Many paths lead to the targeted investment success – but which is the right one? Every investor should choose the path that suits him or her best. Based on the defined investor profile, there are basically three implementation options available to the bank client with different levels of responsibility and advisory:

1. Execution-only
The customer manages his assets independently and makes his investment decisions without the support of professional advice or asset management. In addition to the necessary self-confidence, this requires above all good knowledge of the financial markets.

2. Advisory mandate
The client is supported by an investment advisor for his investment decisions.

3. Asset management mandate
The client delegates the management of his assets to an investment professional. In the first and the last variant, it is clear who is responsible for the investment decisions. In the case of an advisory mandate, this is actually also the case, because it is de facto the customer himself. Most of the time, however, he relies very heavily on his advisor. Therefore, he should pay attention to the following aspects:

Does my investment advisor understand my needs and demands?
The basis for this is the investment profile, in which key characteristics such as risk tolerance and risk capacity
are recorded, as well as good financial planning. However, it is also important to get a good picture of one’s own situation and expectations and to communicate them clearl

Are there potential conflicts of interest in the proposed investment solutions?
Advice is rarely free of conflicts of interest due to proprietary products, reimbursements from financial instruments and transactions, as well as bonus programs. The investment advisor is often caught between optimizing profits for the client, his employer and, of course, himself. Here, it is important to critically question the recommendations, demand for transparency and read the fine print carefully.

Can I understand the recommendations and are all my questions answered?
Do not rely on big promises and “nice stories”. Therefore, demand clear explanations and unambiguous return and risk characteristics. Especially the purpose of derivatives, structured products and non-transparent, expensive and illiquid investments should be checked.

Do I get the advice I want or do they only sell me products?
You should follow proven investment principles, such as buy-and-hold with disciplined rebalancing and sufficient diversification, and not be constantly pushed into specific transactions.

Do I receive transparent and comprehensible reporting regarding investment results, costs and risks?
The capital market environment is dynamic and requires meaningful, timely and clear information. Make sure you have access to accurate information about your investments in terms of investment performance, risk and cost at all times. Your investment advisor should also be able to demonstrate the added value of his or her recommendations.

What is the price of this advice?
Often the prices for advisory mandates are in the range of discretionary asset management mandates. You should then ask yourself whether the relationship between personal efforts, own responsibility and costs is suitable for you compared to a discretionary managed mandate.

Conclusion
An investment advisory mandate is a kind of interim solution. You rely on third parties, but still bear the responsibility yourself. For this reason, it is very important to provide clarity. The investment advice should be a valuable support. An independent financial expert can help you with an independent second opinion in a professional manner.