Stock Investment Services

Providers of good stocks for investment?

The stock investment services provided by financial investment advisers and financial planners do not necessarily include direct stock investment advice as their services relate more to advising on managed funds and overall financial advice.

Whether you need a financial adviser will depend on your individual financial circumstances and time availability.

However, there are questions that should be considered when making a decision.

For example, if you are looking for the best stock to buy, a stock broker may be a better source of free stock tips - remembering of course that you will have to pay brokerage when you make a purchase.

Also, there are financial advisers offering stock investment services whose primary focus is on stock market trading. That is, buying and selling stock over short time frames.

If you are serious about value investing, you will not need the services of this type of adviser. Participating in an online value investing course may be a better (and cheaper) option.

Some advisers charge fees as a percentage of the funds that you invest with, or through them.

When I require financial advice specific to my circumstances, I use a fee-for-service adviser who charges on an hourly rate.


Your Rights and Choices

Financial advisers are required by law to identify your risk profile and advise on investments that fit that profile.

You should also be able to have some control over the asset classes (cash, bonds, stocks, property etc.) into which your funds are being invested.

It is important to understand the fee structure to ensure that there are no further fees if you choose to alter the balance of the asset classes.

In relation to stock market related mutual funds, you have a range of types of fund that a financial adviser might suggest for investment.

These choices can include in-country funds, global funds, income-generating funds, growth funds, index-hugging funds ... and so on.


Concerns Relating to Managed Fund Advice

A concern relating to managed funds that are invested in the stock market on the advice of a financial adviser is that the percentage returns quoted are pre-tax returns. This hides some of the tax problems that might arise for an individual.

Some fund managers offering stock investment services have a much greater turn-over of stocks in any one year, sometimes referred to as their churn rate.

This can have a significant effect on how much tax you may have to pay. Your after-tax return may be reduced by as much as 60% for some funds with a large 'churn' rate if you are on the top marginal tax rate.

So a fund manager who makes a noise about having a (pre-tax) return of 20% may in fact give you an after-tax return of 8%, which is quite a different story.

Hence, you need to investigate the policy of the fund manager of the fund that an adviser may be suggesting you invest in. Since when you add fund management fees to financial adviser fees and then consider the tax on any returns, your investment may take on a different look.

I look for funds that have a value-investing approach with longer investment time frames, and hence less 'churn'.

If the fund also focuses on shares with franked dividends, then all the better, as this will also help to offset tax liabilities.


To Conclude

The moral of the story when using the stock investment services offered by financial advisers and fund managers is to obtain some knowledge of the investments that are being offered to you.

You also need to be aware of the effect of fees and taxes on your overall post-tax returns.

Whether value investors need the advice of a financial adviser will no doubt depend on individual circumstances and the time available to carry out their own research.

The related article below provides more detail on some of the discussion above.

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Related Article

Managed fund fees - These fees, together with the fees charged by a financial advisor may have a serious effect on your potential returns. Access to a fee calculator is available by following this link.

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