What Is an Investment Adviser, and Do I Need One?

An investment adviser provides clients with investment advice to help them achieve their financial goals. But are they worth the cost?

by | Last updated 30 Dec, 2022 | Financial Advisors, Investing Basics

An elderly couple talking to a financial advisor

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An investment adviser is an individual or company that provides expertise, financial insight, research, and recommendations to help investors achieve their investment objectives. This service is typically individually tailored by qualified professionals who are licensed and duty-bound by legal responsibilities to serve their clients in the best manner possible.

Investment advisers can advise on a broad range of financial securities, including stocks, bonds, mutual funds, exchange-traded funds, and unit trusts, among others. However, these services are typically reserved for individuals with a high net worth exceeding £1m.

How do investment advisers charge for their services?

The fee structure for services can vary depending on the needs and wealth of the client. But generally speaking, an investment adviser can charge three types of fees.

  • Annual Retainer Fee – Charge clients a fixed percentage of their total value of assets under management on a yearly basis. This is the most common billing method used by investment advisers and typically ranges between 1% and 2% of client assets.
  • Hourly Fee – Charge clients based on hours of work done on the client’s behalf. This billing structure is typically reserved for additional services requested explicitly by the client.
  • Flat Fee – Charge clients a fixed rate to complete a task. This is most commonly used when offering standalone consultations.

Investment manager vs investment adviser

A subset category of investment advisers is investment managers. These qualified individuals focus exclusively on building and maintaining an investment portfolio. This essentially allows investors to take a hands-off investment approach, letting the professional make the decisions. But the investor can always override decisions if they choose to.

Investment ManagerInvestment Adviser
Main RoleProvide analysis and data of financial instruments such as stocks, bonds, and funds to make recommendations and execute investments on behalf of the client.Provide complete investment advice, which includes capital allocation, investment research, and investment planning, among other services.
Scope of ServicesAdvise is limited to portfolio creation and management.Complete financial advice upon reaching the clients’ investment objectives after assessing their financial position.
Fee StructureTypically commission-based work.Typically a fixed percentage fee relative to the size of assets they are handling.

Financial adviser vs investment adviser

Unlike a financial adviser, an investment adviser only provides services relating to investing, whereas the former typically deals with personal finance matters such as estate planning and retirement planning.

Financial AdvisersInvestment Advisers
Main RoleProvides a broad range of personal finance services outside of the realm of investing.Provides services and advice to help clients achieve their investment goals.
Legal Requirements/ CertificationsAre required to have specific qualifications. In the UK, financial advisers must have a DipFA qualification to provide services to clients.Are required to have specific qualifications. In the UK, investment advisers must hold a level 4 qualification recognised by the Financial Conduct Authority.
RegulatorFinancial Conduct Authority (UK)
Financial Industry Regulatory Authority (US)
Financial Conduct Authority (UK)
Securities & Exchange Commission (US)

Advantages of having an investment adviser

Investors with an investment adviser guiding their decisions gain a lot of advantages, even for more experienced individuals.

  • Expertise – Investment advisers are experienced professionals who can steer investors onto the right path to achieving their financial goals.
  • In-depth research – Investors can enjoy access to a unique pool of research that can uncover new opportunities and consult with their adviser on whether certain investments are suitable.
  • Save time – Researching investments and maintaining a portfolio can be a time-consuming process that a professional can do instead. This can be immensely helpful for individuals juggling a full-time career, raising a family, or simply pursuing other ventures.
  • Peace of mind – Investors can be assured they are making sensible investment decisions by letting a professional take care of the planning and execution of strategy.

Disadvantages of having an investment adviser

While investment advisers offer plenty of benefits, there are some disadvantages to consider.

  • Costs – Professionals don’t come cheap, and it’s possible that the fees charged by an investment adviser could significantly dampen the overall returns generated through investments.
  • Unreliable advisors – While qualified, not all investment advisers are top-performing analysts or strategists. Even with a professional making the investment decisions, mistakes can still be made that could destroy wealth rather than create it.
  • Conflict of Interest – Depending on the fee structure with an investment adviser could lead to a conflict of interest. For example, suppose the adviser charges fees based on performance. In that case, they may begin to invest in risker assets than the client is comfortable with in pursuit of higher returns to maximise their billing.

The bottom line

Investment advisers can add tremendous value to an investor’s journey. Apart from being able to execute an expertly-crafted, custom-tailored investment strategy, they can provide a shoulder to lean on when exploring new ideas.

However, the high-cost nature of these services can make them unsuitable for investors with smaller amounts of capital. That’s why the decision to hire an investment adviser is a highly personal one.

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This article contains general educational information only. It does not take into account the personal financial situation of the reader. Tax treatment is dependent on individual circumstances that may change in the future, and this article does not constitute any form of tax advice. Before committing to any investment decision, an investor must consider their individual financial circumstances and reach out to an independent financial advisor if necessary.

Written By

Saima Naveed

Saima spent the early days of her career advancing the finance office of a prominent manufacturing business. After taking a sabbatical, she decided to use her expert knowledge and apply it to the stock market. Now, 10 years later, she manages a substantial portfolio built using detailed and thorough analysis.

Outside The Money Cog, Saima is an avid supporter of empowering women in the workplace. She is currently working very closely with Women of Wonders Pakistan to help other women achieve their career goals.

Current Holdings


Edited & Fact Checked By
Zaven Boyrazian MSc

Zaven has worked in several industries throughout his career, from aircraft factories to game development studios. He has been actively investing in the stock market for the better part of a decade, managing over $1 million across multiple portfolios.

Specializing in corporate valuation, Zaven employs a modern take on the principles set out by Benjamin Graham to find new opportunities at fair prices.

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