How To Perform Due Diligence On An Investment Advisor


Investment advisers (IAs) come in different shapes and sizes. You can find one in every state of the Union and in almost every country. They all compete to manage – to put it simply – other people’s money (let’s just call it “OPM”). Investment agencies offer different products to their clients and models of these products are generally referred to as investment models or investment strategies. These investment models / strategies form the foundation of any actively managed mutual fund that can be found in your pension plan; but maybe you need professionals to directly manage your assets. Well, fear not, as AIs can come up with specific models / strategies to provide you with the personalized portfolio you need, which also adheres to your appetite for risk. Executing agencies provide these services for a fee, which is usually based on a small percentage of the overall amount they are responsible for managing. A simple concept, right? An AI does their money saving and growing your money.

As an investor, you need to be able to weigh and measure the qualities of any business you decide to entrust your assets to, whether you invest in a mutual fund or hire an IA to run a trust or a pool of assets. The main prerequisite for winning your business is performance results over time; However, there is another quality that you, as an investor, should consider before pulling the trigger: the corporate culture of AI.

Why is this important? This is important because you are entrusting an IA with the management of the money that you have worked hard to accumulate. As an investor, you need to make sure that the company that manages your money acts as a trusted trustee. When choosing an AI to take on this important responsibility, make sure you’ve done your proper research first. Here are a few places to look for.

• Start with the IA website. Find out who they are and how they do what they do. The company should be able to describe its unique investment philosophy in an easy to understand manner. Be sure to review the backgrounds and levels of experience of the portfolio managers who are assigned to manage the fund / investment strategy that interests you. Make sure these managers have significant experience.

• If you invest in a mutual fund, the next website you should visit is a website that will provide an independent opinion on the product, the portfolio managers and the company you are considering. An example of this type of website is Morningstar.

• Once you have reviewed the IA website and incorporated an independent opinion of the company, it is recommended that you review the IA regulatory information that is readily available on the Securities and Exchange Commission website. the United States. website. It only takes a moment or two to extract the information you need to understand the history, ownership structure, size, regulatory history, affiliates, and other mandatory agency disclosures. execution. Once you’ve landed on the website and done a simple search for the AI’s company name, you’ll notice a few referenced documents that are “clickable.” The one you want to go through first is called the Form ADV Part 1. This disclosure, while important, gives you an overview of the IA that you need to understand before handing over a check, and it needs to be updated. annually.

Once you’ve completed your research, you should be more comfortable with the AI ​​you’re investing in. Performance is important; However, understanding who the firm is, who the professionals are involved in managing your money and the regulatory history of ATI allows you to make a more informed decision upfront. It’s your money. You’ve worked hard for this, and you shouldn’t trust an anonymous, faceless entity to handle it. Instead, you should do your research so that you can sleep a little better every night, knowing that seasoned professionals are protecting your wallet.

You wouldn’t hire a new hire without going through their resume, getting a referral or two, and doing a background check, right? Well, it’s important to apply that same logic to your investment advice selection process.


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