What Does an Investment Firm Do?
An investment firm is a financial company that helps individuals, families, businesses, and organizations manage and invest their money. Depending on the type of firm, its services may include investment management, portfolio construction, financial planning, retirement planning, and ongoing financial guidance.
While some investment firms primarily focus on buying and selling investments, others take a broader approach. They consider how investments fit into a client’s financial goals, risk tolerance, retirement plans, income needs, taxes, and overall financial strategy.
Understanding what an investment firm does can help you determine whether working with one makes sense for your financial situation.
What Does an Investment Firm Do?
An investment firm’s primary role is to help clients make informed decisions about their investments and, depending on the firm, manage those investments on their behalf. The exact fiduciary services vary from one firm to another, but an investment firm may:
- Assess your financial goals and investment objectives
- Evaluate your risk tolerance and investment timeline
- Develop an investment strategy
- Build and manage an investment portfolio
- Recommend investments that fit your financial objectives
- Buy and sell investments within managed accounts
- Diversify investments across different asset classes
- Monitor investment performance
- Rebalance portfolios as circumstances change
- Coordinate investment decisions with retirement and financial planning
The goal is not simply to choose investments that might increase in value. Investment management should begin with understanding what the money is ultimately intended to accomplish.
For example, someone investing for retirement 25 years from now may require a very different investment strategy than someone who is already retired and relies on their portfolio to help provide income.
What Types of Investments Does an Investment Firm Manage?
The investments available depend on the investment firm and the needs of the client. Investment portfolios can potentially include:
- Stocks and Bonds
- Mutual funds
- Exchange-traded funds (ETFs)
- Real estate investment trusts (REITs)
- Cash and cash-equivalent investments
- 401ks, IRAs, and Roth IRAs
- Other investment products and securities
A portfolio does not necessarily need to contain every type of investment. Instead, investment selection and asset allocation should reflect factors such as the investor’s goals, time horizon, liquidity needs, and tolerance for risk.
How Does an Investment Firm Build an Investment Strategy?
Before recommending an investment strategy, an investment firm should first understand you as the investor. That process can include discussing questions such as:
What are you investing for?You may be building wealth for retirement, generating retirement income, saving for education, preserving wealth, or working toward another long-term financial goal.
When will you need the money?Your investment timeline can significantly affect how a portfolio is constructed.
How much investment risk are you comfortable taking?Investments involve risk, including the potential loss of principal. An investment strategy should consider both your financial ability and personal willingness to accept market fluctuations.
What investments do you already own?Existing retirement accounts, brokerage accounts, employer plans, and other assets can affect the overall investment strategy.
How do investments fit into your larger financial plan?Investing should not necessarily happen in isolation. Retirement income, insurance, estate planning, taxes, savings, and other financial considerations may affect investment decisions.
Once these factors are understood, an investment strategy can be designed around the investor rather than simply around individual financial products.
Investment Firm vs. Financial Advisor: What’s the Difference?
An investment firm is the company that provides investment-related services. A financial advisor is a financial professional who works with clients and may provide investment advice, financial planning, or other financial services. The distinction can become confusing because financial firms operate under different business models and regulatory structures.
For consumers, a better question may be: What services will this firm actually provide me?
Some financial planning firms focus almost entirely on investment management. Others combine investment management with comprehensive financial planning. Before working with a financial professional, understand the services being offered, how the firm is compensated, whether your investments will be monitored on an ongoing basis, and who will make investment decisions within your account.
What Is an Independent Investment Firm?
An independent investment firm is generally not limited to the proprietary investment products of a single financial institution. This can give an independent firm access to a broader selection of investments and financial products when developing recommendations for clients.
At Langan Financial Group, for example, we operate as an independent firm using an open-architecture approach. We are not required to meet sales quotas for specific products. This allows our financial professionals to focus on developing strategies based on each client’s individual financial objectives.
What Is Investment Management?
Investment management is the ongoing process of building, monitoring, and adjusting an investment portfolio. It can include determining an appropriate asset allocation, selecting investments, executing trades, monitoring portfolio performance, rebalancing investments, and making adjustments as the client’s financial circumstances evolve. Investment management can also be provided on either a discretionary or non-discretionary basis.
With discretionary investment management, the client authorizes the investment adviser to make certain investment decisions and execute transactions within the agreed-upon guidelines of the account.
With non-discretionary investment management, the adviser can make recommendations, but the client ultimately decides whether to buy or sell the recommended investments.
Understanding which arrangement applies is an important part of choosing an investment firm.
Do Investment Firms Manage Retirement Accounts?
Many investment firms work with retirement assets, although available services vary by firm. This may include helping clients manage assets held in IRAs, Roth IRAs, taxable investment accounts, and other investment accounts. Investment professionals may also help clients evaluate assets held within employer-sponsored retirement plans.
Retirement investment management becomes particularly important as investors approach retirement because their priorities can change. Accumulating assets may gradually give way to questions about generating income, managing withdrawals, preserving assets, and maintaining an appropriate level of investment risk.
What Should You Look for in an Investment Firm?
Choosing an investment firm is about more than investment performance. Consider asking prospective firms about their approach to investing, services, fees, investment options, account monitoring, and how they develop recommendations.
You may also want to ask:
- Will my investment strategy be customized?
- How often will my portfolio be reviewed?
- How are investment decisions made?
- Who will manage my investments?
- How is the firm compensated?
- Does the firm provide financial planning in addition to investment management?
- Is the firm independent?
- Does the firm act as a fiduciary when providing investment advisory services?
- How will the firm communicate with me when markets or my financial circumstances change?
You should feel comfortable understanding both what the firm does and why it is recommending a particular strategy.
Talk With Langan Financial Group About Investment Planning
Investing is about more than selecting stocks, funds, or other financial products. Your investment strategy should reflect what you are trying to accomplish with your money. Langan Financial Group works with individuals, families, businesses, and organizations to provide personalized investment management and financial planning services.
With offices serving the Harrisburg and York, Pennsylvania areas, our team can help you understand your current investments, identify your financial objectives, and develop an investment strategy built around your needs. If you have questions about your investments or would like to learn more about working with an investment firm, contact Langan Financial Group to schedule a conversation.
