Financial Advisor

Consulting management

What is Consulting Management?

Consulting management refers to providing professional and personalized investment guidance. Advisory management services allow individuals to consult an investment professional before making changes to their portfolio. Consulting management professionals have expertise in one or more investment areas and provide guidance tailored to the specific circumstances of the individual.

key takeaways

  • Advisory management is the provision of professional, personalized investment guidance, usually for a fee.
  • Consulting management can be carried out by an individual, an independent team or a group of professionals in a private bank, investment management company or professional consulting agency.
  • Key roles in advisory management include financial advisors, portfolio managers, investment bankers and investment managers.
  • Consulting management professionals review clients’ individual circumstances, identify optimal asset classes, monitor investment performance, provide guidance and rebalance investment portfolios.

Understanding Consulting Management

Consulting management involves the management and planning of investment portfolios and is usually for a fee. Individual investors seeking investment advice will seek the services of a consulting manager or consulting management firm. Consulting management can be carried out by an individual, an independent team or a group of professionals in a private bank, investment management company or professional consulting agency. Key roles in the field of consulting management include:

  • Financial advisors: These professionals provide guidance and financial advice, including investment management, taxation and estate planning.
  • Portfolio Managers: This group consists of one or more people who invest in any number of portfolios and manage day-to-day portfolio transactions to maximize returns.
  • Investment Bankers: These bankers help corporate clients find funding sources for business transactions and provide analysis and guidance.
  • Investment Advisors: Clients who turn to an investment advisor can obtain highly specialized investment and financial planning advice and guidance.

Investment advisors working for advisory management teams meet and work with clients in a variety of capacities. They evaluate clients’ time horizons, performance goals and risk tolerance to determine which asset classes are the most appropriate investments. Advisors are responsible for day-to-day monitoring of investment performance and frequent execution of orders, as well as providing guidance in the areas of asset allocation and portfolio rebalancing. Portfolio rebalancing protects investors from adverse risks and ensures that portfolio exposures remain within the manager’s area of ​​expertise.

Asset allocation is the practice of balancing risk and reward in a portfolio based on personal goals or institutional policy. Managers allocate the funds of the portfolio to three main asset classes: equities, fixed income, cash and equivalents, and alternative investments such as private equity and derivatives.

Because each asset class offers different levels of risk and reward, each asset behaves differently over time. Investors may use different asset allocations for different objectives. For example, someone saving for a year’s travel in the short term might invest their savings in a conservative mix of cash, certificates of deposit (CDs) and short-term bonds. Another person saving for an expensive home (at least a decade from now) may diversify into more stocks because they have more time to ride out short-term volatility in the market.

Consulting Management and Discretionary Investment Management

Advisory management services allow individuals to retain full control over their investment portfolios and make their own investment decisions. The role of an investment advisor is primarily to provide informed advice. So while wealth managers that provide advisory services consult and advise clients, the final buying and selling decisions are made by clients.

In consulting management, it is the client who makes the final buying and selling decision.

Discretionary investment management works in the opposite way. In this discipline, professional wealth managers have more control over investment decisions. For clients, the discretionary approach is more laissez-faire and suitable for those who may not have the experience or time to actively manage their own portfolio. Discretionary investment management can only be provided by experienced professionals, many of whom hold the Chartered Financial Analyst (CFA) designation.

While consulting managers always take the time to understand the client’s goals and assets, this is usually not as thorough as a discretionary manager.

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