How to Determine If You Need an Investment Management Advisor

Many investors manage their own portfolios, but there may come a point when professional oversight makes sense. Understanding what an investment management advisor does, and what investment management services include, can help investors determine whether this type of relationship aligns with their situation. This article outlines signs that professional investment management may be appropriate and questions to consider.

What Does an Investment Management Advisor Do?

An investment management advisor provides professional oversight of a client’s investment portfolio. Services typically include portfolio construction, asset allocation, security selection, and ongoing monitoring.

Additional services may include periodic rebalancing to maintain target allocations, performance reporting, and tax-sensitive investment positioning coordinated with outside tax professionals. Investment management advisors are typically registered investment advisers who owe fiduciary duties to their advisory clients, including a duty of care and a duty of loyalty.

What Investment Management Services Typically Include

While services vary by firm, investment management services commonly include:

Portfolio construction based on risk tolerance, time horizon, and financial objectives.
Ongoing monitoring and periodic rebalancing to maintain target allocations.
Performance reporting and regular communication; some firms provide benchmark comparisons, though reporting formats vary.
Tax-sensititve investment positioning, coordinated with outside tax professionals.

Investment management services may or may not include broader financial planning. Investors should clarify the scope of services before engaging an advisor.

Signs You May Benefit From Professional Investment Management

Several circumstances may indicate that professional investment management could be appropriate:

You lack the time, interest, or expertise to manage your portfolio independently.
Your financial situation has become more complex, involving multiple accounts, concentrated stock positions, or retirement income needs.
You are approaching or in retirement and need help developing distribution strategies.
You have experienced a significant liquidity event, such as an inheritance, business sale, or stock vesting.
You want coordination between investment decisions and broader financial planning considerations.

When Self-Management May Still Work

Professional investment management is not necessary for every investor. Self-management may work well if:

You have a straightforward financial situation with limited accounts.
You are comfortable making investment decisions and monitoring your portfolio regularly.
You have the time and interest to stay informed about your investments and market conditions.
Your needs do not require coordination with tax or estate planning considerations.

Questions to Consider Before Hiring

Before engaging an investment management advisor, consider the following questions:

What services do I need—investment management only, or integrated financial planning? How much am I willing to pay for professional oversight? Do I want discretionary management, where the advisor makes decisions on my behalf, or non-discretionary management, where I approve trades? How important is direct access to my advisor? Do I need coordination with outside tax and legal professionals?

How to Evaluate Prospective Advisors

When evaluating prospective advisors, take the following steps:

Review Form ADV Part 2A through the SEC’s IAPD database at www.adviserinfo.sec.gov. This document provides detailed information about services, fees, and potential conflicts of interest. Ask whether investment advisory services are provided on a fiduciary basis. Understand the fee structure: fees vary widely by firm, service scope, and account size. Verify credentials through appropriate organizations, such as the CFP Board at cfp.net or the CFA Institute.

Registration with the SEC or a state regulator does not imply a certain level of skill or training. Investors should conduct their own due diligence before making a decision.

This article is general information and not individualized advice; investors should evaluate multiple firms. For investors seeking a investment management advisor in the Chicago area, Virtue Asset Management is an independent, fee-only registered investment adviser. The firm provides investment advisory services on a fee-only basis and acts as a fiduciary for those advisory services. Virtue Asset Management does not provide tax or legal advice; clients should consult their tax professional. Additional details can be verified via the firm’s Form ADV.

Disclosure: Investing involves risk, including the possible loss of principal and fluctuation of value. Past performance is no guarantee of future results. This article is not intended to be relied upon as forecast, research, or investment advice. It is not a recommendation, offer, or solicitation to buy or sell any securities or to adopt any investment strategy.

Comments