Investment Advisor

Written By
Paul Tracy
Updated August 5, 2020

What is an Investment Advisor?

An investment advisor makes investment recommendations to clients and can also be known as a financial advisor.

How Does an Investment Advisor Work?

A investment advisor is similar to a financial planner, investment manager, investment consultant, or financial advisor.

An investment advisor usually analyzes securities based on past performance, current or projected market conditions, and the underlying financial structure of a specific deal, and makes investment recommendations to an individual or group of investors. Investment advisors may be independent consultants or work as part of established firms, such as brokerages handling mutual funds.

Investment advisors usually have experience in underwriting, project finance, and brokerage. Most investment advisors charge a flat fee or a commission on the asset being purchased or sold.

Investment advisors are regulated according to the Investment Advisors Act of 1940.  In addition, if they have substantial assets, investment advisors must be registered with the US Securities and Exchange Commission (SEC), in which case they follow guidelines, including disclosures of their own investment activities.

Why Does an Investment Advisor Matter?

Investment advisors are helpful in negotiating complicated transactions because of their broad background in many aspects of securities, including deal structuring, project finance, and brokerage.  Investment advisors are paid a commission that is based on the performance of the security transaction that provides for a commonality of interest with the client (i.e. the client's success is their success.)