Investment Advisor

Loading the player...

What is an 'Investment Advisor'

An investment advisor is defined by the Investment Advisors Act of 1940, as any person or group that makes investment recommendations or conducts securities analysis in return for a fee, whether through direct management of client assets or via written publications.

An investment advisor who has sufficient assets to be registered with the SEC is known as a Registered Investment Advisor, or RIA. Investment advisors are prohibited from disseminating advice known to be deceitful or fraudulent, and from acting as a principal on their own accounts by buying and selling securities between themselves and a client without prior written consent.

May also be referred to as a "financial advisor".

BREAKING DOWN 'Investment Advisor'

Mutual fund companies are generally included in the definition of investment advisors, but stockbrokers are not (they receive fees from commissions and not asset-based compensation).

Most investment advisors charge either a flat fee for their services or a percentage of the assets being managed. In most cases, there are very limited conflicts of interest between investment advisors and their clients, because the advisor will only earn more if the clients' asset base grows as a result of the advisor's recommendations and securities selection.

RELATED TERMS
  1. Registered Investment Advisor - ...

    An advisor or firm engaged in the investment advisory business ...
  2. Fee-Based Investment

    An investment account in which the advisor's compensation is ...
  3. Federal Covered Advisor

    An investment advisor in the United States that manages more ...
  4. Advisor

    1. The person or company responsible for making investments on ...
  5. Advisor Account

    A type of investment account where an investment advisor works ...
  6. Personal Financial Advisor

    Professionals who help individuals manage their finances by providing ...
Related Articles
  1. Term

    What's an Investment Advisor?

    An investment or financial advisor makes investment recommendations and analyzes securities.
  2. Investing Basics

    7 Steps To Evaluate A Financial Advisor

    Looking to hire a financial advisor but unsure what you want or need? Follow these seven steps.
  3. Professionals

    Investment Advisors Act of 1940

    FINRA Series 6 Exam Study Guide - Investment Advisors Act of 1940. This section defines investment advisor, IA 1092 and Investment Advisor Representatives.
  4. Financial Advisors

    Essential Questions for a Financial Advisor

    If you're a prospective financial advisor client (or an adviser), here are some questions you should ask ... and be prepared to answer.
  5. Personal Wealth & Private Banking

    What People Hate About Financial Advisors

    Advisors need to make a living too, but doing so by cutting corners at a client's expense isn't right. Here are the top complaints against advisors.
  6. Investing Basics

    5 Things to Ask Before Hiring a Financial Advisor

    Choosing a financial advisor isn't an easy task. Here's a list of the most important things to consider when planning for your financial future.
  7. Professionals

    Things That Keep Financial Advisors Up at Night

    Financial advisor worries include the changing technology landscape, the emergence of robo-advisors, government regulation and financial crisis fallouts.
  8. Investing Basics

    Choosing the Right Financial Advisor

    The right financial advisor for one person may not be right for another.
  9. Personal Finance

    Should You Choose a Fee-only Financial Advisor?

    Is working with a fee-only financial advisor always your best option?
  10. Your Practice

    Why Clients Leave Their Advisors

    Clients fire financial advisors for many reasons. Here's a rundown on why they're likely to do so and how to avoid losing any from your roster.
RELATED FAQS
  1. Do financial advisors have a base salary?

    Find out how self-employed and corporate financial advisors make a living. Find out whether they get paid based on commission ... Read Answer >>
  2. What fees do financial advisors charge?

    Learn how much financial advisors charge clients; discover the various payment plans available to customers seeking financial ... Read Answer >>
  3. How do financial advisors charge fees?

    Learn how financial advisors make their money and how you can make sure they are looking out for your best interests by understanding ... Read Answer >>
  4. Do financial advisors work only in banks?

    Learn how financial advisors are employed not only by various financial institutions, such as banks, but an increasing number ... Read Answer >>
  5. What's the average salary of a financial advisor?

    Learn about average salaries for financial advisors. Explore different levels of compensation financial advisors receive ... Read Answer >>
  6. Are hedge funds registered with the Securities and Exchange Commission (SEC)?

    Learn the conditions that require hedge fund advisors to register with the U.S. Securities and Exchange Commission. Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center