Investment Advisor

Couple with an advisor
An investment advisor is an individual or a firm that is in the business of giving advice about securities to clients.

Investment Advisor Career Information

Nancy Woods is an investment advisor and associate portfolio manager with RBC Dominion Securities Inc and is also a columnist for The Globe and Mail. She works full time from home, beginning her day with catching up on the latest news in the business world. After helping her children off to school, Woods works from 9:30am to 4pm when the markets are open and does some follow up work in the evenings, such as writing reports and conducting research. Some investment advisors may work longer days and make more money, but she prefers to have a work-life balance.

“Investment advisors are people earning a living by assisting others, just as lawyers, doctors, accountants, and therapists do. We give advice based on our knowledge and experience”. The Globe and Mail, September 6, 2012

“Yes, it’s true, with the advent of the Internet and online investment brokerages there are tools and means that allow an interested and informed investor to manage their own investments. But there is also the majority of people who cannot dedicate the time, nor afford the absence from their job, to manage their money,” writes Woods in her September 6, 2012 Globe column. Investment advisors assist those who want to invest their finances but do not have the time to find out about their best opportunities.

Scott Leonard CFP, RIA, (founder and president of Leonard Wealth Management, Inc.) shares, in a video produced by Videojug Corporation Limited, that “there is no real rule” on calling yourself an investment advisor – that the term may have different meanings depending on who you talk to. He adds that those who go by titles such as financial planner, wealth manager, stockbroker, registered representative or registered investment advisor (RIA) might all potentially advise investors.

Specifically RIAs are licensed through the U.S. Securities and Exchange Commission (SEC), or their state’s securities agency, to specifically advise clients on investments (not to sell or buy products and to work for a fee rather than commission). RIAs also have a fiduciary duty which means they are legally bound to work in the best interest of their clients, and thus they must provide impartial, objective advice at all times.

Investment Advisor Job Description

“An investment advisor is an individual or a firm that is in the business of giving advice about securities to clients,” states the U.S. Securities and Exchange Commission (SEC). “For instance, individuals or firms that receive compensation for giving advice on investing in stocks, bonds, mutual funds, or exchange traded funds are investment advisors. Some investment advisors manage portfolios of securities”.

Investment advisors may be self-employed, work for a firm that specializes in investment advising, for a brokerage, for their own firm they have started or another entity. (Note RIAs are known especially for working independently or starting their own firm).

Ultimately investment advisors balance their time between researching investment opportunities, monitoring the markets and communicating with a variety of financial professionals (such as stockbrokers or mutual funds representatives) with communicating with their clients. Leonard states that the most successful investment advisors truly listen to their clients and ensure they understand their needs. Their job is to help their clients make the best decisions for their investments by making sound recommendations, but to also explain the reasons why they are making those recommendations.

Generally investment advisors (i.e. RIAs) earn income through charging a fee to their clients. The SEC states this could be a fixed or hourly fee or a percentage of the assets they are helping their clients manage. If a financial professional is a cross between an investment advisor and a broker/dealer, then he or she might earn their salary from both fees and commissions.

What’s the Difference between a Financial Planner and an Investment advisor?

“Most financial planners are investment advisors, but not all investment advisors are financial planners,” states the U.S. Securities and Exchange Commission (SEC). In other words, advising clients on investments is just one of several duties of a financial planner. Since an investment advisor’s focus is on investment opportunities, he or she may be more beneficial to a client whose main focus is on investing, compared to a financial planner who delves into several financial areas.

Degree Requirements

To reaffirm what Leonard stated, the term “investment advisor” may have varying definitions. Generally speaking, however, a minimum of a Bachelor’s degree in finance, business or a related field is required. Some employers may prefer potential investment advisors to have a Master’s degree in Business Administration or Finance.

Generally Investment advisors may gain previous, related experience through working as an Investment Representative, an Investment Sales Assistant or other positions related to finances-customer service.

Certification Recommendations

The SEC states that investment advisors are not required to have certifications or credentials.

Although voluntary, credentials are signs of expertise, and many employers (as well as clients) will prefer their prospective investment advisors to have them. Some common certifications among investment advisors include:

CFA (Chartered Financial Analyst)
CIMA (Certified Investment Management Analyst)
CFP® (Certified Financial Planner)

Licensing Requirements

A Registered Investment Advisor (RIA) is either licensed through the U.S. Securities and Exchange Commission (generally if the total client assets they manage equals or exceeds $100 million) or through their state’s securities agency (generally if the total client assets they manage is less than $100 million).

According to Interactive Brokers (in their report “What to Expect When Transitioning from a Broker Rep to a Registered Financial Advisor”) there are several advantages of becoming an RIA. These include autonomy and having no restrictions on the number of clients and assets they can manage.

Prospective clients also value the fiduciary duty that RIAs must abide by. “This means that you have a fundamental obligation to always act in the best interests of your clients. You owe your clients a duty of undivided loyalty and utmost good faith,” states Interactive Brokers.

(Additionally, find out whether your state’s securities agency has specific requirements for investment advisors, such as writing a proficiency exam).