People who need advice on investing are small investors who are just starting out, but also people who have experience in investing and therefore possibly also more money. The quality of investment advice is not something to be bargained with – you need to demand expertise and honesty from your advisor. This is a person who gets commission for giving you advice but that shouldn’t be the most important condition for it. A good advisor makes money also to their customer.
The customer can get advice on investing from many different directions. For example banks give advice and the people who give advice can be trusted to be experts on the subject. However, if the customer is seeking advice from a bank or other financial company, they may find themselves in a sales session where they try to get the customer to invest in their own products. They may not focus too much on the wants and needs of a customer. The best option would be to find an expert in the investing business who is independent and whose fee is bound to the proceeds of the customer’s investments.
When trying to find advice, it should be remembered that honesty is required from both sides of the party. It is difficult to give advice if the customer isn’t honest about their financial situation and other things that may have influence on it.
First, the advisor maps out the financial situation of the customer, the goals for the investments and how much risk the customer is willing to take. Different risk scenarios are part of the discussion as well as taxing. Investments should be thought as whole to start with, for example how to distribute the investments on shares and bonds or other products. After that, it is time to think about single investments, such as which company’s shares the customer wants to buy. A good advisor doesn’t make the decisions for the customer but gives a clear and comprehensive view of different options. It is also important that the customer knows about the costs of the investment. The costs aren’t only the commissions but there are also fees for share subscriptions and book-entry accounts. It’s also important to get regular updates about how the investments are doing depending on the nature of the investment and do they own up to the expectations of the customer. All of this is settled between the customer and the advisor, so the customer isn’t completely adrift in their endeavors. This might mean a long relationship between the two.
The investment advisor is primarily a customer service representative, whose job description includes selling and taking care of the customer’s needs. If the job is done well, the advisor has earned their commission whether they are an independent expert or a bank official. The most important matter is that the customer has handed over their money to another person’s hands with a trustful mind.