What Does an Investment Advisor Really Do Anyway?

Sometimes, a financial adviser’s super power is just uttering the simple word “no.”

When someone introduces herself as a “financial adviser,” she has just defined for you what role she plans to play in your investment activities. A financial adviser’s job is to give advice to clients. That’s fairly straightforward, and is about all there is to it. Right?

Not so quick, cowboy. There’s a lot more to advising than just giving advice. An investment adviser may be an individual or a business firm. The job you pay them for is to give you advice about investing, whether you’re looking into securities, stocks, bonds, mutual funds or exchange-traded funds. Some advisers may also recommend a portfolio management approach to tackle your investment needs.

What exactly should you expect your financial adviser to do for you? One of the main services your adviser should offer is a generous application of the word “no” when you think you need to hitch your investment wagon to the latest unbelievable deal that’s come down the pike.

Cover me, I’m going in

In a nutshell, that’s one of the main benefits of engaging a financial adviser. Advisors can protect you from your own impulses. Most of us, if left unsupervised, will make mistakes in our financial decisions, time and time again. We’ll jump on every sizzling stock that comes along or jump into whatever tax shelter our favorite crazy uncle is pitching this week. Your financial adviser is there to be the voice of reason when it comes to your investment portfolio.

Keeping your money safe and secure

Another role of a financial adviser, whether your adviser is an individual or a firm, is to protect you from the predators in their own industry. The business of business is to make money, and this holds true in the financial adviser industry. Individuals or firms that charge high fees or loads, or sneak in myriad hidden costs, should be avoided. As an investor, you should be able to trust your advisor. Don’t fall into the quagmire of blind loyalty; do your homework before choosing your financial adviser.

You should feel secure in placing your trust in your financial adviser. One of the services you should expect from your adviser is to keep the costs of investments under control. When it comes to fees for services, your cost should settle toward the low end of the accounts payable spectrum. High price doesn’t automatically equate to high performance in the world of financial advising.

The power of the word “no”

“No” is not something any of us like to hear. Sometimes, however, it is a necessary evil when it comes to making devastating mistakes with our personal finances. We may not listen to our financial adviser when it comes to dissolving a business partnership or investing in a high-risk business opportunity that supposedly guarantees a massive return on investment. If your financial adviser isn’t telling you “no” when you ask his or her advice on these schemes, you may want to consider finding a new financial adviser. A responsible financial adviser will not hesitate to lay out the potential hazards that unruly investments may have on your financial future.

The bottom line is this: your financial adviser should be on your side of the equation when it comes to managing your investment portfolio. That includes telling you “no” when you need to hear it.