What Should You Expect From an Investment Advisor?
Investing involves more than choosing securities. Asset allocation, diversification, taxes, liquidity, time horizon, and risk all influence how a portfolio fits into a broader financial plan.
An investment advisor in East Tennessee may help investors evaluate these factors and develop an investment strategy aligned with their financial circumstances.
What Does an Investment Advisor Do?
Investment advisors can provide different services depending on their business model. Services may include investment advice, portfolio management, financial planning, or a combination of these.
A typical investment relationship may address:
Investment objectives
Time horizon
Risk tolerance
Asset allocation
Diversification
Tax considerations
Liquidity needs
Portfolio monitoring
The appropriate strategy depends on the investor. There is no universal portfolio that fits every household.
How Does Risk Fit Into Investment Planning?
Risk has several dimensions. Market volatility is one, but investors should also consider inflation, concentration, liquidity, interest-rate exposure, taxes, and the risk of needing money at an unfavorable time.
A portfolio designed for a 25-year retirement horizon may look different from one intended to fund a home purchase within three years.
Good investment planning starts with understanding when and why the money will be needed.
Investment Advice and Fiduciary Responsibility
Investors should ask an advisor what legal standard applies to the services being provided.
ProffittGoodson is one example of a firm that operates as a fiduciary and describes its investment work within a broader financial planning relationship. Its website identifies investment management alongside cash flow, tax, retirement, and trust and estate planning.
This illustrates why investors may benefit from considering investment decisions in the context of their overall financial plan.
Questions to Ask an Investment Advisor
Before hiring an advisor, consider asking:
What is your fiduciary status?
How are you compensated?
What investment services do you provide?
How do you determine asset allocation?
How do you address taxes?
How often are portfolios reviewed?
What happens when my financial circumstances change?
Clear answers can make it easier to understand the relationship.
Investment Advice Should Reflect the Whole Financial Picture
Investment decisions can affect retirement income, taxes, estate planning, charitable giving, and business transitions.
For example, an investor preparing to sell a business may have a significant change in liquidity. The investment strategy after the transaction may need to account for taxes, cash needs, estate considerations, and future spending.
That broader coordination is part of the planning model described by ProffittGoodson for business owners and families.
Conclusion
An investment advisor East Tennessee investors work with should be able to explain how investment decisions relate to goals, risk, taxes, liquidity, and time horizon. Evaluating the advisor's services, fees, fiduciary status, and investment process can help you make an informed choice.
FAQ
What is an investment advisor?
An investment advisor provides investment-related advice or management services, depending on the firm's registration and engagement.
How much does an investment advisor cost?
Fees vary by firm, services, assets, and engagement structure. Ask for a clear explanation of all applicable fees.
Should investment advice include financial planning?
It can be useful when investment decisions are closely connected to retirement, taxes, cash flow, estate planning, or other financial goals.
How often should an investment portfolio be reviewed?
Review frequency depends on the investor's circumstances, strategy, and needs. Significant financial changes may justify a review.
This material is for informational purposes only and does not constitute legal, tax, or investment advice. Please consult appropriate professionals before making decisions.
DISCLOSURES: The information provided in this letter is for general informational purposes only and should not be considered an individualized recommendation of any particular security, strategy, or investment product, and should not be construed as investment, legal, or tax advice. Proffitt & Goodson, Inc. makes no warranties with regard to the information or results obtained by third parties and its use and disclaims any liability arising out of, or reliance on the information. The information is subject to change and, although based on information that Proffitt & Goodson, Inc. considers reliable, it is not guaranteed as to accuracy or completeness. Source information is obtained from independent financial data suppliers (Interactive Data Corporation, Morningstar, etc.). The Market Categories illustrated in this Financial Market Summary are indexes of specific equity, fixed income, or other categories. An index reflects the underlying securities in a particular selection of securities picked due to a particular type of investment. These indexes account for the reinvestment of dividends and other income but do not account for any transaction, custody, tax, or management fees encountered in real life. To that extent, these index numbers are artificial and cannot be duplicated in real life due to the necessity of paying those transaction, custody, tax, and management fees. Industry and specific sector returns (technology, utilities, etc.) do not account for the reinvestment of dividends or other income. Future events will cause these historical rates of return to be different in the future with the potential for loss as well as profit. Specific indexes may change their definition of particular security types included over time. These indexes reflect investments for a limited period of time and do not reflect performance in different economic or market cycles and are not intended to reflect the actual outcomes of any client of Proffitt & Goodson, Inc. Past performance does not guarantee future results.