Investment counsel

From CEOpedia | Management online

Investment Counsel, also called Investment Adviser or Financial Adviser, is an individual person or organization whose expertise and assistance in financial and investment matters is used by individuals or other organizations. An investment counsel provides advice on asset management matters that the client has or on what is better for him when it comes to potential investments. The definition of an investment counsel refers to many companies as well as people who provide services related to investment advice, including securities[1].

It is important that an investment adviser meets three elements to be called an investment adviser[2]:

  • compensation - a concept that is defined as receiving a fee for consultancy services provided to clients,
  • involvement in business matters - person provides investment advice, but it does not have to be the only activity or work of such a person, this factor can be assessed by the number and frequency of consultancy services provided, or receiving a fee for them,
  • advice on shares, bonds, investment funds and other securities.

Advisory services

An investment counsel gives expert opinions on specific investments, e.g. shares, investment funds and bonds, gives advice, creates reports and analyzes. They often manage the client's assets in terms of investment - the client allows an investment counsel to make decisions related to investing on his behalf, previously giving him authorization. An investement counsel is obliged to act in good faith and in favor of clients, using expert knowledge to help the customer in the best way possible and show the best way out of the situation. The person or organization involved in investment consulting must always be loyal to clients and inform about any problems or conflicts of interest, if any occurs[3].

Advisory services require a great deal of expertise. They are difficult to assess, as the advice provided does not allow automatic assessment of financial proposals. It is very different from buying material things like a book or a t-shirt. Investment advice can not be assessed at the time of providing it, so it is not possible to submit a complaint and get back the money. A well-educated, experienced investment adviser is able to advise his client to make the best decision for him, not to consider short-term decisions, but to focus on what is important in the long run, and also highlighting the negative and positive effects of each decision[4].

Examples of Investment counsel

  • Investment Banks: Investment banks are financial institutions that provide a wide range of services such as investment banking, asset management, wealth management, securities brokerage, and corporate finance. Investment banks act as a middleman for companies and governments when it comes to issuing securities, underwriting new stock and bond offerings, and providing financial advice. Investment banks also provide advice on mergers and acquisitions, and provide research and analysis on the markets and on specific stocks and bonds.
  • Certified Financial Planners (CFPs): CFPs are professionals who provide financial advice to individuals and small businesses. CFPs are required to pass a certification exam and have a minimum of three years of relevant experience. A CFP provides advice on a variety of topics, including taxes, investments, estate planning, retirement planning, and insurance. CFPs are also trained to understand the nuances of the financial markets, and can provide advice on how to best manage investments.
  • Investment Advisors: Investment advisors are professionals who provide advice on investments, such as stocks, bonds, mutual funds, and exchange-traded funds (ETFs). Investment advisors typically have a background in finance or economics and have experience in the markets. Investment advisors may also be registered with the Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA). Investment advisors are required to adhere to certain standards of conduct when providing advice.
  • Wealth Managers: Wealth managers are professionals who provide advice on a wide range of topics, including investments, taxes, estate planning, insurance, and other financial matters. Wealth managers often work with individuals and families to develop long-term financial plans. Wealth managers typically have a background in finance, economics, or accounting, and are well versed in the markets and financial products. Wealth managers are often registered with the SEC or FINRA.

Advantages of Investment counsel

Investment counsel can be a great asset for a person or organization looking to make sound financial decisions. It is important to understand the advantages of having an investment counsel before making a decision. Below are some of the advantages of investment counsel:

  • Access to Expertise: Investment counsel have years of experience and expertise in the area of investments and can provide valuable advice on the best options for a person or organization. This can help the client to make informed decisions and maximize returns.
  • Professional Advice: Investment counsel are professionals who are well versed in the financial markets and can provide advice on which investments are suitable for a person or organization’s circumstances. This advice can be invaluable for those who may not be familiar with the financial markets.
  • Diversification: Investment counsel can help clients build a diversified portfolio to reduce the risk of losses. They can assess the client’s risk tolerance and recommend investments that meet the client’s needs.
  • Tax Advantages: Investment counsel can help clients to identify tax planning opportunities and strategies. This can help to reduce the amount of taxes paid and help to maximize returns.
  • Objectivity: Investment counsel are objective and impartial, and can provide unbiased advice on the best investments for a particular situation. This can be invaluable for those who may not be able to make an informed decision without the help of an expert.

Limitations of Investment counsel

Investment Counseling is a valuable service for anyone looking to make informed decisions about their investments and finances, but it does have its limitations. The following are some of the main limitations of Investment Counseling:

  • Investment counseling does not guarantee financial success, as it is impossible to predict the markets. Investment counsel can provide guidance and advice, but the success of any investment ultimately depends on the individuals' knowledge and decisions.
  • Investment counselors cannot guarantee the security of an individual's investments, as the stock markets are unpredictable and the value of any investments can fluctuate drastically.
  • There may be a conflict of interest with the investment counselor, as they may have an incentive to advise clients to purchase certain investments in order to increase their own profits.
  • Investment counseling is often expensive, as the costs of hiring a qualified and experienced financial advisor can be high.
  • Investment counselors may not be knowledgeable about all investments, as different types of investments may require different levels of expertise.
  • Investment counseling does not guarantee tax savings or other financial benefits.

Other approaches related to Investment counsel

  • Financial Planning: Financial planning is a comprehensive approach to managing one's finances that includes budgeting, debt management, retirement planning, estate planning, and investment management. An investment counselor can help individuals or organizations create and implement a financial plan that meets their goals and objectives.
  • Investment Management: Investment management involves the selection and monitoring of investments to ensure they are meeting the client's goals. Investment counselors typically provide advice on the best portfolio mix of stocks, bonds, mutual funds, ETFs, and other investments to meet the client's risk tolerance and return objectives.
  • Tax Planning: Tax planning is the process of minimizing taxes owed by individuals or businesses by strategically utilizing deductions, credits, and other tax-advantaged strategies. Investment counselors often advise clients on the most tax-efficient way to manage their investments and to maximize their after-tax returns.
  • Estate Planning: Estate planning is the process of planning for the transfer of assets from one generation to the next. Investment counselors may provide advice on how to structure investments to minimize taxes and maximize the transfer of wealth.

In summary, investment counsel provides advice and guidance on a variety of financial matters, including financial planning, investment management, tax planning, and estate planning. Investment counselors are often used by individuals or organizations to help them make sound financial decisions.


  1. Financial Advisory Services, 2012, p.18-22
  2. Regulation of Investment Advisers by the U.S. Securities and Exchange Commission, 2013, p. 2-3
  3. Financial Advisory Services, 2012, p.18-22
  4. Financial Advisory Services. Exploring Relationships between Consumers and Financial Advisors, 2012, p. 17-18

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Author: Justyna Wicek