Continuing Education (CE) requirements are common for many professions, but historically there has been no minimum CE requirement for individual Investment Adviser Representatives (IARs) of advisory firms. While holders of certain credentials (e.g., CFP certificants and CFA charterholders) have CE requirements to retain their credentials, IARs without such credentials haven’t traditionally had any ongoing CE requirements. Which meant that an IAR could go years – or even decades – in their career without any requirement to refresh or expand the knowledge they had when they were first registered. To address this issue, the North American Securities Administrators Association (NASAA) in 2020 released a Model Rule creating the first-ever CE requirements for IARs. In 2022, the first states to adopt the new Model Rule implemented their IAR CE requirements, and by 2024, at least 15 states will have begun requiring IAR CE.
In this post, Senior Financial Planning Nerd Ben Henry-Moreland discusses how IARs can determine whether they’re required to complete CE and, if so, how to go about it – since with the adoption of the Model Rule ramping up among states, more and more IARs will be subject to the new CE requirements.
At a high level, every IAR who is registered in a state requiring CE must complete a total of 12 CE credits each year, comprising 6 credits of Ethics and Professional Responsibility and 6 credits of Products and Practice. The caveat, however, is that content must be approved by NASAA to count towards IAR CE requirements – the only exception being CE content that goes towards FINRA’s Regulatory Element CE requirement for registered representatives of broker-dealers, which can also be used for IAR CE (when the IAR is also a registered representative) even when it isn’t specifically approved by NASAA. On the other hand, holders of other credentials who have their own CE requirements, such as CFP certificants and ChFC designees, can only apply CE credit for their designations towards their IAR CE requirements if the content is NASAA-approved, meaning that IARs who hold those credentials may benefit from finding CE sources that are eligible for both sets of requirements (particularly if they’re used to getting ‘free’ CE from sources like product vendor webinars, which largely aren’t NASAA-approved).
There are other considerations for IARs to be aware of, particularly for those becoming registered as IARs for the first time, changing firms and/or state registrations, or temporarily withdrawing their registration (such as to leave work to raise a family). And for IARs who fall behind on their CE requirements, it’s important to be aware that, while IARs who don’t complete the required 12 credits can still renew their registration and work with clients in the following year, failure to catch up in the next year results in being unable to renew the IAR’s registration in any states with IAR CE requirements.
Looking ahead, it will be worth monitoring how different states adapt NASAA’s IAR CE Model Rule into their own investment adviser regulations. Because while the states that have already adopted IAR CE requirements follow the Model Rule almost verbatim (making it relatively easy for IARs who work across state lines to understand their requirements), it seems inevitable that we’ll see more individual nuances as more states adopt the rule. Ultimately, however, although IAR CE is a new requirement that will take time to iron out wrinkles in its implementation, it is a positive development that will raise the bar for an industry that previously had no baseline requirement for individuals giving investment advice to regularly update and expand their knowledge.
