An investment advisor manages your financial portfolio by guiding your decisions on what instruments to buy into and what to sell. The investment advisor is also licensed to place orders on your behalf and is therefore in a position to trade on the stock market using the money you place in your investment account.
Of course, investment advisors do not only deal with stock market trades. They conduct a fact-finding interview to determine your financial means and goals and then they recommend a course of action or tailor-made investment plan. Typically an investment advisor works with high net worth individuals because they charge a commission for their advice and it therefore makes good financial sense to spend time working on deals that can potentially net more money in commissions.
Unfortunately, all investment advisors are not created equal so it helps to know what you can expect so it is easier to identify stellar service from shoddy treatment. Take a look at the following tips on how to choose a good investment advisor.
Ensure Your Investment Advisor has the Right Credentials
There are a number of different recognized credentials in the field of investment advising or portfolio management so it helps to do a bit of research into what is considered standard. Your advisor might have a first degree in business, but generally a person in this position is licensed and may also have a specific financial certification such as Certified Financial Planners (CFPs). Courses in portfolio management should come from recognized international institutions. It is also interesting to find out how long the advisor has held the position as this will give an indication of their level of experience.
Insist on Proper Disclosure of Fees
Different investment advisors charge different fees. Some work for companies and therefore adopt their fee structure while others work independently and can therefore have greater control over what to charge. Look out for advisors who focus on charging transactional fees and those who have high fees that are not tied to performance.
Look for a Track Record of Success
Of course, one of the things you should ask any potential investment advisor is for their track record or past performance. Although past performance is not indicative of future results it can give an insight into an advisor’s capability.
Feel Comfortable with Your Communication
You should be able to reach your investment advisor to discuss your strategy at your convenience. If the advisor is always to busy to meet face-to-face or even to return your phone calls you should probably be looking for someone else to manage your affairs.
You should take your time to choose an investment advisor that can fully meet your needs and one with whom you are able to build a comfortable rapport. After all, this person will have access to sensitive information about your income and your goals and aspirations so they should be someone you can trust.