How to Protect Yourself From Investment Consultants

There are many risks to working with Investment Consultants. Some have conflicts of interest, while others don’t. These consultants may not be as honest as they claim to be. And they may charge more than you expected. If you’re not sure if a consultant is trustworthy, you can look up their background online to see whether they have any serious violations. Those with a criminal record should also stay away. There’s no need to worry; there are some things you can do to protect yourself.

First, invest with caution. Don’t work with someone who claims to be a fiduciary. Many of these advisors sell on-platform products with embedded fees. Even being a fiduciary won’t shield you from a conflict of interest. Always check red flags before you choose an investment consultant. Make sure you ask for documentation of the source of their total revenue. The documentation should be part of your annual 408(b)(2) disclosure. Finally, make sure that the investment consultant only accepts a hard-dollar fee.

The biggest brokerage firms are filled with “fiduciary” advisers who are only selling on-platform products with embedded fees. Even being a fiduciary doesn’t protect you from conflicts of interest. There are other warning signs you should look out for. For example, do they insist on receiving an explicit, hard-dollar fee from clients? If they don’t, move on. That’s one of the first signs of a conflict of interest.

Some asset managers may question the need for an investment consultant. But different investors have different philosophies when it comes to investing, and their fee structures are usually an important factor in deciding whether to hire one. In general, investors will look at the fees and commissions that an investment consultant earns and weigh these against the perceived value of a professional money manager. But it’s worth noting that an investment consultant’s accountability is paramount. As a result, you’re likely to have the best results.

A good investment consultant should not be based on a fee that isn’t explicit. They must be transparent about all sources of revenue and their conflicts of interest. Moreover, they should have a strong reputation among clients. Some of the biggest brokerage firms employ so-called “fiduciary” advisors who only use the term “fiduciary” to describe themselves. It’s important to be wary of so-called “fiduciary advisors.”

Some investment consultants may use specially vetted mutual funds, separately managed accounts, and alternative investments. Some consultants are registered as brokers and may be in conflict of interest. A consultant’s role is to protect their client’s interests. A consultant must also be ethical and uphold the principles of the firm. Ultimately, the relationship between a consultant and an asset manager is mutually beneficial. And the consultant should be able to provide transparency and consistency.