Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

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Who is authorized to charge a client for securities-related advice?

Only registered investment advisers
Broker-dealers
Financial analysts
Accountants

The correct answer is: Only registered investment advisers

The correct answer is that only registered investment advisers are authorized to charge a client for securities-related advice. Registered investment advisers (RIAs) are individuals or firms that provide advice about securities and are regulated under the Investment Advisers Act of 1940. This legislation requires RIAs to be registered with the Securities and Exchange Commission (SEC) or state regulators, thereby ensuring they adhere to fiduciary standards and perform in the best interests of their clients. Broker-dealers primarily execute transactions for clients and may provide some advice; however, they are not typically authorized to charge specifically for advisory services unless they are also registered as investment advisers. Financial analysts, while knowledgeable in securities and investing, usually work within firms and do not directly provide client advice in a manner that permits charging fees. Accountants may give financial advice, but they are generally not credentialed to provide securities-related investment advice and thus cannot charge fees for that service. This regulatory distinction ensures that individuals receiving securities-related advice have protections and can trust that their adviser is well-trained and held to industry standards.