV, Part II) provide that as a fiduciary the RIA is required to fully disclose to all clients all material facts regarding conflicts of interest between the RIA and the client.

Q. Why does the word Fiduciary keep being discussed?

A. RIAs utilize a fiduciary model for their clients and thus have a legal obligation to put their client’s interests first—a stark contrast to the traditional commission-based brokerage model. Providing an investment consulting service to clients acting as a fiduciary is dramatically different from services provided by sales people following a lower standard of care.

Q. What is a Fiduciary?

A. A “fiduciary” is someone that manages money for the benefit of another called a “beneficiary.” A fiduciary is bound by law to place the interests of its beneficiary first – before the fiduciary’s own interests. A “Registered Investment Advisor,” subject to the Investment Advisers Act of 1940, is a fiduciary. A Registered Investment Advisor must follow the “trust” standard – the highest known in law –Which requires it to place the interests of its clients ahead of its own and fulfill critical fiduciary duties of trust and confidence. Under the fiduciary trust standard, a Registered Investment Advisor must provide its “best advice” to a client.

Q. What is an investment adviser representative?

A. Most states follow a definition of investment adviser representative similar to that in the Uniform Securities Act. An investment adviser representative generally is a person who, for compensation (1) makes any recommendations or otherwise renders advice regarding securities; (2) manages accounts or portfolios of clients; (3) determines which recommendation or advice regarding securities should be given; (4) solicits, offers, or negotiates for the sale of or sells investment advisory services, or (5) supervises employees who perform any of the foregoing. Only states register investment adviser representatives, not the SEC, but those who must be registered include individuals working for both state and SEC-registered firms.

Q. Is there a federal licensing requirement for individuals?

A. No; the SEC just registers firms meeting the applicable criteria. Individual investment adviser representatives, whether they work for SEC or state-registered investment adviser firms, must be registered under state law.

Q. How is an investment adviser representative different from a stockbroker, securities broker or a financial consultant?

A. Stockbroker, financial consultant, financial advisor, securities broker — these are all general terms used by individuals and brokerage firms alike, to refer to a regulatory term of “registered representative” — or shortened to “registered rep”. A registered rep is an agent of a broker/dealer who is paid commissions on the trades placed through the firm on behalf of their customer.

Q. What is a Certified Financial Planner™ (CFP®)?

A. CFP®, CERTIFIED FINANCIAL PLANNER™, and marks are certification marks owned by Certified Financial Planner Board of Standards Inc. These marks are awarded to individuals who successfully complete CFP Board's initial and ongoing certification requirements. The CFP® certification is the most widely recognized financial planning certification in the United States.The CFP® certification is granted only by Certified Financial Planner Board of Standards Inc. to those persons who, in addition to completing an educational requirement such as this CFP Board-Registered Program, have met its ethics, experience, and examination requirements.