Chicago-area investors seeking professional portfolio oversight often search for asset management firms or an investment consultant Chicago residents can work with. Understanding what asset management services entail may assist investors in evaluating prospective advisors and determining whether this type of relationship is generally designed to align with their needs.
What Is Asset Management?
Asset management refers to professional oversight of an investor’s portfolio, including decisions about asset allocation, security selection, and ongoing monitoring. Asset managers may work with individual securities, mutual funds, exchange-traded funds, or other investment vehicles, depending on the firm’s approach and the client’s preferences.
For high-net-worth individuals, asset management may extend beyond basic portfolio construction to include tax-aware investment positioning and coordination with retirement and estate planning objectives.
What Does an Investment Consultant Do?
The term “investment consultant” is used broadly in the financial services industry. In some contexts, it refers to professionals who advise institutional investors such as pension funds or endowments. In others, it describes advisors who provide investment guidance to individual investors.
When evaluating an investment consultant, investors should clarify the scope of services provided, how the consultant is compensated, and whether they operate under a fiduciary standard. These factors vary considerably across firms.
Common Services Included in Asset Management
While services vary by firm, asset management commonly includes:
- Portfolio construction based on risk tolerance and financial objectives.
- Periodic rebalancing to maintain target allocations.
- Performance reporting and regular communication; some firms provide benchmark comparisons, though reporting formats vary.
- Tax-aware investment positioning, coordinated with outside tax professionals.
- Coordination with retirement and estate planning objectives.
Investors should ask prospective advisors to specify which services are included in their engagement.
Fee Structures to Understand
Fees vary widely by firm, service scope, and account size. Many firms charge an AUM-based fee; some provide flat-fee or hourly arrangements, particularly for smaller accounts or planning-focused engagements.
Investors should ask about all costs they will pay, including advisory fees, underlying fund expenses, trading costs, and any custodial fees. Reviewing Form ADV Part 2A discloses fee arrangements and potential conflicts of interest.
Fee-only advisors receive compensation exclusively from client fees and do not earn commissions from product sales. This structure may reduce certain conflicts, though all firms should disclose conflicts and how they manage them. Investors should confirm an adviser’s compensation model in the firm’s Form ADV.
Fiduciary Standard vs. Other Standards
Registered investment advisers are held to a fiduciary standard for investment advisory services under the Investment Advisers Act of 1940. This means they are legally obligated to act in the client’s interest when providing those services.
Broker-dealers making recommendations to retail customers are generally subject to Regulation Best Interest; specific obligations vary by capacity and service. Some professionals hold both registrations; investors should ask which capacity applies to the services being provided.
Registration with the SEC or a state regulator does not imply a certain level of skill or training. Investors should conduct their own due diligence.
Custodial Arrangements
Asset management advisors generally do not hold client assets directly. Client assets are typically held at an independent qualified custodian, which issues statements directly to clients. Investors should understand where their assets will be held and confirm that the custodian is a reputable institution.
Tax-Aware Investing
Many asset management firms incorporate tax considerations into their investment process. This may include decisions about asset location, positioning certain investments in tax-advantaged accounts and others in taxable accounts, as well as timing of rebalancing.
Tax-aware investing does not replace advice from a CPA or tax attorney. Asset management firms typically coordinate with clients’ outside tax professionals rather than providing tax services directly. Clients should consult their own tax professional for tax advice.
Questions to Ask Before Hiring
When evaluating an asset management Chicago firm or Investment Consultant Chicago area investors are considering, the following questions may help:
- What is your investment philosophy?
- Do you provide investment advisory services on a fiduciary basis?
- How are fees calculated, and what is the total cost?
- What custodian holds client assets?
- How do you coordinate with outside tax and legal professionals?
This article is general information and not individualized advice; investors should evaluate multiple firms. For investors exploring asset management in the Chicago area, Virtue Asset Management is an independent, fee-only registered investment adviser. Investment advisory services are provided on a fiduciary basis for advisory clients. The firm does not provide tax or legal advice; clients should consult their tax professional. Additional details can be verified via the firm’s Form ADV.
This material is provided for informational purposes only. Different firms offer different services, and investors should evaluate whether a firm’s offering aligns with their specific needs.
Disclosure: Investing involves risk, including the possible loss of principal and fluctuation of value. Past performance is no guarantee of future results. This article is not intended to be relied upon as forecast, research, or investment advice. It is not a recommendation, offer, or solicitation to buy or sell any securities or to adopt any investment strategy.
