Investment Advisors – Concept, Working Style, Example, Types, Working Pattern & more

Ideally, Investment Advisors are also known as stockbrokers. These are individuals or a group of individuals who offer investment advice by understanding the current performance of stocks.

In exchange for these services, the advisors charge some fees. They make money by managing assets, directly addressing the investments on behalf of their clients or publications. 

Almost all the governments have a specific definition for the investment consultant. Specific laws govern the them. 

In India, if individuals want to become an investment planner, they need to clear NISM and CFA. They need to register with the Securities and Exchange Board of India compulsorily. 

People use the terms of financial advisors and investment advisors interchangeably. 

They tend to manage money. They tend to select financial assets, including bonds, support, and mutual funds. 

Consultants buy and sell securities, and also monitor the client’s account, keeping with your investment objectives. 

Generally, they have discretionary powers over the client’s account. Clients give the authorization to advisors to trade on their behalf. 

They don’t really ask the clients before making a new transaction.

A few investment advisors tend to work holistically as they choose to consider all the elements of the client’s financial life.

They put everything together to get a bigger picture of the investment plan, and you can say the process is ideally wealth management. 

On the other hand, some financial advisors tend to have a narrow approach, including having expertise in dividend paying stocks or so. 

Ideally, it is quite common for wealth management advisors to hire specialized advisors to manage some part of the portfolio. 

About Investment Advisors or Investment Consultants

An investment advisor who has a plethora of assets can get registered with the Securities and Exchange Commission (SEC). And then you can say the entity is a Registered Investment Advisor. 

Commonly people say investment consultants and financial advisors are one and the same but they are not. We shall clear this query later in this guide.

Within the financial industry, investment planners tend to work as professionals. In exchange for fees, these advisors tend to provide some specific advice to their clients. 

Above all, these advisors tend to give more priority to the benefits of the client over their own benefits. 

They provide all the recommendations to the clients are as per their needs, financial circumstances, and preferences. 

Additionally, these advisors need to be quite careful about not getting into any conflict of interest. 

A compensation structure is the only way through which investment consultants can reduce conflicts of interest. The only reason behind the success of advisors is their fees. 

The investment planners tend to charge fees based upon the size or performance of the assets of the clients. 

By doing this, they are clear about the financial motive of the client so he can work clearly towards the goals.

Often these advisors enjoy the benefit of discretionary authority that allows them to work on behalf of the clients.

But the client needs to give this authority as a part of the client onboarding process.

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Defining Investment Advisor or Investment Planner

You can use the term investment advisor or investment consultant for an individual or a company that is registered with the Securities and Exchange Commission.

In simple terms, they not only choose but also recommend some investments to their clients. 

A regulated body governs these advisors. It is mainly based on services, including financial planning or retirement.

Typically, these advisors choose to charge on the percentage basis of the clients.

Any individual or an entity who provides advice to others or issues securities reports or analysis must register with the registry body.

The registration is quite compulsory, which helps the investment planner stand out.

Working Style of Investment Advisors

For instance, you are a retiree falling in the senior citizen age group; then you can hire an investment advisor who can manage your retirement portfolio. 

You must choose an advisor who has a close adherence to the exceptional practices of the investment industry. 

Secondly, if you decide to buy a house using your retirement funds, then you have some experience purchasing blue-chip securities.

But as per your age, you are most likely willing to preserve the capital amount. Above all, you need to ensure that you lead a comfortable life for years down the line.

Your investment consultant will start asking you a bundle of questions when you meet them for the first time. 

All they want to know is your financial conditions, risk tolerance, retirement plans, and investment objectives. 

They will also explain the onboarding process and also obtain discretionary authority. Besides the power, the financial advisors will also have a fiduciary responsibility.

After knowing all the details about you, the investment planners are most likely to suggest you a financial plan. 

The financial plan will not only meet your needs but also be as per your budget. You agree on a course of action. 

Difference between Investment Advisor and Financial Advisor

No doubt there is a lot of overlap here, but one thing you need to know is that financial planning is way different than investment advice. 

Financial planners consider things like budget, loans, savings, etc. When it comes to advising, financial planners tend to suggest mutual funds instead of some particular stocks. 

A few financial planners are also stockbrokers who tend to trade on behalf of their clients. The financial planners don’t have discretionary power, unlike investment advisors. 

Often people find it too challenging to distinguish between the two. It is especially true for the wealth management type who tend to offer general financial advice. 

Just like financial planners, even investment consultants need to understand your financial goal.

It includes what you want to do with your money and where you envision yourself a few years down the line. 

They also need to have some financial data about their clients. Take time and understand the risk-taking capacity of the clients. 

Investment Planners don’t need to undertake any qualifying exam like a certified financial planner.

How to Choose the right Investment Consultant?

When it comes to choosing an investment advisor, you need to ensure you select the one who meets your financial goals.

Things to discuss with your Investment Consultants

• Where can you invest?
• Should you buy stocks or mutual funds?
• Risks associated with the investment.
• What type of taxable investments do you need to include?
• How can you rearrange the funds to minimize the investments?

Specialized Investment Planners

You need to hire an investment advisor who has some specific specialty as compared to the one who offers overall financial management. Some examples:

• If you own a large number of securities of the company, then you need someone who can write options for the same. You can use a protective strategy here.
• You need to find someone who can manage all the assets on your behalf if you own an extensive portfolio of securities and bonds.

Why do you need an Investment Planner?

The question mainly depends on the situation about how comfortable you are monitoring, selecting, or managing your portfolio. 

You are most likely to benefit from the investment planner if you have a complicated process. 

Additionally, you need to hire an investment advisor if you feel that your money could be doing more for you, but you aren’t clear where you can start. 

You can go for a Robo advisor also if you feel your finances are simple or you wish to have a budget-friendly option.

Basically, the robot advisors use computer based algorithms to manage your portfolio. 

The Robo advisors usually charge from 0.25% to 0.50% of your portfolio annually for balancing an account. 

Essential skills of Investment Advisors

Here are some of the most important skills of Investment Advisors –

Relationship and Management

If you want to be successful in the financial industry, you need to have good people skills.

You are most likely going to work with a plethora of types of personalities throughout the career. The professional must have learning and listening skills.

Not only the professional has to determine what question to ask but also solve conflicts on behalf of the clients.

When you have strong relationship management skills, you are most likely able to understand your clients. It allows you to give unbiased suggestions to your clients.

Communication and Presentation

No doubt, the investment advisors mainly deal with numbers only, but besides that, they need to present their skills with confidence.

With your strong speaking skills, only you can impress your customers. 

Investment Advisor – Conclusion

You need to know that the styles of investment advisors vary broadly. In general, investment consultants tend to offer transparent and easy to understand advice. 

Unless they know your time horizon, these professionals don’t recommend anything. If you want to get recommendations from the investment planners, you need to pay them some fees. 

Thus, professionals who are significant in math choose to work in the financial industry, so you don’t need to stress about the numbers. 

Above all, as financial planning plays a crucial role, it is essential for you to hire an investment advisor.

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