What Will a Good Investment Advisor Do for Me?
In this day and age, it is difficult to be a “jack of all trades“ when it comes to managing one’s own finances. For starters, they don’t teach high school and college students how to properly manage their money. That is a shame considering each individual’s financial stability and future are at risk.
The good news is there are professionals out there in the world of personal finance who can help guide people to their financial future. One such professional is the investment advisor.
As you contemplate investing your money in the future, you might not have the expertise and time to do your investment portfolio justice. If that’s the case, you could certainly benefit by hiring a reliable investment advisor. How would you benefit? The following discussion will tell you how.
Firstly, What is an Investment Advisor?
As you compare investment advisors versus financial planners, you will learn the difference is subtle. An investment advisor is a financial advisor who specializes or focuses on investment management.
Their primary function is to work with clients to develop an investment strategy that makes sense based on the client’s financial and life circumstances, plus risk/reward tolerance. A financial advisor or planner deals with a broader focus that includes asset accumulation and debt management.
To fulfill their obligations, an advisor would need information about each client’s financial situation, investment goals, and risk tolerance.
They would also need to know the client’s life objectives such as what age and lifestyle the client would like to retire.
Based on this information, it would be the advisor’s job to help their clients develop an investment strategy towards those objectives.
Secondly – What an Investment Advisor Can Do for You?
It is understandable that before you pay for investment advice, you would want some assurance you would benefit by doing so. Of course, your decision would be based on both how you can benefit and your own level of expertise. The less expertise you have about investing would certainly impact your decision to hire a professional advisor.
To help motivate you to make the right decision, here are five advantages to hiring an investment advisor.
1. Hiring an Expert
Whether it be real estate or stocks, the process of investing money can be very complicated. There are law and tax provisions that will be affected by every investment decision you make. If you don’t know where the mines are buried, why would you walk through the minefield without direction?
A good investment advisor is a versatile investment expert. They understand all the nuances of every investment option that might be at their disposal. They understand how to measure risks versus rewards, and they have had ample exposure and education related to a very wide range of investment options. More importantly, they are experts at squeezing every penny of possible profit out of every dollar invested.
2. Emotional Distancing
When you invest your money on your own, you are assuming a material risk. For some people, assuming that risk can become unnerving. The problem usually involves them getting too emotional about the investment decisions they are making. When people get too emotional, they make costly mistakes.
By hiring a professional advisor, you can minimize the emotional investment you have to make in the investment process. Of course, you will need to be able to put your full faith and trust in your advisor, but if you can do that, you should be able to sit back and let your advisor work their magic.
3. Investment Education
While working with your investment advisor, you might want to pay a little extra attention. If you do, you could learn a lot about investing.
Remember, you have the right to ask very specific questions about the decisions your advisor is making. If you ask the right questions, it could lead to you gaining your own expertise over time. At some point, you might have enough confidence and know-how to start managing your own investments. That could result in some savings should you not have to keep an advisor on your “payroll.“
4. Access to Wider Range of Investment Opportunities
Through their years of experience, professional advisors encounter a wide range of investment opportunities. Because of their status within the investment community, they sometimes get access to very unique investment opportunities that are not available to the general public. If they are working for you, you could well get access to those same opportunities if your advisor felt any of them fit within your portfolio.
This is what you need to know about investing. It is never a good idea to put all of your investment eggs in one basket. A diverse investment portfolio often offers reliable returns with less risk, and that is what most people want.
5. Time Management and Avoiding Mistakes
The simple truth is you might not have time to adequately manage your investment portfolio. Your lack of time could translate to mistakes and missed investment opportunities.
Your advisor would have an obligation to constantly keep your portfolio on their radar. They are there to monitor your investment account to ensure your investments match up with your goals and investment objectives. They are far less likely to let bad investments run too long or miss an opportunity to take advantage of a good investment.
Finally – Hiring and Paying Your Advisor
If you decide to hire an advisor, you might want to start by seeking referrals from friends, relatives, or business associates. Otherwise, a big investment firm might be the right call. Regardless of the path you choose, you will want to interview prospects and find one with which you feel comfortable.
As far as costs, investment advisors charge fees in one of several ways. Some advisors simply charge a flat monthly fee. You might encounter some that charge a monthly fee based on a percentage of your average daily portfolio balance. It is also possible you could find an advisor who works on commissions. The bottom line is you have options, and you should choose the one that makes you feel most comfortable.
Assante Capital Management Ltd. is a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada.
This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please make sure to see a professional advisor for individual financial advice based on your personal circumstances.