Rules for Registered Investment Advisors

The government has set regulations and rules in place for registered investment advisers (RIA) to follow in order to protect the investors from bad practices from advisors who are not educated. There are many regulations that are unique to each state.

Education

There are not set regulations on the federal level governing the minimum level of education that is required for registered investment advisers. There are state wide regulations that require a certain level of education before becoming eligible to take each exam in order ot meet the licensing requirements. If one has completed an undergraduate degree in a finance related field, they will be better prepared for the exam than someone with no education in finance.

Licensing

Each state has different requirements in terms of licensing. Depending on the area of investments that an RIA will work in, they will require a specific license for that area. A basic licensing requirement in most states for RIAs is the Series 65 license. This exam can be waived in some state when the RIA has a certified financial planner designation, also called a CFP. There are many levels of exams that one can take in order to be registered to perform certain duties as a registered investment advisor.

Fiduciary Responsibility

Every registered investment advisor has a responsibility to their clients to act in their best interest all the time. This means that the registered adviser must perform due diligence and disclose any potential risk of all investments to their clients. The fiduciary responsibility includes the investigation of each investment on behalf of each client. The suitability requirements of the investors are also an important issue to investigate before placing a client's money in a particular investment.