IA 770 was issued in 1981 to clarify the definition of investment advisors. It provided guidance on the following matters:

  • What is a "security"? - Life insurance and fixed securities are not securities, so those who give advice solely on these financial instruments are not required to register as IAs.
     
  • What is "advice"? - The guidelines here are very broad - simply recommending that a client buy "stocks" instead of insurance is considered advice.
     
  • Who is "in the business" of giving advice about securities? - The standard requires only that you "hold yourself out" as a financial planner or investment advisor (e.g. by advertising, making business cards, etc.), even if you have no clients yet.
     
  • What is "compensation" for giving advice about securities? - Compensation includes fees, commissions, assigning a liability of the advisor to the client, or requiring the purchase of another product.

IA 1092 was issued in 1987 in response to increased activity in financial planning and investment advice. It essentially reaffirmed the definition of an IA as stated in IA 770, but refined some of the definitions:

  • Pension consultants and advisors to athletes and entertainers are considered providers of investment advice.
     
  • Firms that recommend investment advisors may have to register themselves.
     
  • An IA does not have to give advice as his/her principle business activity - simply doing so on occasion is enough to require registration.
     
  • If a registered representative of a broker-dealer sets up a separate business entity to provide financial planning or investment advice for a fee, he/she may not rely on the broker-dealer exemption from registration (this is known as a statutory investment advisor).
     
  • Compensation does not have to be monetary to fall under the definition - receipt of products, services or discounts is also considered compensation.
State Registered Investment Advisors

Related Articles
  1. Financial Advisor

    How Does Your Financial Advisor Get Paid?

    Some questions to ask your financial advisor about the recommendations they make and how they get paid.
  2. Personal Finance

    What to Look for When Looking for Financial Advice

    Good financial advice is timeless and timely; it never goes out of style. Here's how to identify the best type of advice from an advisor.
  3. Financial Advisor

    Should You Choose a Fee-only Financial Advisor?

    Is working with a fee-only financial advisor always your best option?
  4. Tech

    Advisors: How and Why to Justify Your Fees

    In an era of fee compression here's how financial advisors can justify what they charge clients.
  5. Tech

    Management Fees: How Advisors Can Protect Them

    With management fees falling, advisors are wondering what they can do about it. Here are a few tips.
  6. Small Business

    The Cost And Consequences Of Bad Investment Advice

    Is your advisor working for you, or for him/herself? Find how to tell the difference.
  7. Personal Finance

    How Should Your Financial Advisor Be Compensated?

    The way financial advisors get paid can affect the cost and quality of their services.
  8. Financial Advisor

    The Pros & Cons of Partnering with a Broker/Dealer

    Financial advisors must determine a business model that meets their needs and meets the expectations of their clients.
  9. Investing

    What's an Investment Advisor?

    An investment or financial advisor makes investment recommendations and analyzes securities.
  10. Financial Advisor

    Choosing the Right Financial Advisor

    The right financial advisor for one person may not be right for another.
Frequently Asked Questions
  1. What's the Best Way to Contact Warren Buffett?

    Learn how to contact Warren Buffett and what kinds of contact is most likely to receive a response from him or from his company, ...
  2. What is the Financial Services Sector?

    A diverse group of companies, beyond banks and credit unions, comprises the financial services sector.
  3. Who are Whole Foods' (WFM) main competitors?

    Whole Foods' main competitors are Sprouts Farmers Markets and Trader Joe's. However, the recent acquisition by Amazon my ...
  4. What caused the Stock Market Crash of 1929 that preceded the Great Depression?

    Find out what led to the stock market crash of 1929, which in turn led to the Great Depression. It sparked a nearly 90% loss ...
Trading Center