What is an investment advisor?
If you’re looking for expert help, investment advisors are not only specialists in helping to set up and manage a portfolio, but they’re also bound by strict rules which ensure they put their client’s interests first.
An investment advisor is a registered professional who provides personalized investment advice and securities analysis.
Advisors draw up, research, and manage investing plans for clients while taking into account financial objectives, timelines, and attitudes to risk.
Investment advisors may charge commission, flat or hourly rates, advisory fees, or a combination.
The benefits of an investment advisor are numerous, especially for those unfamiliar with the investing process.
Unbiased can match you with a financial advisor suited to meet your needs.
What is an investment advisor?
An investment advisor is a financial expert or firm that recommends investments, analyzes securities, and builds or manages investment portfolios for a fee.
The US Securities and Exchange Commission (SEC) regulates money managers, investment consultants, and financial planners.
What does an investment advisor do?
These experts focus on the investment side of a client’s wealth management needs, often leaving related aspects, such as tax and estate planning, to other financial professionals.
Investment advisors usually have ongoing relationships with clients rather than merely processing a few transactions on their behalf. When onboarding a new client, the advisor analyzes the client's financial status and helps them establish a road map to achieve their monetary goals.
They provide the client with an overview of various types of investments and how each could affect their objectives. This includes assessing the risk a client can tolerate and advising them on how aggressive they can afford to be with their investments.
The advisor thoroughly researches investment options, strategies, and market conditions to find the most suitable financial solutions for the client. The next step is to assist the client with building a diversified investment portfolio, which may include investing in stocks, real estate, bonds, and private equity, to name a few options.
Meticulous recordkeeping is a crucial part of an investment advisor's job. As they have access to sensitive financial data, they must keep detailed records regarding their services. These include discretionary authority documents, disclosure agreements, signed contracts, invoices, and payments.
What is their fiduciary duty?
Investment advisors must always put their client’s interests above their own and take care to avoid any conflicts of interest, real or perceived.
All recommendations and advice must benefit the client’s financial needs rather than the advisor’s potential gains.
How much does an investment advisor cost?
When you need financial advice, a significant consideration is what an investment advisor costs.
Financial experts receive payment in various forms:
Commissions
Hourly or flat rates
Advisory fees
A combination of the above
Advisor costs can vary according to the investment advice and services offered and the fee structure of an individual professional or a company. Fees may be applied according to a flat or hourly rate or calculated on a sliding scale as a percentage of the client’s investment assets under management (AUM).
According to 2023 figures from AdvisoryHQ, investment advisors typically charge between 1.18% (AUM up to $50,000) and 0.59% (AUM over $30 million).
Similarly, some advisors charge flat annual rates scaled according to AUM, ranging from $7,500 for investments below $500,000 to approximately $55,000 for those worth over $7.5 million.
Sometimes, an investment advisor may charge an hourly rate for the time spent managing the client’s account. This is often a more affordable option. Hourly rates can range from $120 to $300 depending on the services provided and a firm’s location.
Investment advisors can also create packaged deals that group-specific services for a “one-stop-shop.” Alternatively, they may offer a hybrid payment structure, for example, an hourly fee in addition to a percentage of AUM.
It’s vital to discuss these with your advisor before you sign up for their services so that you know exactly what you will be billed for as well as how much.
Are investment advisors worth it?
Investment advisors are typically on top of the latest market trends and products and can ensure the best performance on clients’ portfolios.
Hiring an investment advisor can help you better manage your investment portfolio, especially if it is a more complex portfolio involving a substantial amount of money. An investment advisor can also help you gain the knowledge or skills to obtain the best returns on your investments, regardless of your investment amount.
The advantages of hiring an investment advisor include:
Their expertise and knowledge ensure the best solutions for your financial goals.
They tailor your portfolio to your specific needs.
Investment advisors provide ongoing management and support.
Do I need an investment advisor?
You may need an investment advisor if:
You have a high net worth
You’re unfamiliar with investment strategies and products
You’re experiencing significant life changes like marriage, expanding your family, or retirement
Unbiased can match you with an SEC-regulated financial advisor that best suits your needs.
How to find an investment advisor
Choosing a professional to manage your investments is a step you should not take lightly.
Do due diligence and keep the following points in mind to make sure you select a suitable person or firm:
Consider their fiduciary status, ensuring they have your best financial interests at heart.
Understand their compensation structure.
Check the investment advisor’s credentials to make sure they are suitably qualified.
Look for professionals who work on a fee-only basis.
Seek expert investment advice
When you're ready to invest in your future, working with an advisor can be your best decision.
An investment advisor will provide expert advice on developing a portfolio tailored to your needs and goals, which is especially helpful as they have the skill, knowledge, and keep abreast of the latest trends and products.
If you need help with investing or are ready to get expert advice, let Unbiased match you with an advisor to secure your financial future.
Content Writer
Andrew Michael is a multiple award-winning financial journalist and editor whose work has appeared in numerous newspapers, magazines, and online platforms, including The Times, Evening Standard Money, Financial Times, Shares, and Forbes Advisor.