Understanding the Two Main Investment Service Categories
When deciding where to invest their money, many people wonder about the rules of the game and what they should know when reading the fine print of an investment contract. This guide provides a clear and detailed explanation from that perspective.
There are two primary categories of investment services: advised and non-advised. Advised services involve a financial institution or advisor providing personalized recommendations to the investor based on their investment profile and risk level of the financial products being marketed.
In contrast, non-advised services mean the investor makes decisions without guidance from a financial intermediary, taking full responsibility for their choices and needing to thoroughly understand the features and risks of financial products.
Types of Advised Investment Services
Within advised services, there are two distinctions. The first is investment advisory, offering personalized recommendations based on the client’s profile, considering their financial goals, knowledge, risk tolerance, and economic situation.
The second is portfolio management, where the financial institution manages the investor’s portfolio discretionally, making decisions on their behalf within an authorized and tailored framework.
These advised services provide greater benefits, especially for those seeking strategic, personalized, and diversified wealth management. Moreover, they are subject to a regulatory framework that protects investors since financial institutions must act in the best interest of the client, manage risks, and fulfill a fiduciary responsibility—a legal and ethical obligation to appropriately manage the client’s assets.
Non-Advised Investment Services
Non-advised investment services include order execution, which involves receiving, transmitting, and executing investment orders according to the client’s instructions. In this case, the financial institution does not offer recommendations or advice, so the investor must thoroughly understand the features, conditions, and risks of the financial products.
This service is suitable for experienced or knowledgeable investors who are responsible for evaluating whether the transactions align with their investment objectives and time horizon, as well as the outcomes of those decisions.
Marketing or Promotion Service
The last category is the marketing or promotion service, offering general recommendations for buying or selling simple financial instruments. Since it does not consider the client’s profile or provide personalized advice, this service is more appropriate for beginner investors or those wanting to avoid high-risk scenarios.
Regulation in Mexico
In Mexico, these activities are regulated by the National Banking and Securities Commission (CNBV) through Investment Services Dispositions. The primary goal is to protect investors and promote more transparent and efficient financial markets.
Choosing the Right Service
The choice between these services depends on each investor’s profile, objectives, and experience. While some prefer the personalization of an advised service, others opt for digital trading platforms or delegate decisions to experienced advisors. The key is for the investor to thoroughly research the financial institution or advisor, verifying their solidity, experience, reliability, and regulation. A well-planned investment is crucial for achieving financial goals and safeguarding one’s assets.
Key Questions and Answers
- What are the two main categories of investment services?
Advised and non-advised services.
- What do advised services involve?
Financial institutions or advisors providing personalized recommendations based on an investor’s profile and risk tolerance.
- What are the types of advised investment services?
Investment advisory and portfolio management.
- What are non-advised investment services?
Order execution and marketing or promotion services.
- Who regulates investment activities in Mexico?
The National Banking and Securities Commission (CNBV).
- How should an investor choose the right service?
By considering their profile, objectives, and experience, thoroughly researching financial institutions or advisors for solidity, experience, reliability, and regulation.
