Investment Adviser

What is an investment adviser?

An investment adviser is a financial professional who provides investment recommendations or conducts securities analysis for a fee. Advisers often manage client assets and owe a fiduciary duty—meaning they must put clients’ interests ahead of their own. The terms “investment adviser” and “financial adviser” are commonly used interchangeably.

Key responsibilities

• Provide tailored investment recommendations based on a client’s financial situation, goals, and risk tolerance.
• Act as a fiduciary: prioritize clients’ interests, avoid or disclose conflicts of interest, and place client transactions ahead of their own.
• Maintain records and compliance documentation to enable regulatory oversight.
• Communicate regularly with clients about performance, strategy adjustments, and fees.

Compensation and conflicts of interest

• Advisers are typically paid fees rather than commission-based sales incentives. Fee structures include:
• Asset‑under‑management (AUM) fees (percentage of assets)
• Flat or retainer fees
• Performance or incentive fees
• Fee-based arrangements align an adviser’s financial interests more closely with client outcomes, which can reduce certain conflicts of interest. Advisers must still manage and disclose any real or perceived conflicts.

Registration and oversight (U.S.)

• In the U.S., firms managing $100 million or more in client assets must register with the Securities and Exchange Commission (SEC) and are known as Registered Investment Advisers (RIAs).
• Advisers with less than $100 million typically register at the state level, though some smaller advisers may choose SEC registration.
• Regulation requires recordkeeping and provides mechanisms for investor protection and oversight.

Discretionary authority

• Clients can grant advisers discretionary authority to execute transactions without prior approval for each trade. This is usually formalized during onboarding.
• Discretionary authority increases efficiency but makes it important for clients to understand the adviser’s strategy, limits, and reporting practices.

Practical example (summary)

A retiree with $1 million in savings hires an adviser who:
* Assesses the retiree’s income needs, time horizon, risk tolerance, and objectives.
* Explains fee structure and conflict-of-interest safeguards.
* Secures discretionary authority to manage day‑to‑day portfolio decisions.
* Recommends a conservative strategy focused on principal preservation and sustainable withdrawals, with ongoing reviews and client communications.

What to expect from an adviser

An adviser should:
* Ask detailed questions about your financial circumstances, goals, and risk tolerance.
* Propose a customized investment strategy and explain the rationale.
* Disclose fees, compensation methods, and potential conflicts of interest.
* Explain any discretionary authority you grant and your fiduciary protections.
* Provide information so you can verify their registration and monitor performance.

Bottom line

Investment advisers offer professional guidance and, in many cases, portfolio management in exchange for fees. They are held to fiduciary standards, must manage conflicts of interest, and—if large enough—are overseen by the SEC. Choosing an adviser involves evaluating their approach, fee structure, fiduciary commitments, and transparency.

Sources and further reading

• Investment Advisers Act of 1940
• U.S. Securities and Exchange Commission — General information on the regulation of investment advisers and related guidance