Investment Adviser Association

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The Investment Adviser Association [1] (IAA) is a not-for-profit association that exclusively represents the interests of federally registered investment advisory firms. Founded in 1937, the Association played a major role in the enactment of the Investment Advisers Act of 1940.[2] The IAA’s membership today consists of over 500 firms that collectively manage in excess of $9 trillion for a wide variety of individual and institutional investors.

The IAA provides significant benefits to its members, including up-to-date regulatory, compliance, and educational services. In addition, the IAA serves as the advocate for investment advisory firms with respect to every major issue that arises before the U.S. Congress, the United States Securities and Exchange Commission (SEC), the United States Department of Labor, state securities regulators, and other policy makers.[3] The purposes of the IAA are:

  • To promote high standards of integrity, public responsibility, and competence in the investment advisory profession.
  • To provide effective, quality representation of the investment advisory profession at all levels of government with respect to the development, formulation, and enactment of legislation, rules, and regulations relating to investment advisers.
  • To provide benefits, services, and products that assist and add value to member firms in their course of doing business.

What is an investment adviser? [4]
Legal Definition. “Investment adviser” is a legal term that appears in the Investment Advisers Act of 1940, the federal law that governs investment advisers. Generally, this law defines an investment adviser as someone who, for pay, is in the business of advising others on investing in stocks, bonds, and other securities.

What Investment Advisers Do. Investment advisers provide professional advice to their clients regarding investments in securities. Investment advisers typically have the authority to make investment decisions on behalf of their clients, including which securities to buy or sell (referred to as “discretionary authority”) consistent with each client’s objectives and guidelines. The adviser’s authority may also extend to deciding which additional investment advisers to retain on behalf of their client to manage all or a portion of the client’s investments.

Spelling and Titles. The word “adviser” is often spelled “advisor.” There is no difference in meaning between the two terms. The Investment Adviser Association prefers to use the spelling Congress used when it passed the Investment Advisers Act. “Investment adviser” is a broad legal term that encompasses a wide range of businesses. Other terms that investment advisers frequently use to describe themselves include “investment counsel,” “investment manager,” “asset manager,” “wealth manager,” “money manager,” or “portfolio manager.”

Registration. If an investment adviser has at least $100 million in assets under management, manages a mutual fund, or meets certain other requirements, it must register with the SEC by filing a document called Form ADV, Part 1. Investors can review the information that investment advisers file with the SEC by visiting: Form ADV, Part 1 includes useful information about the adviser, including its address, phone number, number of employees, types of clients, assets under management, ownership information, key executives, and disciplinary information (if any). An investment adviser is also required to maintain and deliver to clients and prospective clients Form ADV, Part 2, a narrative document that includes additional information about the investment adviser, its employees, and its business practices.

Fiduciary Duty. Investment advisers owe a fiduciary duty to their clients. As such, an investment adviser stands in a special relationship of trust and confidence with its clients. As a fiduciary, an investment adviser has an affirmative duty of care, loyalty, honesty, and good faith to act in the best interests of its clients. The parameters of an investment adviser’s fiduciary duty depend on the scope of the advisory relationship and generally include the following duties:

(1) to place the interests of clients first at all times; (2) to have a reasonable basis for its investment advice; (3) to seek best execution for client securities transactions where the adviser directs such transactions; (4) to make investment decisions consistent with any mutually agreed upon client objectives, strategies, policies, guidelines, and restrictions; (5) to treat clients fairly; (6) to make full and fair disclosure to clients of all material facts about the advisory relationship, particularly regarding conflicts of interest; and (7) to respect the confidentiality of client information. This fiduciary duty differs from the suitability obligations that govern brokers.

Public Disclosure. In recent years, much more information has become widely accessible to the public regarding investment advisers. As noted above, the SEC maintains a public web site that allows anyone to review information the adviser has filed with the SEC (Form ADV, Part 1).[5]


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