The term Investment Advisor (IA) (spelled "Investment Adviser" within U.S. financial law) is an individual or firm who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities [1]. Investment Advisors may be registered with state regulatory agencies, the Securities and Exchange Commission, or pursuant to certain exemptions, remain unregistered. [2]
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IAs generally are paid in one of the following ways[3]:
The anti-fraud provisions of the Investment Advisers Act of 1940 and most state laws impose a duty on IAs to act as fiduciaries in dealings with their clients. This means the adviser must hold the client's interest above its own in all matters. The Securities and Exchange Commission (SEC) has said that an adviser has a duty to[4]:
Registered Investment Advisor (RIA): Refers to an IA that is registered with the SEC or a states securities agency and typically provides investment advice to a Retail investor or registered Investment company such as a Mutual Fund, or Exchange-Traded Fund. Registration does not signify that the SEC has passed on the merit of a particular IA.
Unregistered Investment Adviser: Refers to an IA that is not registered with the SEC or a states securities agency and typically provides investment advice to private pools of capital. Such an investment pool is commonly known as a Hedge Fund or a Private equity fund.