Basics of Investment Advisor

Investment advisors are financial experts who have the perfect knowledge and reading of the market. They are market analyzers who have the vision to focus on investment sector as a specialized field of finance. Investment advisors provide guidance and support on issues of different securities as well as on real estate. Investment advisors cater to all kinds of investors, namely, insurance companies, corporations and private investors. Investment advisors are divided into two main classes that are as follows:

1) Advisors that provide direct financial advise to individuals and business firms.

2) The second category of investment advisors is that of advisor that provide assistance on asset management, especially for corporate clients. It includes professional advice related to collective investments, wealth management and portfolio management.

Functions of Investment Advisor

An investment advisor may not necessarily restricted to providing advise to investment issues of the investor. The investment advisor can provide assistance on the overall financial assistance to the investor. Some of the major functions of an investment advisor are as follows:

1) After studying the profile of the investor, the advisor provides the various options available for the investor to invest his money. He provides a list of all the companies of which the investors can buy shares and other securities.

2) The advisors advise the investors regarding the extent of risk that he must and can take in the process of investing money in a particular company or a project. The advisor studies the profile of the company and if he feels that the company has great future prospects, only then he advises the investor to invest in the company.

3) The advisor ensures that the investor gets maximum returns at minimum risks and short-lists the investment options accordingly for the investor. The investor can then choose the particular company or project that he wants to invest into.

4) Investment advisors play a major role in real estate investment. Real estate investment involves transactions in huge amounts. Hence, it is necessary that the properties be appraised properly and precisely so that the investor does not make any wrong investments.

5) The financial advisor appraises and determines the market value of the property and the expectedreturns from it to the investor. Once the returns are determined, the investors are advised whether to invest in it or not.

6) The investment advisor also provides alternatives to invest the premium collected from the shares so that the returns can be maximized to an even greater extent.

7) Some of their other functions also include monitoring the happenings in the stock market as well as the fluctuating trends in the industry and make the investment decisions for the investors accordingly.

8) The advisors also purchase or sell stocks and other securities on the behalf of the investors.

9) It is essential that the advisors are aware of all the latest developments in the investment products and markets.

Vital Tips

There are a large number of investment advisors in the market and it can be very confusing for the investor to find the right advisor. To do away with this confusion there are some tips that are bound to be helpful to the investor. Some of the tips important for selecting the right investment advisor are as follows:

1) Investors can rely on the Computerized Registration Depository (CRD), which is a computerized database of all the licensed brokers, companies that have floated their shares in the market and other regulators. The investors can rely on this database for getting all the information about the brokers and brokerage firs as well as of the good investment advisors in the market.

2) The investment advisors need to register with the state securities agencies. Thus investors can get in touch with the SECs or state security agencies in order to get the right investment advisor for themselves.

3) Investment advisors have investment representatives, who are the link between the client and the company. These representatives must be licensed or registered with the SECs or state securities agencies.

4) Investors must make sure that they read the Form ADV before they hire an investment advisor. This form is like a mirror of the investment advisors. Part of the form consists of all the information of the businesses and transactions of the advising company. The form also provides information about the problems, if any, faced by the investment advisor. The form also gives all the key details like the service charges, other fees and the fundamental strategies and principles followed by the advising firm. Hence, an investor must read this form to get the precise idea about the profile of the advising firm. The investor can get this form easily on the Internet before hiring an investment advising company.

Exercise Caution

It is important that investors recognize the credibility of the investment advisors in order to avoid any losses. There are some signs that act as warning indicators and advocate a change in the investment advisor. The signs are as follows:

1) The capital market is flooded with investment instruments like monthly income plans (MIPs), mid cap funds and flexi cap funds. Hence, it is important that the investment advisor has a keen study and research done about the investment instruments and identifies the underlying objectives and risk appetites. If the advisor ignores these areas and simply opts for the investments then he is more interested in his own commissions and it is time to switch to another investment advisor.

2) If the advisor gives an advise of lump sum or collective investing then it gives out the wrong signals. Every creditable advisor is expected to follow the strategy of systematic investment plan (SIP) for the clients. Instead of the SIP, if the advisor advises lump sum investments then it is a wrong signal.

3) If the investor feels that he is making all the major decisions and there are no significant inputs from the advisor then it is time for the investor to move on to a better investment advisor.

If the investors follow these simple caution signs, then they can be rest assured that the advisor selected by them is creditable and has a considerable market value. An investment advisor is bound to make a difference to the investment returns of the investor.