When we think about the role of an investment advisor, it can seem like their job is to predict the future. In truth, no investment advisor (IA) possesses a crystal ball, but the best in the field can excel without one. With a solid basis of research, a deep understanding of financial markets, and a thoughtful portfolio strategy, an investment advisor can ultimately help their client to create and maintain a financial plan geared toward their long-term goals.
In some ways, this is a novel approach to the field because, over the past decade, the job of an IA has changed to keep up with modern markets. In many ways, this role used to focus on the short term. It wasn’t unusual for an individual interested in investing to hire an advisor to pick stocks or gain access to IPOs (initial public offerings) for them. These investments were often made based on reactions to current events, ‘hot’ stock tips, or anecdotal stories heard on the markets.
This approach may have worked well in years gone by, but in today’s world, it would be tough to stay invested in anything. Without a basis of scientific research backing each investment decision, the advisor would likely recommend selling when faced with any dip in stock or fund prices. Avoiding a downward trend may seem like a good idea in the short term, but such a dip might also be temporary and resolve with a long-term positive return. In this situation, the investor would be better off taking a smart risk and waiting for the downturn to reverse.
Deciding which risks are wise and which are not requires a lot of research. In today’s volatile markets, IAs employ a disciplined approach to this problem, using new technologies and up-to-date market research to actively track investments to identify opportunities for growth. This holistic method also allows for greater transparency between investors and their advisers, giving both parties a deeper understanding of the market and a nuanced view of how their investments are performing in the short and long term. This opens doors to new ways of looking at the market and also invites a new kind of IA-client relationship.
Greater transparency, after all, means greater trust, allowing for truthful dialogue between investors and advisors. IAs should be open to voicing concerns and disagreements when it’s in their client’s best interests. Likewise, they should be equally able to admit mistakes, adjust strategies when necessary, and communicate on any issues related to investors’ portfolios. As an investor, you and your IA should be able to talk candidly about specific immediate financial choices, as well as your long-term personal and financial goals.
By considering these long-term goals, you can create your own financial roadmap with your IA’s help. Having a solid, up-to-date financial strategy allows you to move from where you are today, to where you want to be—financially and personally. Whether you’re thinking about retirement and focusing on maintaining your savings, raising a young family, investing for the future, or trying to safeguard your portfolio for long-term stability, a clear strategy is needed. An IA can help create and maintain such a plan along the way.
Each IA, after all, is an individual with their own approach to investment choices, a unique communication style, and distinct personality traits. In my role as an investment advisor, I employ a progressive, evidence-based approach that allows clients to evaluate individual investments systematically and objectively, aligning each choice with their long-term financial plan.
So, what are the advantages of taking this progressive approach? Consider an example in the medical industry. Suppose you are a heart patient requiring surgery. If given the choice, would you rather have a surgeon who performs every operation the same way they were taught as a trainee, or one who constantly stays up to date with the latest methods and technologies and considers various solutions? While there are some advantages to a traditional strategy, a research-based, tailored solution could lead to a better prognosis for the patient and decrease risk. That’s why choosing the right IA matters–ultimately, your financial health deserves the same care and attention granted to other vital aspects of your life.
I see the role of an investment advisor as multi-faceted, and when each element of the job is done correctly, we can reduce the need for guesswork and create opportunities to take smart risks. The best IAs consider client needs, liabilities, and appetite for risk to create an effective investment strategy to suit their long-term financial plans. This means wearing a lot of hats, and there are seven key roles that I think every excellent advisor should embody:
- -> The Expert who develops client-specific knowledge and considers a range of strategies to help them reach their financial goals while mitigating risk.
- -> The Independent Voice that advises clients objectively without trying to sell them a product.
- -> The Listener who gives clients the space they need to discuss their goals, dreams, and concerns at their own pace and responds with practical long-term solutions to accommodate them.
- -> The Teacher who meets the client at their level of financial knowledge and helps them to understand important concepts, including risk and return, diversification, asset allocation, and financial discipline.
- -> The Architect who builds a sturdy, risk-assessed wealth management strategy, strong enough to weather potential downturns and tailored to help each client achieve their long-term financial goals.
- -> The Coach who provides stability and reinforces each investment strategy’s benefits when emotions run high, or temporary fears come knocking.
- -> The Guardian who scans the horizon for market changes that may affect their clients and keeps them informed of possible outcomes and potential safeguarding strategies.
If you’re a new investor interviewing for potential advisors, you should seek out these qualities by asking candidates the right questions. In my role as an advisor, I am asked a wide range of questions whenever I meet a potential client, dealing with everything from my personal history to my career performance to the client deliverables I might require. The best questions receive the clearest answers, so here are a few basic examples that I think every prospective investor should ask:
- -> How do you describe your investment approach?
- -> How do you tailor your investment strategies to each client?
- -> What is your ideal client profile, and am I a good fit for your practice?
- -> How have your clients’ portfolios fared in the markets?
- -> What risk mitigation strategies do you use to protect your clients when faced with downturns or adverse market conditions?
- -> What is your client retention rate?
- -> How often do you meet your clients to discuss new strategies and review recent performance?
- -> How much do you charge for your services?
The right IA is the one with whom you feel comfortable and safe and who you’re confident has your best interests in mind. This should be someone with an honest, intelligent approach and the expertise required to stay on top of today’s ever-evolving financial landscape. If you find such an IA, I suggest you hold onto them dearly.
Investment is all about building trust and taking smart risks that contribute towards your goals in the long run. Avoid the trap of judging your advisor’s value based on short-term returns and focus on the bigger picture of what can be controlled. By working together closely and openly, you and your IA can:
- -> Create an investment plan to fit your needs and personal risk appetite.
- -> Structure a portfolio directed towards capturing positive expected returns.
- -> Diversify your investments globally, increasing investment options and providing long-term stability.
- -> Manage expenses, turnover, and taxes.
- ->Maintain financial discipline throughout market dips, downturns, and swings.
Ultimately, the right investment advisor can give you a better investment experience across the board, helping to create a tailored personal roadmap, pursue smart risks and worthwhile investments, and stay on track to meet your long-term financial milestones and goals.
Maili Wong, CFA, CFP, FEA
Senior Portfolio Manager & Senior Wealth Advisor
Wellington-Altus Private Wealth Inc.
Wellington-Altus Financial Inc.
Maili Wong is a senior portfolio manager and senior wealth advisor at The Wong Group at Wellington-Altus Private Wealth, and the Amazon best-selling author of ‘Smart Risk’. She has over two decades of experience in the finance industry and was named a Top Wealth Advisor and one of the Best in Province in the 2022 rankings produced by The Globe and Mail and SHOOK Research.