Your investment advisor has many different responsibilities. These are commonly referred to as their fiduciary duties. Your portfolio manager must carefully research potential trades before making them and disclose any associated risks with you before doing so. If your investment advisor makes unauthorized transactions or engages in fraud, then they may be accused of breaching their fiduciary duty and face penalties for doing so.
One thing that any good investment advisor should do when they meet with you is to ask about your financial goals. Your portfolio manager should educate you about the breadth of investment options that exist including mutual funds, bonds and stocks as well as the benefits and risks that are associated with them.
Your investment advisor will likely discuss more with you than simply stocks or mutual funds. Your portfolio manager may also delve into how to best invest your money from within your retirement account. You should expect your advisor to detail what nonretirement accounts are best for you including actively managed or index funds.
Advisors should always be upfront about the benefits and risks associated with each of the investment opportunities that you’re considering. It’s as part of this that your portfolio manager should discuss the tax implications of making certain investment choices. Your advisor should counsel you about how to best minimize your tax burden as well. Your advisor should also let you know about what rate of return you can expect given your investment choices.
You should realize that your contract with your portfolio manager likely gives them the full responsibility to make certain trades on your behalf without them having to pass each one by you. This is why you and your investment advisor must be on the same page with one another. If you’re not, then a significant portion of your savings could be at risk.
It can be helpful for you to consult with an attorney here in Louisville before you agree to work with an investment advisor. You should also seek out the advice of one if you suspect that the one that you’re in a contract with has breached their fiduciary duty. Your lawyer can advise you of how Kentucky law protects investors like yourself who have been deceived.