The hiring process of investment consultants can sometimes be brutal. But, even so, they are known, generally not highly positively, as the gateways to the world’s most successful high net worth individuals: the investment consultants who advise the most powerful financial allocators in the world on where to invest their money. These are the people that everyone wants on their team; and, when they are hired by a client, they almost always bring a lot of value to the table.
Unfortunately, many of these same investment consultants who have such great potential to bring value to your business are also notoriously bad at communicating the kind of information that is necessary for a successful investor. They may know a lot about creating a good portfolio, for example, but when it comes to actually identifying which assets will generate the greatest return, they are completely invisible. As a result, the portfolio manager that they hire tends to make bad choices; and those poor choices are usually mistakes that end up costing the client a lot more than they would ever have spent on their services – for instance, the portfolio manager may decide to add too much debt to their portfolio, or he might choose to purchase a company that has a poor track record, or one that is outside his financial umbrella.
As you can see from the preceding paragraphs, this can be a particularly sticky situation for investment consultants. However, there is good news: because of recent changes to the Advisers Act (UK), most financial planners and investment consultants in the United Kingdom are required to inform clients of their conflicts of interest. This means that if you hire an investment consultant, you are really not just hiring a financial planner; you are hiring the man that knows the best places to put your money. In addition, you are also hiring somebody who likely has an incomplete or non-exhaustive knowledge of the investment consultant art, since the new law requires the advisers to disclose all of their “prior experience.” Unfortunately, many firms are still ignoring this requirement, and so it’s up to you, the consumer, to make sure that you do business with an advisor who does disclose his conflicts of interest.
This isn’t a time for you to be “wasting” your money. Even if your goal is to find the best long-term investment opportunities, it’s important that you do your homework on every investment consultant that you consider, as well as the firm that they work for. Remember that not all firms are created equal. Some are more ethical and effective than others, and some specialize in offering long-term financial advisory services, while others focus only on short-term solutions.
One way to be sure that you are working with an ethical and effective firm is to ask questions regarding their investment consultants engagement and in-depth experience with various investment products. An investment consultant’s portfolio should include a wide range of assets and asset classes; at least a quarter of his or her portfolio should consist of asset classes and products that are at least minimally accredited by Financial Industry Regulatory Authority (FINRA). A good rule of thumb when evaluating investment consultants is to consider their investment strategies from the perspectives of their potential clients. For instance, if you are a middle-aged woman with good credit who is considering purchasing her first home, it would be in your best interests to find an investment consultant who has experience in purchasing homes for this demographic.
While it is true that many investment consultants have a broad range of complimentary skills, these skills are often developed through working for a certain clientele and in a specific industry. For this reason, it can often be difficult to differentiate between a “core” asset manager and a “core” investment consultants. This is why it’s so important to perform due diligence on any company and especially the asset managers who will be representing your company. Doing so can help ensure that you are working with an experienced professional who will be able to provide you with the asset management services that you need for the years to come.