
As a first-time investor, you might be overwhelmed with how to proceed with different investment options. It could be shares, fixed-income bonds, or mutual funds, to name a few.
Therefore, it is always a better idea to approach an investment advisor or a financial planner to get a better know-how of what works and what does not, concerning finances or investments.
Here is why we must carefully analyze the roles and responsibilities of a fee-only registered investment advisor. Let’s get started:
Who is an Investment Advisor
An investment advisor is a personnel who advises customers on what kind of investment portfolios run profitably in the market.
Say, for instance, you have a stockbroker who acts as an investment advisor because he is the intermediary between the share broking firm and the customer. The personnel advises the member on what shares to buy or what shares can be sold and he advises the customer on the volatilities of bearish or bullish market trends so that the member makes well-informed investment decisions.
An investment advisor also helps customers manage their financial portfolios by analyzing their risk tolerances and helps them with asset management across varied forms of investment categories.
Roles and Responsibilities of the Investment Advisor
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Helps You with Portfolio Management
An investment advisor helps you with managing your financial portfolio in a precise and comprehensive manner. He assesses the risk tolerance you are capable of handling under your belt.
To analyze your level of risk tolerance, an initial risk assessment screening is done wherein you are asked to fill up questionnaires as to what kind of investments you prefer investing in and how much working capital are you ready to stash out to maintain your investment portfolio. Here, you can also state the financial requirements you foresee for yourself and your family.
Post the screening session, the investment advisor helps you pick time-horizon investments that provide tailor-made and customized investment solutions that gear you to achieve your financial goals in a hassle-free manner.
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Investment Analysis and Research
You can approach an independent fee-only advisor to have your research findings done systematically and comprehensively.
The personnel analyze market trends and help you pick between profit-earning stocks, shares, commodity-linked products, currencies, or mutual funds, to name a few. This way, you pick the right type of financial investments to build a robust wealth-generating portfolio.
A qualified fee-only investment advisor provides his intellect to help you pick the right type of financial instruments so that you do not suffer pitfalls or hassles as a newbie investor. This way, the personnel empowers you to achieve your financial goals in a hassle-free manner indeed.
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Helps You with Asset Allocation
You might need the services of experienced investment advisors to help you manage a diversified financial or investment portfolio. This is because the personnel help you pick the correct assets in your portfolio.
Having a diversified financial portfolio is of the utmost importance primarily because you want your investment portfolio to grow at a steady pace and you do not want to run into the risk of falling prey to market volatilities that can erode your entire financial wallet in one go.
For instance, when the global recession took place in 2008 while Lehmann Brothers had signed up for their insolvency, several shares, bonds, or capital investments of Lehmann Brothers were rendered valueless.
An investment advisor helps you allocate funds between shares, bonds, or currencies so that the loss of one product is offset by the gains of another type of investment option, and this way your portfolio would not suffer from capital degradation.
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Facilitates Risk Management
Investment advisors work closely with their clients to facilitate market volatilities different investment options have.
For instance, in a stock market, a bullish market represents an indicative trend wherein the stock prices or shares of different Fortune 500 companies are going to rise. This is a good trend for investors to sell their shares in the stock market or via equity stock exchanges across the globe.
On the contrary, the bearish trend is an indicative trend of share prices falling in the stock exchange markets. Therefore, when you foresee a bearish trend, it means that the share prices of companies are more likely to drop or plummet. Therefore, investors can buy shares or stocks in the market.
An investment advisor therefore can gauge bullish or bearish trends in the market and advise customers on what shares they can buy vis-a-vis the shares they can sell in the market.
Furthermore, an investment advisor also works closely with their clients thereby assessing their levels of risk tolerances. The personnel helps clients build their investment portfolios by developing investment strategies that align with their risk preferences.
Investment advisors also monitor their client’s portfolios from time to time to manage their portfolios effectively. The assets that are not performing so well in the market are replaced by ones that perform well. These kinds of adjustments are made by investment advisors on behalf of their client portfolios so that the client’s financial objectives are met efficiently. Therefore, we require the services of investment advisors to mitigate market risks effectively.
A Fee-Only Investment Advisor Vs Financial Advisor Who Works For a Firm
A financial advisor in a firm works for the better interests of the financial console or conglomerate the personnel represents.
Here, clients are put under the advisor’s portfolio wherein their investments or financial portfolios are managed according to the rules or norms of that particular financial company, the advisory personnel is working for.
Whereas, in the case of a fee-only investment advisor, the individual is an independent contributor who caters to private clients on the whole. Here, the advisor provides more customized and tailor-made solutions for the individual clientele the financial advisor is dealing with.
In the case of a financial advisor who works in a company, the compensation is in the form of a salary package provided to the personnel on a month-on-month basis. Here, the salary structures are fixed by the firm he is working for.
On the other hand, for the services that are rendered by a fee-only investment advisor, the client pays the fee on a transaction-by-transaction basis. The client individually pays the fee-only investment advisor for the individual portfolios the personnel maintains on the whole.
This way, a fee-only investment advisor offers more dedicated services that align with each investor’s tailor-made requirements or financial obligations over an advisor that represents a financial firm or advisory console as such.
Key Takeaways
To approach the best fee-only investment advisor, you can activate your online directories or internet-based Google searches to help you reduce the overall time you need to find your best fit that is capable of handling your finances and investments systematically. And, a fee-only advisor specializes in the area of jurisdiction you want him/her to work around with, regarding your investments or financial portfolios.