Choosing an investment advisor to work with can be a daunting task because they all seem to sound the same. Don’t despair, not ALL of us are the same! There are different types of advisors out there to choose from. The differences range in how they are licensed to the types of investments they can provide access to. In terms of licensing, you should ask what credentials your advisor has and how they are bound from a regulatory and legal standpoint. Most importantly don’t just take someone’s word for it, do your research and even check them out online (you may be shocked what you find doing a good Google search!) We get all those letters behind advisor’s names may mean a lot (such as CFA, MBA or CPA), or they may not mean much at all.
Frequently Asked Questions
How do some investment advisors differ?
The differences range in how advisors are licensed and the types of investments they can access. In terms of licensing, you must ask what credentials your advisor has and how they are bound from a regulatory, legal, and fiduciary standpoint.
What is fiduciary responsibility?
The term ‘fiduciary’ gets tossed around a lot, but there is much more meaning to the term. Essentially, it refers to the fact that an advisor has to put your interests ahead of their own. The problem that most don’t realize is that there are two types of fiduciaries within the investment management industry; a moral fiduciary and a legal fiduciary. The latter has a higher standard of care, making it an important question to ask when looking for an advisor.
What can an advisor do for me?
With a mutual fund deal license, your advisor can only provide investments in the form of mutual funds.
With this type of advisor, each investment decision needs to be run by you first. This style generally charges a fee for each transaction that takes place in the account.
Discretionary means an advisor can manage your accounts daily according to an investment plan laid out at the beginning of your relationship and updated regularly to keep up with life events. This type of advisory service is best suited for those who are too busy, not interested or do not know how to manage their money independently, as it takes the onus off of you to approve any daily transactions. This style also allows for fair dealing across all clients.
Not all investment professionals are the same
Selecting the right type of investment advisor is essential