Selecting an appropriate investment advisory service is crucial for investors to achieve their financial goals. However, not all investment advisory services can satisfy investors. Understanding common complaints against investment advisory firms and how to properly handle them can empower investors.
High advisory fees of investment advisory services
Investment advisory services charge fees to manage investors’ assets. Typical fee arrangements include percentage of assets under management, hourly rates, fixed rates, etc. Investors may complain if they find the advisory fees unreasonably high or unclear. To avoid or handle such complaints, advisory firms need to be transparent about their fee structure, benchmark their fees to industry averages, and educate clients on fee differences.
Underperformance of investment portfolios
Investment advisory services are expected to help clients get market-beating returns. However, portfolios may sometimes underperform the benchmarks due to unfavorable market conditions. Under such circumstances, advisors should thoroughly communicate with clients to set reasonable expectations and adjust portfolio allocations if necessary.
Poor client services and lack of reporting
Apart from portfolio performance, investment advisory services are also responsible to provide quality client services and regular reporting. Investors may complain about the unresponsiveness of advisors or not receiving account statements regularly. Advisory firms need to have robust client servicing procedures and reporting systems to avoid such issues.
Conflicts of interest
Conflicts of interest, such as advisors recommending proprietary products for commissions, are big concerns. Strict policies around disclosure of conflicts and acting in clients’ best interests are musts. Firms should also regularly review compensation structures to eliminate perverse incentives.
Unexpected account losses
Although investing inherently carries risks, investors tend to blame advisors for account losses beyond expectations. Clear investment policy statements and frequent client education are key to managing expectations. Firms also need to ensure suitability of investment strategies to specific clients.
To avoid and manage complaints from investment advisory clients, firms need to be highly transparent in their offerings, manage clients’ expectations properly, and have robust compliance procedures. Investors should also thoroughly evaluate providers before engaging their services.