Getting started or managing your investment portfolio could be over your head if you are new to investing. Thus, it is always advisable to consider finding a registered investment adviser who can lend a helping hand instead of trying to figure it out without assistance.
An investment adviser is an individual or a company registered with either the US Securities and Exchange Commission (SEC) or a state securities regulator. The spelling we know and commonly use is “advisor”. The laws, however, refer to financial professionals with the spelling “adviser”.
The work of an investment adviser is to choose, manage and recommend investments for you. Investment advisers also provide other services like planning for retirement. Investment advisors’ fees would generally be a percentage of the holdings they manage. The typical advisory cost is 1.17%, while some charge 0.98%.
Who can be the adviser?
Any financial professional who can provide financial advice, issue security reports and insights can register with the SEC or a state securities regulator to become an investment adviser. Registration is, however, mandatory. The regulations given by the SEC alongside state securities regulators make investment advisers distinctive. Both of them have guidelines for investment advisors to follow — for instance, it is mandatory to have a written policy and a code of ethics.
Unlike other financial advisors, the SEC or the state regulates investment advisers based on the money they manage. Investment advisors who manage more than $110 million in assets are supervised by the SEC. In comparison, the state supervises investors with AUM (Assets under management) of less than $110 million. Any investment advisor can register with the SEC on their own volition as soon as their AUM goes past $110 million.
Are investment advisers and financial advisors the same?
No, they are not. Though the terms investment adviser and financial advisor are frequently used interchangeably, they are not the same. The term financial advisor is an all-encompassing term that refers to all kinds of financial professionals. The term investment adviser is a legal authority sanctioned by the SEC or a state regulator.
It is always advisable to check if the individual or organization is legally eligible to offer investment advice. Registered investment advisors also have a fiduciary responsibility — that means they are legally obligated to work for the client’s best interest in preference to their own.
Investment advisors have certifications like Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA). These certified analysts would also be in a position to provide overall financial guidance. Besides this, you will get investment advice like budgeting, planning for retirement or paying off debt. However, you must be sure that their certifications would meet your needs. You could look up online about their qualifications, fiduciary duty, and fee structure to see if they would be able to provide assistance specific to your need.
Does everyone need an investment advisor?
If you’re unsure where to start, you can consider hiring an investment adviser or even a financial advisor depending on your needs. People whose investments are not straightforward would need technical assistance. You will not need professional help if you know your way around your investments.
Moreover, you can consider using a robo-advisor if you have a basic investment plan. They are a low-cost alternative to a human advisor. It uses computer algorithms for an annual fee of just 0.25% to 0.50% of your account balance to raise and shape your portfolio.
