Investment Adviser Representative (IAR) vs. Registered Representative: What’s the Difference?
The same person can change roles. One moment they’re acting as a fiduciary adviser, and the next, they’re a Registered Representative. The legal duties and compensation models change, even if the person across the table looks the same.
IAR Meaning: What Is an Investment Adviser Representative?
An Investment Adviser Representative (IAR) is an individual who provides investment advice on behalf of a Registered Investment Adviser (RIA) firm, and who is held to a fiduciary standard — legally required to act in the client’s best interest at all times.
A Registered Representative (RR), by contrast, works on behalf of a broker-dealer and follows Regulation Best Interest rather than a fiduciary standard.
IAR vs. Registered Representative: Two Different Legal Duties
Many financial professionals are “dual registrants,” meaning they are registered as both Registered Representatives of a broker-dealer and Investment Adviser Representatives of a fee-based adviser. When these professionals act as Investment Adviser Representatives, they are held to a fiduciary standard. This requires them to demonstrate strict, undivided loyalty to their clients.
In contrast, when they serve as Registered Representatives, they do not have fiduciary duties. Instead, they must follow Regulation Best Interest, which requires them to disclose and, in some cases, address or eliminate material conflicts of interest. However, this standard of best interest applies only at the point of sale; there is no obligation to provide ongoing advice, and it only concerns the options offered to the client by his broker-dealer or insurance company.
However, notable exceptions exist. For instance, ‘statutory employees’ (often insurance agents) might have their eligibility for health insurance and other benefits directly linked to the sale of proprietary products. Under Reg BI, this specific conflict is generally allowed and doesn’t need to be eliminated, as long as it is disclosed.
Regulation Best Interest vs. Fiduciary Standard
As of June 30, 2020, broker-dealers operate under Regulation Best Interest (Reg BI). The aim is to minimize conflicts like sales quotas and proprietary product pushes, and to require that recommendations serve the client’s best interest.
Under Reg BI, Registered Representatives are now often called “financial professionals.” Fiduciary advisers under an RIA can still identify as “financial advisors.” The industry labels have become less distinct, but the responsibilities have not fully merged.
Some critics argue Reg BI still doesn’t provide investors with the same level of protection as a pure fiduciary duty. That’s one reason I operate in both roles: to tailor a model to the client’s actual situation rather than applying a single label to everyone.
Is Your Financial Advisor a Fiduciary or a Registered Representative?
Under the Dodd-Frank Act and SEC oversight, Congress directed regulators to assess whether brokers and investment advisers should follow a single, consistent fiduciary standard.
The point was simple: most investors don’t realize that the same person can change roles.
Read More: What is the Difference Between a Fiduciary Financial Advisor and a Broker
ERISA Fiduciary: The Strictest Standard for Retirement Plan Advice
There is also a third standard: an ERISA fiduciary advisor who works with retirement plans like 401(k)s. Unlike most Investment Adviser Representatives (who can disclose conflicts), an ERISA fiduciary is expected to remove conflicts entirely when advising retirement plans and participants.
Fee-Based vs. Commission: How Your IAR or Registered Representative Gets Paid
I mainly give advice to public employees as an Investment Adviser Representative. I charge a fee-based or flat fee, usually based on the size and complexity of the portfolio.
If a client has a smaller account — like a Roth IRA, a 529 plan, or a teacher’s 403(b) retirement plan — I might receive commissions as a Registered Representative. That can cost less for the client while still getting the job done. It’s about matching the cost structure to the need, not forcing everyone into one model.
I have been a client of Tim Hayes for several years. Although I don’t have a large portfolio, Tim has still treated me with caring, professionalism and respect to optimize my success with my account. He sends regular updates regarding market changes and recommendations and offers to meet as needed to discuss life changes and financial planning. I highly recommend Tim as a financial advisor.
Judy Carter
Client
Testimonial Disclosure: Testimonials are based on individual client experiences and may not represent the experiences of all clients. They are not a guarantee of future performance. Each client’s situation is unique. No compensation has been provided for these testimonials.
These are the opinions of Financial Advisor Tim Hayes and not necessarily those of Cambridge Investment Research. They are for informational purposes only and should not be construed or acted upon as individualized investment advice. Content provided via links to third-party sites should not be considered an endorsement of content that we cannot verify completeness or accuracy of.