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Best Investment Advisors – The Complete Guide

By Dave

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Investment Advisors

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You know that investment in the market is the best way to grow your money over time and save for financial goals like retirement. But, you’re not sure how to develop your own investment strategy, what assets to invest in, or how to manage a portfolio

That’s where investment advisors come in. Investment advisors can help you manage your investments and allow you to step back from dealing with the stock market yourself. In this guide, we’ll explain everything you need to know about investment advisors and help you decide whether an advisor is right for you. 

What Does an Investment Advisor Do?

Investment advisors work with you to manage your money and investments. They can help advise you on your financial goals, directly invest your money, and manage the day-to-day business of your portfolio.

Most investment advisors work to develop long-term relationships with their clients right from the beginning. Typically, they’ll hold in-person or over-the-phone meetings to discuss your goals, from buying a home to saving for your kids’ college tuitions to retirement. They’ll also get an idea of your tolerance for risk. All of this helps determine what investment strategy is best for you and what balance of assets will be most suitable for your portfolio.

From there, your investment advisor can make investments on your behalf to execute the strategy that you discussed. The advisor will keep an eye on your portfolio, buying and selling positions, and rebalancing as needed over the course of years. Most advisors will also work to ensure that your portfolio minimizes your tax burden so that you maximize the return on your investments. Throughout all of it, your investment advisor will keep you informed about your portfolio’s performance and adapt to changes in your financial goals along the way.

Investment Advisor

How Do Investment Advisors Get Paid?

Investment advisors can be paid in several different ways. It’s critical to understand how a specific advisor charges for his or her services before hiring them.

The most common way in which advisors get paid is through a commission on your assets. Advisors typically take an annual fee that is equivalent to between 0.2% and 2% of the total money they’re managing in your portfolio. Keep in mind that a small percentage difference in this annual management fee can be very significant over decades of service.

Some advisors charge an hourly or flat fee instead of a commission. In the case of hourly fees, it’s important to get an estimate of how much time the advisor will spend managing your portfolio and how that will translate to in fees. Also be sure to check whether you will be charged for like trade commissions and fees on investment products, or whether those are included in the cost of your asset management.

Finally, some investment advisors earn third-party commissions when they sell specific financial products, such as insurance. You won’t directly pay for these commissions, but they may be priced into the financial products that your advisor is investing in on your behalf. 

Where Can You Find an Investment Advisor?

There are a number of different places where you can find an investment advisor. Your bank or brokerage, if you already have one, is likely to offer investment advising services. There may also be multiple tiers of advising at these types of institutions.

You can also find an independent advising firm or individual. There are numerous large firms that focus entirely on investment advising and offer a range of pricing options. If you use an individual or smaller business that you find online, be sure to vet them thoroughly before committing. An investment advisor should be able to offer a prospectus of past performance, and you can check whether a broker has a history of litigation or regulator violations using FINRA’s BrokerCheck database.

Pros of Investment Advisors

There are a number of advantages to using an investment advisor to manage your portfolio.

Hands-off Investing

The biggest reason that many people use an investment advisor is that it enables them to take a hands-off approach to investing. You can rely on a professional’s knowledge of the markets and investing experience rather than try to master the stock market yourself. Although you pay a fee, you get peace of mind knowing that your money is being managed appropriately and save time that you would otherwise have to spend managing your investments yourself.

Exclusive Investments

Another advantage to investment advisors is that they often have access to exclusive investment products, such as mutual funds that are only open to professionals. Advisors can also help you navigate the tax consequences of investing in complex assets that most non-professionals would otherwise avoid.

Tailored Strategies

Finally, one of the most important things that an investment advisor provides is an investment strategy that’s tailored to your financial goals. It’s far from easy for individuals, and especially individuals who aren’t well-versed in finance and the market, to work backward from a long-term goal like retirement to a specific portfolio balance. An investment advisor can help you identify what’s most important to you, and then use that information to determine what your portfolio should look like and how it should shift over time.

Cons of Investment Advisors

Of course, investment advisors also come with several drawbacks that are important to understand.

Advisory Fee

The number one downside to using an investment advisor is that it’s not free. The advisory fee, no matter how it is structured, eats into the profits that you otherwise earn on your investments. That’s money that isn’t being reinvested, so you lose potential compound interest.

In addition, most investment advisors collect their fees regardless of whether your portfolio is gaining money or losing money. Even if the market drops 10% on the year, and your portfolio value drops a corresponding amount, your advisor will still collect their hourly fees or commission.

Fund Fee Comparison


Another major disadvantage of using an investment advisor is that very few advisors actually beat the market. Some trade your money actively but fail to consistently beat the major market indices. Others simply invest your money in a handful of mutual funds or ETFs and then let it sit.

You could easily match the latter strategy by buying mutual funds or ETFs on your own, and the fees would be significantly lower. However, keep in mind that when you invest in an ETF on your own, you lose all of the portfolio management and advising services that your investment advisor provides. 

Suboptimal Strategies

If you’ve chosen your investment advisor well, the investment strategy that they put in place should perfectly match your goals while minimizing risk and maximizing return. However, it’s not uncommon that investment advisors take a formulaic approach to clients and leave them with a less than optimal investment strategy.

This manifests itself in two ways. First, you can actually see negative returns on your portfolio. Drops in the market happen, but your portfolio should generally gain over time – especially when the broader market is rising. Second, there’s an opportunity cost to a subpar strategy. If you’re losing out on profits, that is money that is not compounding over time. Over the course of decades of financial management, lost compound interest can add up quickly.

Is an Investment Advisor Right for You?

Choosing whether or not to depend on an investment advisor to manage your investments is a major financial decision. While every situation is different, there are a handful of things to consider.

First, how financially savvy are you? If you have a good understanding of how to invest your money and feel comfortable developing an investment strategy on your own, you can save money by doing so. On the other hand, if you don’t know where to start with creating a target portfolio balance or weighing risk tolerance, you may be well-served by using an investment advisor.

The amount of money you want to invest also matters. If you only have a few thousand dollars to invest, an advisor may not be worth it – and you may not be able to find an advisor that is willing to take you on as a client. But, if you have a significant nest egg that is sitting as cash or in a low-return investment, an investment advisor may be able to help you get more from your money.

Your investment goals also matter. Hopefully, you’ve given some thought to your financial goals. If not, you’ll need to start there before enlisting an investment advisor. Many advisors work best with common goals like retirement, but may not be as helpful if your goal is to pass on wealth or to buy a business late in life.

Finally, having an advisor you strongly trust can be a major factor in your decision to use an investment advisor. If you can’t find an advisor you like, you may want to consider alternative options that allow you to rely more on yourself.

Alternatives to Investment Advisors

If you’re not sure that an investment advisor is right for you, there are a few alternatives that you can turn to for managing your money.

Robo Advisors

Robo advisors are investment services that are designed to mimic human investment advisors. Typically, these are algorithms that automatically invest your money in a specific set of ETFs based on your risk tolerance and financial goals. Some services are more personalized than others or allow more flexibility in what your money can be invested in. What most robo advisors have in common is that they are significantly less expensive than human investment advisors. You can read our reviews of Wealthfront and Betterment if you are considering using a robo-advisor.

Online Investment Advisors

If you’re open to more risk in exchange for potentially higher returns, you can also invest in individual stocks on your own. This is much less hands-off than using an investment advisor, although once you select stocks to invest in, you can hold them for years at a time. If you’re not sure how to research stocks on your own, there are plenty of services – both free and paid – that can help you decide what companies are worth your attention. Many of these services have been able to achieve exceptional returns. For example, Motley Fool’s Stock Advisor Program has beaten the market by 4X for the past 15+ years (find the full review here).

The company also offers a full “portfolio construction” program called Everlasting Portfolio, which allows members to copy the exact portfolio of a millionaire investor.

Motley Fool Performance

Mutual Fund Investments

Many investment advisors put your money in a selection of mutual funds and then don’t touch it much afterward. You can copy this strategy easily by researching mutual funds on Morningstar and then selecting a few to invest in. Even better, hire an investment advisor on an hourly basis once or twice a year to get suggestions on what mutual funds you should invest in to match your goals.


Turning to an investment advisor to manage your portfolio is a sound financial decision for a lot of people. Having an advisor allows you to take a hands-off approach to investing while getting an investment strategy that matches your long-term financial goals. However, an investment advisor isn’t necessarily right for everyone. It’s important to think about your own investment knowledge and alternative, cheaper forms of portfolio management before committing to an investment advisor.

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Dave has been a part-time day trader and swing trader since 2011 when he first became obsessed with the markets. He focuses primarily on technical setups and will hold positions anywhere from a few minutes to a few days. Over his trading career, Dave has tried numerous day trading products, brokers, services, and courses. He continues to test and review new day trading services to this day.

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