What Are the Responsibilities of an Investment Advisor?


Investment advice is considered to be the act of giving professional advice to a potential customer or client about one or more financial transactions related to certain financial instruments. When giving investment advice, companies are required by law to advise the customer (or potential customer) of the appropriate financial instruments which are suited for him/her and are also in accordance with his/her investment objectives. They are further required to undertake due diligence regarding the potential instrument and to undertake adequate investigations and evaluations of the risks associated with it. In addition, they are also obligated not to disclose material information which is restricted by law to the customer and they are also obligated not to trade or perform any transaction in contravention of any rule or regulation. In the United States, the securities laws have a chapter called the Securities Exchange Act of which advisory advice is a part of.

Advisors are independent professionals who provide investment advice to both individuals and organizations. While some advisors are members of financial planning associations, many are self-employed and work from home. Many also have degrees in finance and often work as financial consultants. There are also investment advisors who work through investment banks and brokerage houses.

In order to qualify as an investment advisor, one needs to hold a professional license from the regulatory authority. He may also need to acquire additional professional credentials, including accounting experience and a Master’s degree. In addition to advising people and institutions on investments, investment advisers provide financial planning services, such as asset allocation and pension advice. Some specialize in certain areas such as real estate, commodities and equities. Other advisors focus on a particular sector, such as health care or large cap investments.

Self-employed advisors cannot engage in the business of advising, but they can offer investment advice. An account with a self-employed advisor is a separate entity from the self-employed individual. In addition to managing investments and providing investment advice for his clients, these professionals can also provide tax advice to individuals or corporations. When selecting an advisor, it is important to check his background and see if he is registered under the appropriate regulatory bodies. There are also firms that provide self-employed investment advice.

Professional financial advisors can be categorized into two groups: those who are employed by firms and those who are independent. Although self-employed and freelance financial advisors work independently, most firms employ investment advisers who work on their behalf. All investment advisers should be registered with a qualified regulatory body; in the U.S., this includes the SEC.

A number of other professionals offer investment advice as well. Insurance underwriters must be licensed with the Commodity Futures Trading Commission (CFTC) to provide securities advice to customers. Broker dealers, whose duties include brokering securities for investors, need to be licensed with the SEC to offer securities and futures advice. Finally, investment advisors who work for mutual funds, investment companies, or insurance companies are also registered with the SEC to offer investment advice.



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