Choosing Your Investment Company

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An investment advisor is either an individual or firm which provides advice about investment securities, such as advice on commodities (gold, silver, natural resources, etc); bonds, stocks, and more. The advisor receives compensation for giving advice on investing in the commodities. He or she may be registered or unregistered, and may manage portfolios of securities.

Difference between Financial Planners and Investment Advisors

While there are similarities between financial planners and investment advisors, there are many key differences. For example, a financial planner is mostly an investment advisor, but not all advisors are financial planners. That is, it may be one way but not the other. Financial planners may assess every aspect of your financial life and portfolio. Your financial portfolio may include estate planning, retirement, saving, taxes, and investments. The financial planner can help you create a detailed strategy or financial plan to meet all of your financial goals. The advisor only advises on your portfolio’s investments.

When choosing an investment advisor, it is important to ask each one key questions as well as to find out how compensation will be received for the advisor’s work. Each compensation method has possible benefits and drawbacks, so make sure they are dependent on your individual needs. Generally, an advisor is paid either

  • An hourly fee for the time spent working with you and your portfolio
  • A percentage of the value of assets they manage for you
  • A fixed fee
  • A commission on the securities sold (if the advisor is a broker-dealer)

Or a combination of all. You may also ask if the fee is negotiable.

Key Questions to Ask
You should also your potential advisor questions before choosing them as the one who will manage your investment portfolio. Ask them what experience he or she has, what licenses do the advisor holds, are they registered with the SEC, state of Financial Industry Regulatory Authority; how is he or she paid/compensated; of any disciplinary action recourse.

Make sure to meet your potential investment advisor so as to know that you get along. Know your financial goals, have a plan, and check their backgrounds.

Registration with the SEC
Not all investment advisors have to register with either the SEC or the state securities agency where they have their principal place of business. An advisor that manages less than $25 million in client assets must register with the state securities agency in the state where the advisor conducts the principal place of business. Advisors who manage $25 million or more in client assets must register with the SEC.

Advisors come with many different backgrounds, both educational and professional. Before you hire the advisor, make sure to ask about the background, if they have credentials, and whether he or she is in good standing – ie, no broken laws, no suspicious activity.

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