An investment advisor’s basic responsibilities are:
• establishing a client’s profile with regard to expectation, return, tax obligations and risk tolerance,
• determining the financial goals of a client,
• advising the client,
• providing investment information,
• executing a client’s transactions,
• reviewing a client’s needs when changes occur i.e. retirement, inheritance, etc.Brokers represent the investor in investment markets. Should you get a financial advisor? Finding a good investment advisor is similar to finding a good doctor, dentist, lawyer or accountant. We know from experience that in every profession there are a few outstanding individuals, some very good, but most very average. Some professionals are just incompetent.
Serious investors seek an investment advisor who is going to make money for them and who will match their investment objectives with the financial instruments and investment strategies that will withstand the test of time.
The best investment advisors manage the money of wealthy individuals. Investment advisors work for themselves, getting a percentage of a transaction in commissions. They do not share in the success of individual transactions. The financial success of investors is, however, important to investment advisors. The success leads to management of greater amounts, increasing number of clients, as well as a good feeling. The lack of financial results usually leads to losing the client base.Are investment advisors worth it? Good investment advisors make a substantial amount of their money during bull markets. Portions of their earnings come from the fees they receive from clients and the rest from astute investments they make for their own accounts.
Active trading of financial instruments costs the investor a substantial amount in commission fees. These fees are a part of doing business. A full service brokerage firm charges a higher commission in comparison with firms which do not provide any investment advice.
Investors who make their own decisions and want to save money on their commissions can open their accounts with discount brokers, buy government securities directly from the U.S. Treasury, or take advantage of the dividend reinvestment plans.The cash level kept by the institutional investor is at its lowest when investors buy securities and at its highest when they sell them. The statistical data of the last thirty years indicate that the institutional investors are wrong. Investors should sell stocks when the cash level of the institutional investors drops below 5% and they should buy them when the cash level exceeds 10%.
The opinions of investment advisors are always divided into bulls, bears, and neutral. In the periods of absolute and extreme one-sidedness of opinion (either bullish or bearish), you should become a contrarian and play against their opinions.
Adviser vs Advisor
Is there any difference between the terms “investment advisor” and “investment adviser“? No, they both have the same meaning. However, under federal law “investment adviser” was used by Congress and “investment advisor” is more frequently used form within the securities industry.