The Pros and Cons of Investment Consultants
A recent survey revealed that almost half of hedge funds do not hire investment consultants. Despite this, the industry is still a lucrative one. While the role of an investment consultant is highly competitive, it offers many benefits. The job entails a high level of client service. Among these benefits are access to a database of investment managers with whom they can work, as well as specialized knowledge in financial markets. As such, investment consultants often face conflicts of interest and must balance their professional interests with those of their clients.
These professionals monitor the performance of existing investments and make recommendations for future ones. They also analyze the current market and compare it to expectations to gauge if new markets have lower risk or higher returns. In addition, they assess new and emerging markets and compare past performance against current market performance. This process is critical for maximizing returns. Moreover, investment consultants often have direct oversight over the financial products they manage. A CFA charter is one of the most sought-after credentials by many employers.
As an investment consultant, you will be tasked with developing a sound investment strategy for your clients. The job demands an analytical mind and good communication skills. Generally, the investment consulting industry is in good shape, with more than $1.56 trillion under discretion with several investment firms in 2017. Moreover, the market for passive strategies is growing and the amount of money under discretion is reducing. However, this does not mean that a career in this industry is without its challenges.
The consulting industry is currently consolidating and this will make it harder for asset managers to break into the industry. Smaller firms will have a greater influence among consultants, but larger ones will likely have a better chance at winning business. The investment consultants themselves face pressures of their own. The volume of information they must sift through will make it harder for them to get their clients’ attention. Nevertheless, the benefits of working with the biggest consulting firms are clear: a greater number of clients, higher fees, and an increase in profits.
The investment consultant will help you choose the right asset management strategy. The investment manager should be familiar with the tax implications and compliance requirements of the company. A consultant can answer questions regarding the various products and services that are available in the market. An investment consultant will also consult with you on new opportunities. If you’re not comfortable with this type of service, you should consider hiring your own financial adviser. However, it may be difficult to find an experienced financial advisor who can help you.
There are two main types of consultants: institutional consultants and private investors. The first is the general level of expertise. The other is the more specialized investment consultancy. They advise investors on the best possible investment strategy for their needs. Most of the asset managers have at least three full-time employees dedicated to consultant relations. The biggest firms, like pension funds, have a greater number of resources to devote to this process. For this reason, investment consultants are crucial for fund managers.