What does investment advisory mean?
This article outlines Banco Carregosa’s approach to investment advisory, drawing on the expertise of Miguel Ricon Ferraz, Banco Carregosa’s financial analyst and head of Investment Advisory.
At a glance:
• Investment Advisory is a specialised service that provides personalised, strategic support for financial decisions.
• It facilitates the creation of investment portfolios tailored to an investor’s risk profile, objectives, and time horizon.
• At Banco Carregosa, investors remain at the heart of the decision-making process and benefit from specialised, transparent support.
• At Banco Carregosa, the service is structured around two models: one-off and ongoing. This depends on the type of support that each investor seeks.
In an era of abundant financial information and a vast range of products, investors face a different challenge: not access, but discernment. Given the natural volatility of the markets and the fact that portfolios span different assets and geographies, investors should no longer be asking themselves "What products are available?”, but rather "What combination makes sense for me right now, given my objectives?”. Our investment advisory service aims to answer this specific, contextualised, and unique question.
What is Investment Advisory?
Investment Advisory, legally designated as "investment advice” by the CMVM and ESMA, is a regulated financial service in Portugal, subject to registration with the CMVM and governed by DMIF II (MiFID II). It involves providing personalised recommendations on financial instruments, such as shares, bonds, funds, ETFs, among others, based on an initial assessment of the investor’s profile, objectives, financial situation, and time horizon. The decision on whether to act on each recommendation always lies with the investor.
It is this personalisation that sets investment advice apart from generic market recommendations and commercial communications. The suitability criterion of MiFID II requires each recommendation to be based on a documented individual assessment of the client. This ensures consistency between the suggested strategy and the investor’s specific characteristics.
In practice, the service helps to answer specific questions, such as:
• What proportion of assets should be invested in shares, bonds and other assets?
• What adjustments should be made to the portfolio in the context of rising interest rates or increased volatility?
• Which instruments are best suited to achieving medium- or long term objectives while balancing returns and risk management?
• Which parts of the portfolio are exposed to the same risk factors without this being taken into account? Examples include overlapping funds with the same positions, unintended geographical concentration, and high correlation during periods of stress?
How the investment advisory service works
The service is based on four fundamental, sequential, and iterative phases.
1. Assessment of the investor’s profile
The process begins with a thorough analysis of the client profile, taking into account their financial situation, experience of financial instruments, risk tolerance, ability to withstand temporary losses, and time horizon. Without a clear diagnosis of the starting point, any subsequent strategy would lack coherence.
Find out what type of investor you are
Read the article "Investor Profile” to find out whether you are a conservative, moderate, or dynamic investor.
2. Setting investment objectives
Once the profile has been established, the financial objectives can be clarified. These may be short-term goals, such as managing liquidity, or medium-term goals, such as achieving a significant financial objective (e.g. buying a property or funding children’s education). Alternatively, they may be long-term goals, such as retirement planning or capital accumulation. The time horizon has a direct influence on the level of risk taken, asset selection, and portfolio construction. It effectively acts as a filter that determines the success or failure of many technically feasible recommendations.
3. Proposed strategy and asset allocation
A structured proposal is presented based on the profile and objectives. This includes an allocation across different asset classes (such as shares, bonds, funds, and other instruments), taking into account macroeconomic analysis, market outlook, asset correlation and risk control. The proposal is technically sound. Whether to implement it in full, in part, or in stages is at the investor’s discretion.
4. Ongoing monitoring
The service does not end with the initial implementation. The extent of this phase depends on the service package contracted. With the One-off Advisory package, the service concludes with the delivery of the recommendation. It is then up to the investor to decide when to request support again, for example when faced with a new decision, a change in circumstances, or when carrying out a periodic review of the strategy. Support in Ongoing Advisory is structured and recurring. It includes regular monitoring of your portfolio, tracking of market volatility and suggestions for adjustments as markets, economic cycles or your personal circumstances evolve.
Who is Investment Advisory designed for?
The investment advisory service is designed for investors with assets to allocate, who value their autonomy in decision-making, but recognise the value of structured technical support. It is particularly useful in three situations: for those who have already built up a significant portfolio and suspect that their positions are no longer aligned with their current objectives due to obsolescence, overlap between funds, or unintended concentration; for those facing a significant wealth-related event, such as asset reorganisation, retirement planning, or another influx of liquidity that materially alters the decision-making framework; and for those who are just starting out on their investment journey and prefer to start with a defined approach.
The service makes more sense in its ongoing Private Banking form above certain minimum asset thresholds, not as a matter of exclusivity, but because the ongoing management costs are only justified when applied to assets of sufficient size to benefit materially from the diversification and access to research that the service provides. For assets in the early stages of accumulation, the one-off service provides access to the same technical standards at a cost that is appropriate for the objective.
Advantages of Investment Advisory
• More informed and structured decisions: each decision is made within the context of an overall strategy, with an integrated view of the portfolio, associated risks, and the coherence of the assets. This approach is the opposite of making decisions on individual products in isolation.
• Alignment with risk profile: prior analysis of the risk profile ensures that proposals are compatible with the investor’s financial and emotional capacity to cope with volatility. A portfolio that is technically sound but which the investor abandons at the first market correction is a poorly designed portfolio.
• Efficient diversification: this involves structured access to different asset classes, geographies, and sectors. It is important to be vigilant regarding overlaps, as diversifying across five funds holding the same positions does not constitute diversification.
• Ongoing monitoring (Continuous Advisory): monitoring, reassessment, and adjustments whenever markets, economic cycles or personal objectives change, without relying on the investor to detect when intervention is required.
How much does the Investment Advisory service cost
The remuneration model is one of the key elements to clarify before using the service, as it determines how incentives are aligned between the intermediary and the investor. There are three models that are most commonly found in the Portuguese market.
1. Fee based on the value of the portfolio (assets under advisory): the client pays an annual percentage of these assets, typically split into instalments, and charged monthly, quarterly, or biannually. This partially aligns the incentives of the intermediary and the client (the intermediary’s remuneration only increases if the client’s assets grow).
2. Fixed periodic fee: the client pays a set amount, regardless of the sum invested, in exchange for a specific number of recommendations or a set level of monitoring. This option is ideal for investors who prioritise cost predictability.
3. Hybrid model: combines a fixed component (basic service coverage) with a variable component that is either linked to the volume of assets under management or to the execution of transactions through an intermediary.
In addition to these charges, separate fees may be charged for custody, execution and taxation. Indirect remuneration may also take the form of retrocessions received by the intermediary from the management companies of the recommended funds. This is a possibility reserved for non-independent advisory services.
Legal framework in Portugal
This service is provided in Portugal under the supervision of the Portuguese Securities Market Commission (CMVM). and may only be carried out by authorised entities. Compliance with strict requirements is required under the framework:
1. Assessment of suitability to the client’s profile;
2. Rules on transparency and pre-contractual information;
3. Policies for the prevention and management of conflicts of interest;
4. Reporting obligations and ongoing supervision.
5. Working with a supervised entity ensures clear legal standards and investor protection mechanisms, as well as access to formal complaint channels. You should always check that the entity is registered and authorised by the CMVM before engaging a service.
Independent vs. non-independent advisory
MiFID II introduced a formal distinction between the two types:
Independent advisory
The intermediary assesses a broad range of diversified instruments, including products from other entities. They do not retain retrocessions or other benefits paid by third parties and provide a rationale based on meaningful comparative analysis. Only those who meet the criteria and are formally registered with the CMVM may use this designation.
Non-independent advisory
The intermediary may recommend products from their own group or from other companies they do business with. They may also keep the money they receive for referring clients to these companies, provided they disclose this to the client. Both models require the duty to disclose information and ensure suitability for the client’s profile.
Banco Carregosa’s approach
Banco Carregosa offers this service through a non-independent advisory model. This model enables products from the Bank itself and partner entities to be included within the recommended range. Integrating the Bank’s asset management offering with the work of the Investment Department enables us to recommend products that have previously been analysed and monitored by our internal team.
Investment Advisory at Banco Carregosa: One-off or Ongoing
At Banco Carregosa, the service offering is structured around two distinct models, depending on whether investors are seeking one-off assistance with making decisions or ongoing support with managing their wealth.
One-off Advisory Service (Savings and Investment)
One-off Advisory Services are designed for investors who value their independence but do not want to miss out on professional insights. As the name suggests, this is a one-off service designed to address a specific need at a particular moment, with no obligation to provide ongoing support.
· The right moment: ideal for those who need to build a portfolio from scratch, analyse a new opportunity, or reassess their current strategy in light of changes to the market or their personal circumstances.
· The three pillars: based on focused analysis (clear objectives), flexibility (access to a wide range of funds) and autonomy (the investor always makes the final decision)).
See how On-off Advisory works
In this vídeo, Miguel Ricon Ferraz explains the three pillars of the service.
Ongoing Advisory Service (Private Banking)
The Ongoing Advisory service is suited to investors with more complex portfolios, who require constant monitoring and proactive adaptation of advice. Unlike a one-off service, this one is based on an ongoing, long-term relationship. Regular reviews allow the strategy to be adjusted in line with market conditions, personal objectives, and other circumstances.
· Relationship and monitoring: the focus is on continuity. With the support of the Investment Department, the Private Banker closely and continuously monitors the performance of the portfolio.
· Tactical adjustments: the strategy can be adjusted in a timely manner in the face of market volatility or changes in family and succession objectives, without the investor having to initiate a review.
· Privileged access: clients benefit from the internal analysis of the Investment Department and access to a range of products that are usually unavailable to retail investors, including institutional funds and selected opportunities.
Find out how our Ongoing Advisory service works
In this video, Miguel Ricon Ferraz explains in detail the Ongoing Investment Advisory service. In this service, the Private Banker assists the client with allocating and selecting financial assets that have previously been analysed by Banco Carregosa’s Investment Department, in line with the client’s investment objectives, profile, and financial situation.
Comparative summary: which one should you choose?
| Feature | One-off Advisory | Ongoing Advisory |
|---|---|---|
| Objective | Specific decisions and strategy clarification | Comprehensive and ongoing support |
| Interaction | Focused on when needed | Close and proactive contact |
| Execution | The investor decides and acts promptly | Decision supported by constant monitoring |
| Ideal for… | Validating choices or getting started | Managing the complexity of a larger portfolio |
What is the role of the Financial Adviser?
The Financial Adviser is the investor’s strategic partner. The role encompasses more than just selecting instruments; it also involves macroeconomic analysis, risk assessment, and the technical rationale behind recommendations. Perhaps most importantly, it involves managing the client’s behaviour during periods of volatility.
How can you choose a good Financial Adviser?
For a detailed analysis of the evaluation criteria, see the dedicated article: "What does a Financial Adviser do".
What is the difference between Investment Advisory and Wealth Management?
Which service is chosen depends on how involved the investor wants to be in managing their assets on a day-to-day basis.
| Feature | Investment Advisory | Wealth Management |
|---|---|---|
| Decision-making | Client. The investor has the final say on each asset. | Delegated. The manager makes decisions based on a prior mandate. |
| Role of the specialist | Collaborative. The consultant makes recommendations and justifies them. | Autonomous. The manager implements the defined strategy. |
| Execution of orders | Requires prior client approval for each transaction. | Executed by the manager without the need for case-by-case consultation. |
| Investor profile | Investors wish to retain control and participate in the process. | Investors prefer to delegate the technical management aspects to specialists. |
If you are looking for full delegation of decisions, find out more about our Wealth Management service here.
Complementary services to investment advisory services
Banco Carregosa’s Private Banking offers a variety of approaches, each tailored to different levels of involvement:
· Asset Management: ideal for investors who prefer to delegate decision-making with mandates that allow the management team to make decisions within pre-defined parameters.
· Financial Markets: for investors seeking greater autonomy, there is the option of the Trading Room with specialist support or the GoBulling platform.
· Wealth Advisory: an integrated approach to structuring, preserving, and planning wealth on a global scale. This is particularly relevant for complex portfolios or those undergoing strategic changes.
Investment Advisory: Banco Carregosa’s strategic vision
Founded in 1833, Banco Carregosa is the oldest financial institution still operating on the Iberian Peninsula. It has maintained a family-owned and independent shareholder structure for over 190 years and has positioned itself as a bank specialising in Private Banking and wealth management since 2008. As at 31 December 2024, its Common Equity Tier 1 (CET1) ratio stood at 19.48%, which was consistently above the average for the Portuguese banking sector. It also had assets under supervision totalling over five billion euros.
The Investment Advisory service is based on the expertise of certified senior professionals operating within a financial intermediary that is authorised by both the CMVM (registration no. 0169 since January 1995) and Banco de Portugal (registration no. 0235). A specialist from the Investment Department provides support, ensuring the selection of pre-analysed assets and continuous risk monitoring, as well as full transparency regarding significant changes to the portfolio.
Contact us find out how we can tailor our approach to your objectives.
Investment Advisory: FAQs
What does the Investment Advisory team do?
It analyses investors' profiles and uses this information to produce personalised recommendations for financial instruments such as shares, bonds, funds and ETFs, based on the investor’s objectives, time horizon and risk tolerance.
Why is it called "Investment Advisory” rather than "Investment Advice”?
"Investment Advice” is the legal term used by the CMVM and ESMA, set out in the Securities Code and European directives. "Investment Advisory” is the most common commercial term in Portugal, adopted by most banks and brokers. Both terms refer to the same regulated service.
Is Investment Advisory useful?
The investment advisory service primarily adds value in four areas: (1) tailoring investments to the investor’s profile, objectives, and restrictions; (2) behavioural management to avoid hasty decisions during periods of market stress. Academic studies identify this as one of the main causes of subperformance among retail investors; (3) methodological discipline and risk control of the portfolio as a whole, avoiding unintended concentrations, overlap between funds and overlooked correlations during periods of stress; (4) access to research and institutional analysis that investors are unable to replicate on their own, as well as access to a broader range of instruments on an ongoing basis.
When is the right time to bring in an Investment Advisory service?
There is no universal answer; it depends on the chosen model and the type of support required. The one-off service provides a more affordable option for those beginning a structured investment journey or facing a specific decision. The ongoing service is provided as part of Private Banking and is most beneficial when assets are large enough to materially benefit from the diversification and continuous technical support it provides.
Does Investment Advisory service guarantee returns?
No, like any activity linked to the financial markets, it involves risk. The objective is to enhance decision-making quality and strategy suitability, not to eliminate market uncertainty. Recommendations are based on current market conditions, which may change between the time a suggestion is made and its final implementation.
What is the difference between Advisory and Portfolio Management?
In the Advisory model, the final decision is always at the discretion of the investor. While the adviser makes recommendations and provides justification, it is the client who executes the decision. In Asset Management, the investor delegates execution through a mandate, allowing the manager to make decisions and execute them within agreed parameters. Investment Advisory is the recommended approach for those who wish to retain full control over investment decisions.
Disclaimer: This article has been prepared by Banco Carregosa for informational and educational purposes only. It does not constitute an investment proposal or recommendation to buy, nor does it constitute personalised financial advice. Investing in financial instruments carries risks, including the possibility of losing your initial investment. Past performance does not guarantee future results. Before making any investment decisions, we recommend that you consult an account manager or financial adviser to ensure that they are suitable for your risk profile and financial objectives.