Skip to main content


By February 11, 2014April 28th, 2020No Comments

Why your Financial Adviser and Investment Adviser should not be the same person?

Does your financial adviser make investment decisions on your behalf? Most do, but are they really the best person to make those decisions. Many financial advisers like to claim that they are investment experts but are they?

When selecting an adviser I think it can be difficult and confusing for consumers to fully understand what their adviser does and doesn’t do on their behalf. There are a lot of client misconceptions out there and this adds to the confusion.

I believe consumers should start by understanding the adviser’s value proposition or “how is this professional going to help me achieve my financial objectives?” Good advisers tend to be strong strategists, planners, educators and communicators. A value proposition around these elements should be a good sign for consumers, it’s a heady mix and done properly a client is likely to experience a good outcome. Of course investments are part of any wealth management process and your adviser will certainly be well placed to assist you in selecting the right investment service, however he or she is unlikely to be the right person to be making the investment decisions on your behalf.

Think of it this way if you will, you have a good and trusted relationship with your doctor, he or she is very well positioned to take care of your general health, however they wouldn’t be your first choice to carry out open heart surgery would they?

Financial planning businesses vary considerably in terms of the way that their advisers operate when it comes to the investment piece. However it’s likely to be one of the following:

  • Adviser picks a selection of managed funds on clients behalf

(In this example your adviser might not be making calls on the underlying investments i.e. share selection. The adviser will however make changes on your behalf such as shifts in asset allocation or moving from one fund to another)

  • Adviser picks stocks/shares on clients behalf

(Here the adviser has complete investment control)

  • Adviser selects service but outsources investment decisions

(In this service type the adviser only educates and communicates, the investment decisions are being made by a separate team of dedicated investment professionals)

Whilst the GFC is fading into distant memory it would be foolish in the extreme to have not learned any lessons from it. Advisers who were supposedly making investment decisions on behalf of their clients found that they simply didn’t have the expertise, the tools or the resources to respond to rapidly changing market conditions.

Like any professional a financial adviser only has so much time available, is your adviser really likely to have the time to manage each one of his client portfolios with equal diligence? I would suggest not. When looking at global best practice many of the top advisory businesses around the world have a clear separation between the advisory piece and the investment piece. They recognise that an adviser simply does not have the time or the expertise to be the “investment person”.

So when shopping for an adviser or evaluating your current one I would suggest selecting a business that separates advice from investments. This will mean that your adviser will have far more time to devote to you in areas where he/she can add genuine value (strategy, structure and planning) they will have time to educate and communicate around the investment piece which is as it should be.

Ask yourself the following questions:

1)      Is my financial adviser the best person to also be my investment manager?

2)      Where does my adviser add value to my financial planning?

(is it education, communication and strategy or does he picks stocks/funds?)

3)      Am I clear about the service provided by my adviser?

What are your experiences? I’d like to know if you have clarity about what your adviser does and doesn’t do for you.

Leave a Reply