When looking for a financial expert, you may come across a variety of titles – investment advisor, financial planner, wealth manager, financial advisor, investment advisor representative, asset manager, and so on. But, is the title enough when deciding which professional would be the perfect match for you?
The investment world is vast and complicated. As an investor, you will need professional guidance to plan your financial journey and make the best decisions. Now, this requirement can be met in two ways. You could either do your own internet research and go the DIY method or you could hire a skilled, independent counsel or a large firm that manages investments. Not everyone can devote ample time to learn and stay up to date with the financial world. It requires an extensive amount of time, effort and resources. You can seek guidance from a professional financial advisor on how to best attain your financial goals. The advisor can help create a financial plan for you based on your needs, risk appetite and investment horizon.
This article carries out a comprehensive analysis of both independent advisors and large firms that will help you access the best option as per your convenience.
In today's world, managing your finances can be a difficult task. Not every individual has the expertise and research skills to manage their finances and portfolios. An independent advisor can either be an individual or firm. Since independent financial advisors aren’t tied to any larger financial institutions, they are not limited by the kinds of financial instruments they can recommend to their clients.
In such scenarios, you may be better off hiring an independent advisor due to the following reasons:
More often than not, hiring an independent advisor is more cost-effective compared to a large firm. Most large firms charge a high fee compared to independent advisors that is counterproductive and may be out of reach for the common public. In contrast, you can hire an independent advisor for nearly the same services at a better price. This way, not only do you have a professional advisor overseeing your portfolio, but you have done so in a cost-effective way.
Professional investment advisors can devote ample time and effort to maximizing their client's portfolios which may not be possible with a large firm as they may not devote enough individual attention to your account.
An independent financial advisor will go over and above to effectively manage your portfolio. Their business acumen and abilities can help you obtain access to larger markets, identify major investment possibilities, and improve the efficiency of your portfolio. They also provide custody services allowing you to have more control and flexibility over your portfolio.
A good independent advisor will manage your money effectively and work towards creating an optimized investment portfolio geared towards achieving your financial dreams. As the advisor is focused on improving your returns to be able to meet your short and long-term financial goals, it allows you to take a step back, relax and have peace of mind.
An independent counsel is more beneficial than doing it yourself for the following reasons:
All said, the needs of every individual varies. For instance, independent advisors may not be best suited to serve the needs of big organizations, HNIs, or UHNW individuals simply because of their portfolio complexity. An independent advisor may not have sufficient resources at his disposal to address various issues for high-net clients and their likes. There are several areas such as estate planning, retirement planning, tax planning, and more that require extensive expertise and support that an independent advisor may not possess.Large firms, on the other hand, can cater to all these requirements under one roof.
So, should you opt to hire larger firms to manage their portfolios? Read further.
Broadly stating, large investment firms provide holistic money management services ranging from portfolio management to charity, trust, real estate, will, and other investment options. They work in tandem with their client's risk appetite and have a host of professionals operating under them.
In other words, most large investment firms handle the entire process of putting together a client's investment portfolio and provide access to fresh investment opportunities that would otherwise be unavailable. Investment management firms serve a wide range of clients ranging from high-net-worth individuals to businesses, charities, foundations, large organizations, etc.
As mentioned earlier, HNIs, UHNWIs and their likes may have financial complexities that may not be suitable to manage for an independent advisor. For instance, here are some of the questions that high-net-worth investors, many of whom own businesses and real estate, frequently ask –
An independent advisor may not be able to provide solutions or answers to these problems.
Also, "complexity" here may not imply out-of-control spending, high-risk investments, hedge funds, or payment default. It may imply a dense network of keeping track of numerous banking/ retirement accounts, mutual funds, pension funds, equities, investment decisions, and more.
The paper and legal work required here may be extremely high and can be met only by a firm with the resources and time to address it.
Investment management firms handle financial assets and other investments. Their role is not limited to simply buying or selling investments. It involves creating a short- or long-term strategy for acquiring and disposing of portfolio holdings, banking, budgeting, tax services and duties, and more. Their chief responsibilities are as follows:
To provide holistic and tailor-made solutions, investment management firms must diligently collect all information on their client's corpus, risk appetite, and investment goals.
Depending on risk capacity, investment firms can look for opportunities for their clients, ranging from investing in government bonds to investing in alternative investments such as real estate, hedge funds, art and antiques. An investment management firm must be aware of the options and analyze the risks and returns of each investment.
Each client needs an investment portfolio that is tailored to their objectives. A diversified portfolio, with investments distributed over a variety of assets, can lead to effective risk management.
These firms may also be in charge of managing investment funds for several different investors. They are also responsible for taking care of activities such as business development and marketing, information technology, pricing, accounting, etc.
A lot of firms provide investment advisory services. It may become difficult to select the best firm suitable to your needs.For starters, you should look into the track record of the investment firm. It also helps if you choose a firm that manages a large amount of assets. Market-savvy investors can also examine the performance history of various funds and schemes operated by the investment firms during periods of market volatility to understand how they have performed over time.
When selecting an investment firm, investors should consider the following factors:
A fund house does not achieve its position overnight; it takes months or years to build a reputation. A company's reputation is built over the course through steady performance and client commitment. If a firm fails on these parameters, you may not want to engage with them. Also, you may speak with other investors to see if the firm's prior performance has been consistent and if they value what they stand by.
You may want to check the credentials of the firm and its employees before engaging their services, as ultimately, these individuals and their teams would be managing your money. Also, you can check the fund manager's track record and investment approach.
This is an important and often missed aspect when looking to engage with an investment firm – What is their crisis handling policy, or how has the firm handled crisis previously?
This will provide you with a lot of information about the firm and its advisors. The firm's response, its strategy, and how it handles clients (in difficult times) can give meaningful insight into the company and its functioning.
If you have a high net worth, employing a large investment firm specializing in complex financial and legal concerns may be worth the fees. A wealth manager here may serve as a trusted counsel in your corner, assisting you in avoiding risky investments, ill-timed financial decisions, and other problems.
On the other hand, if you are a regular investor, you may be better off with an independent advisor managing your finances. The fee range may suit you, and also, these advisors can largely address all of your financial needs.
So, when determining the type and extent of financial guidance that you may require from a financial advisor, it's critical to analyze your financial needs, goals, and risk capacity to have the best professional help at hand.
Use the free advisor match tool to match with an experienced and certified financial advisor who will be able to guide you effectively and help you decide whether you should go for an independent financial advisor or hire a large investment firm for managing your finances. Give us basic details about yourself, and the free match service will match you with 1-3 professional financial fiduciaries that may be suited to help you..
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The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice.
A professional financial advisor should be consulted prior to making any investment decisions. Each person's financial situation is unique, and your advisor would be able to provide you with the financial information and advice related to your financial situation.