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Defined by the Investment Advisors Act of 1940, any person 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 is considered to be acting in a fiduciary capacity on behalf of clients with a higher standard of disclosure due to care, a commitment to disclose, minimize and resolve conflicts of the interest than would be found in a traditional securities brokerage environment. In addition, most RIAs are compensated on a fee basis (usually as a percentage of assets under management) rather than a commission basis.
Registration does, however, cause one to become legally responsible for the investment advice given, requiring more disclosure to existing and potential clients, filing periodic reports with various regulatory bodies and to keep longer, more accurate records of the financial advice given to clients.