Selecting the right investment advisory services is crucial for investors looking to manage their assets effectively. With the growth in investment options and complex financial markets, many investors are seeking guidance from professionals. However, the process of selecting investment advisory firms can be challenging. In this article, we provide key considerations when drafting Request for Proposals (RFPs) and evaluating investment advisors to assist in the selection process.
Understanding Your Goals and Requirements for Investment Advisory Services
The first step is having a clear understanding of your investment objectives, risk tolerance, time horizon, liquidity needs, tax considerations, and any unique circumstances. Outline detailed requirements covering aspects like asset allocation strategies, investment products used, reporting frequency, fees structure, and client servicing standards expected.
Evaluating Expertise, Experience and Resources of investment advisory firms
Conduct thorough due diligence on shortlisted investment advisory firms. Review their investment philosophies, strategies, assets under management, years of experience, team credentials, research capabilities, and technological infrastructure. Firms having expertise in serving clients similar to your profile can better understand your needs.
Assessing Processes, Compliance and Risk Management Capabilities
Evaluate the investment decision making processes, trade execution policies, compliance procedures, and risk management practices followed by investment advisory firms. Ensure they align with your requirements and applicable regulations. Firms should have sound operational capabilities and internal controls.
Comparing Fee Structures of Investment Advisory Services
Analyze and compare fee structures across investment advisors to select a cost efficient option. Fees charged can be asset based, fixed retainers, performance based or a hybrid model. Consider fee breaks, tiered pricing and customized offerings during fee negotiations.
Checking Customer Service Standards and Reporting Framework
Pay attention to client servicing standards like response times, access to advisers, query resolution process and mode of interactions offered. Also review regular reporting covering portfolio statements, performance reports, attribution analysis, risk analytics, market commentary and investor education.
Drafting a detailed RFP and thorough evaluation of investment advisory firms on multiple parameters assists in selection of advisors best suited to manage your investment portfolio.