INVESTMENT

ADVISING
SERVICE INDUSTRY
 INVESTMENT ADVISOR
The financial services industry is a rapidly changing
professional environment. As the needs and desires of
consumers change, firms engaged in managing money are
also evolving.

A registered investment advisor IA manages the assets of

high net-worth individuals and institutional investors, and
sits on the buy side of the investment field.
 State of the Industry
OLD MODEL
The old model of a broker
calling his wealthy clients
with stock ideas is dying.
In fact, there has been a
mass exodus of client assets
leaving this model.
NEW MODEL
Paid much like mutual fund
managers, IAs usually earn
their revenue through a
management fee comprised of
a percentage of assets held for
a client.
So the advisor cannot
make any more money on the
account unless the client
increases his or her asset base.
 BUSINESS PLAN
6 REQUIRED ELEMENTS OF A BUSINESS PLAN FOR
INVESTMENT ADVISORS
a)Whowill they serve?- There are a wide variety of clients that employ
the services of investment advisers. Clients fall into two broad categories:
individuals and institutions. The first category includes: individuals, trusts,
families, and groups of families. The second category includes: corporations,
private pension plans, public pension plans, educational institutions,
endowments, foundations.
b) What will theydofor them?- They give advice about securities to
clients. For instance, individuals or firms that receive compensation for
giving advice on investing in stocks, bonds, mutual funds , or exchange
traded funds are investment advisers. Some investment advisers manage
portfolios of securities.
 BUSINESS PLAN
c)How will they work ?- Investment advisers typically have the
authority to make investment decisions on behalf of their clients, including
which securities to buy or sell (referred to as discretionary authority)
consistent with each clients objectives and guidelines. The advisers
authority may also extend to deciding which additional investment advisers
to
retain on behalf of its client to manage all or a portion of the clients
investments.
d) Investment Strategy and Style.Investment advisers use a
number of
different investment styles and strategies, such as growth or value. Some
specialize in investments in stocks (also called equities), some specialize in
bonds (also called fixed income), while others manage portfolios that
consist of investments in stocks, bonds, and cash.
 BUSINESS PLAN
e) Registration-If an investment adviser has at least $100 million in
assets
under management, manages a mutual fund, or meets certain other
requirements, it must register with the SEC by filing a document called Form
ADV. Investors can review the information that investment advisers file with
the SEC by visiting: www.adviserinfo.sec.gov.

f) Revenue Generation mechanism- Investment advisers enter

into a
written agreement with each client that outlines the advisers responsibilities.
The advisory contract typically identifies the services the adviser will
provide, the assets or accounts it will manage, a description of the advisers
fees, and various other terms and disclosures.
 ESTIMATED COST
Investment advisers generally are paid in any of
the following ways:
a) A percentage of the value of the assets they
manage for you;
b) An hourly fee for the time they spend working
for you;
c) A fixed fee;
d) A commission on the securities they sell (if the
adviser is also a broker-dealer); or
e) Some combination of the above.
 BREAK EVEN POINT
When a business reaches the break-even point, (which is
also referred to as the point of breakeven) the business is
no longer operating at a loss. Its not operating at a profit
either, but it is no longer losing money.
Factors that affect break even point are as follows
I. Securities
II. Mutual Funds
III. Stocks
IV. Bond
V. Cash
VI. Others
 COMPLIANCE DUTIES
Size of Firm.Investment advisers range from small businesses
to large corporations. Most investment advisers are small
businesses that offer more discrete services and cater to a
certain type of individual or institutional client. Some investment
advisers are global businesses that employ thousands of people,
serving both individual and institutional clients and offering a
very broad range of services and products.
Regulatory Hurdles-This means the SEC may visit with the
adviser and will request and examine documents that relate to
how the adviser discloses risks and potential conflicts of interest,
trading activities, and other business practices, including
communications with clients
Public Disclosure.In recent years, much more information has
become widely accessible to the public regarding investment
advisers.
 4PS INVOLVED IN IA
PRODUCT- In this case the product is the ADVICE
concerned that need to be sold in exchange for the settlement
amount.

PRICE- Investment advisers are usually compensated based

on a percentage of assets under management, not on a
transactional basis. This structure promotes a long-term
relationship between client and adviser and helps to align the
interests of the adviser with each client.
 PROMOTION- Many clients are looking to have a true financial
"quarterback", a resource they can use for solid advice on their total
financial picture. A good RIA will speak to the client in terms of his
or her overall goals and objectives, and review these with the client
at regular intervals.

PLACE- Investment advisers, unlike most brokers, typically do not

maintain physical custody of client assets or securities. Instead, the
client specifies a particular custodian (such as a bank, broker-
dealer, or other financial institution) where the clients assets will
be held. The client will receive periodic written statements from the
custodian listing all holdings and recent transaction activity.
 3Ps of SERVICE
MARKETING
As, Investment advisers provide professional advice to their clients
regarding investments in securities.
So, it is basically a service industry portfolio .
a) Physical Evidence- Form ADV, Part 1 includes useful information
about the adviser, including its address, phone number, number of
employees, nature of business, types of clients, assets under management,
compensation arrangements, advisory activities.
b) Process- Some advisers tailor investment portfolios for each client. Other
advisers strictly adhere to one or more centrally managed portfolios that
reflect a specific investment strategy, style, or model. Clients sometimes
retain several advisers with different investment strategies and styles to
diversify their portfolios.
c) People- It is an individual or a firm that is in the business of
giving advice about securities to clients .
 As a business
An RIA firm is a progressive business in today's changing
landscape of money management. It is an excellent place to
begin a career or to focus in on a particular aspect of the
business after cutting your teeth elsewhere for a few years.

Most RIA firms are owned privately, which can allow for
greater opportunities for equity in the company. They are
poised for fantastic growth as baby boomers are finishing
up their peak earnings years and entering into the
highest net worth phase of their lives.