- Efficiency: By allowing your investment advisor to concentrate on the economy and its effect on the securities in your portfolio, your staff is free to better focus on other important assignments. An SEC registered investment advisor will carefully monitor the market for the best investment opportunities, utilizing its technological resources to the benefit of its clients. They will deal with brokers and investment salespersons on the clients behalf, allowing them to concentrate on other tasks with fewer interruptions.
- Increased income: Through continual involvement in the market, utilization of investment technology, thorough understanding of investment options and significant economies of scale, the advisor searches through dozens of dealer inventories daily and is able to obtain the best prices on behalf of the client.
- Cash Management: An investment advisor will often assist their clients in determining an accurate cash flow model that will serve as the base from which investment decisions are made. Through better understanding cash flows, the portfolio may be safely extended without jeopardizing necessary liquidity.
- Diversification: The advisor attempts to invest funds in varying security types and maturity ranges to minimize reinvestment and interest rate risk.
- Compliance: Typically, all investment reports prepared for the client are in full compliance with the requirements of the Public Funds Investment Act as well as critical GASB 31 requirements. Investment Advisors are registered with both the SEC and the State Banking Commission. Broker/dealer compliance is monitored on behalf of clients.
- Control: The client typically maintains control. The trading strategy is agreed on in advance. Trade decisions are always within defined policy guidelines and the client approves all purchases. Confirmations are sent from the trade counter-party to the client, and all securities are maintained in the clients depository institution.
- Reporting:Most investment advisors will provide timely and accurate reporting that adheres to the requirements of the Public Funds Investment Act. Advisors seek to provide clients with information they need to fully understand their portfolio positions. Third party pricing and state of the art computer software assures independent data source.
- Education:An advisor will continually share independent market and economic information with clients so that they fully understand the inputs that go into the decision making process.
- Cost:The advisor seeks to minimize transaction costs and maximize portfolio earnings, so that the overall cost benefit to the clients is positive.
- Other services:An advisor may also assist the district in other financial areas such as depository bidding, cash management procedures and investment of bond proceeds.
- Other considerations:An advisor should never be in a position to sell you securities. In other words, your broker should not advise you on which securities to buy.
This article is reprinted with the permission of:
First Southwest Asset Management
700 Pacific Avenue, Suite 500
Dallas Texas 75201