Investment Advisor Representative: Definition & Requirements

Instructor: Noorahmad Khan
In this lesson, we will learn about the role of an investment advisor representative and conditions required to be fulfilled to become the investment advisor representative.

What's an Investment Advisor Representative?

Maya is an investment advisor representative (IAR), which is an individual who works for an investment company and provides advice on various investments for a fee. Maya receives fees in the form of a commission, a flat amount or percentage of her client's portfolio. She has lots of different duties, including managing her clients' portfolio, training junior employees, supervising regulatory compliance, making any recommendations of investments, and providing advice in general to the public.

Requirements for Investment Advisor Representatives

Maya is exposed to various high net worth clients, and her advice can have a huge impact on their financial decisions. Therefore, Maya, like any IAR, must be certified and get themselves registered to be legal and build client trust.

Say Charlie works for Simple Square, which is an investment advisory firm. He holds a degree in finance, but he wants to become an Investment Advisor Representative for Simple Square. The first step is to pass the Series 66 exam and Series 7 exam, OR the Series 65 exam. These exams are conducted by Financial Industry Regulatory Authority (FINRA). Let's go over them for Charlie now.

Exams

Series 66, also known as Uniform Combined State Law Examination consists of 100 questions and 10 pre-test questions that don't count but are mixed in randomly. Charlie has 150 minutes and needs to get at least 73 of them right in order to pass.

Series 7 is known as the General Securities Representative Qualification and is a co-requisite to the Series 66 exam. It consists of 125 questions and Charlie has to score 73% in 225 minutes to pass. Charlie would need to clear the Securities Industry Essential (SIE) exam along with the Series 7 exam to obtain General Securities Representative Qualification. The topics covered in these exams are municipal bonds, equities, client and margin accounts, life insurance and annuities, among others. Charlie should be sponsored by his employer, Simple Square, who is a member of FINRA.

The Series 65 is also known as Uniform Investment Adviser Law Examination consists of 130 questions with 10 pretest questions, which again, don't contribute to the final result. Charlie needs to answer 94 questions correctly (73%) and has 180 minutes. Charlie doesn't need to be sponsored for this one, but he will need to fill out Form U10 to register. This exam covers:

  • Economic factors and business information
  • Investment vehicle characteristics
  • Client investment recommendations and strategies
  • Laws, regulations, and guidelines on unethical business practices

Those exempted from the Series 65 exam include Certified Financial Planners (CFP), Chartered Financial Analysts (CFA), Chartered Financial Consultants (ChFC), Certified Insurance Counselors (CIC) or Personal Financial Specialists (PFS).

Registration

Say Charlie passed his exam! The next step is to open an account with Investment Adviser Registration Depository (IARD), an electronic system that facilitates registration and publicly discloses the information and reports of the individual investment advisor and advisory firm.

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