Professional money management is a service that encompasses more than just the portfolio managers, the decision makers for a portfolio of investments. There often is a team of researchers or consultants involved, and this is known as the investment advisory arm of the business. Sometimes, these investment advisors will be internal to a large money management firm, and other times, they will be outsourced to a third party. In either case, investment advisory provides an integral piece of the money management puzzle that focuses on advice, ideas and research.
Investment advisory is considered a central asset management unit to any money management firm. Money managers make decisions on behalf of some of the largest institutional investors in the world, including pension funds, large banks as well as wealthy individuals, among others. The investment advisory arm of the firm is responsible for researching investments, including current and potential allocations, and providing advice on those findings. Although some investment professionals make their decisions absent of an investment advisor, there are others who depend wholeheartedly on the advisory component of the business.
An investment advisory arm of a larger business or an outside investment advisory firm will provide an array of services. These functions include recommending the investment into a particular asset class, such as equities, fixed income or hedge funds, or recognizing a trend that suggests that it's time to divest from any of the above mentioned categories. If a large investor has an investment with a large money management firm and there has been some sort of executive shakeup at that company, the investment advisory business will often raise a yellow flag to that investor that there might be some changes in the performance of the portfolio going forward. Of course, it is up to the investor to decide whether to heed the advice of the investment advisor.
The relationship with the investment advisor, who provides advice; the money manager, who makes the investment decisions; and the investor himself or herself is often symbiotic in that each relies on the other for some contribution to the equation. The investment advisor should be aware of the direction that the money manager prefers to take, the resources of the investor and the conditions in the financial markets. In a way, it is the responsibility of the investment advisory business to tie all of these separate components together. Although compensation for investment advisors typically falls below that of the actual money managers, it can still be a lucrative career choice that leads to unpredictable and exciting opportunities.