Tips on Finding Just the Right Investment Manager

An investmentmanager helps individuals make investmentdecisions and manages their portfolios on their behalf. Exactly how extensively this management is varies with the relationship between the client and the investmentmanager, which can range from a single person to a large company. Deciding on whether or not to utilize the services of an investmentmanager can have a huge difference on returns and should only made after careful consideration.

Who needs investment managers?

With the financial tools now available online, having an investment manager is far from a requirement for investors. There is a wealth of information online that anyone can use to research and choose their investments. However, all this information can be overwhelming for some. In addition, others just do not have the time or interest to do the kind of homework they need to pick the right investments and want some kind of help.

Investment advisors vs. brokers

While many people do not see the difference between investment advisors and brokers, there is an important legal distinction. While there is some movement to change this distinction, investment advisors are currently required to abide by the rules of the Investment Advisors Act of 1940 while brokers are regulated by the National Association of Securities Dealers. For investors, this basically means that brokers are not required by law to act in the best interest of their clients, and legal recourse will not be possible if there are problems, in contrast to the options with investment advisors.

Of course, it is still possible to select a bad investment advisor and good broker. However, the danger of brokers recommending investments that may benefit them as much, if not more, than the client, is greater. Regardless, it is always important to choose either carefully.

The most economical routes

For those most concerned with keeping fees as low as possible but still would like to make select investments, an online brokerage will be the way to go. While those looking for advice will have to dig through their website to get it, they will be paying the lowest commission rates when they buy and sell.

On the other hand, those will less time and experience may want to go with full-service brokers that will provide personalized advice but will have higher fees.

One way to get the services of an investment manager without going through one directly is by purchasing mutual funds. Mutual funds are actively managed 24/7. The investor just needs to select the fund. However, there are various expenses to be paid, and even no-load mutual funds will have fees. More information can be found inmutual fund basics.

Considering the fact that the advice from investment managers and brokers often does not do any better than the market as a whole, ETFs are an increasingly popular way for people to invest with diversity. They are designed simply to follow a certain market or index. Being mostly automated, their fees are low. However, they allow people to invest with diversity (see what is an ETF).

Things to look for in an investment manager

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Whenever taking investing advice or allowing someone to manage your money, there are certain things to look for regardless of what type of advisor it is.

  • Does the manager strive for diversity? To stay diversified is one of the most basic investing principles that any advisor should recommend.
  • Trade transparency: Problems to include the Madoff scandal can be avoided if the investor insists on transparency. When this was occurring, Madoff was not showing investors where the money was coming from. Any financial manager with any reputation at all will be very transparent as to where the money is and how returns are being generated.
  • Reputation: It goes without saying, but many fail to properly check the credentials of those managing their portfolios. Carefully look at credentials as well as reputation.
  • Commissions and fees: While some of the bestinvestmentmanagerswill be able to command higher fees, there is no reason to pay more than necessary. Be sure to understand all fees and choose accordingly. In addition, keep in mind that fees are sometimes negotiable.
  • Investmentstrategy: Everyinvestmentadvisor should have a strategy for investing. Ask what it is and make sure it fits with your goals, while being sure to understand the risks. A manager interested in chasing after trends is probably not the best one to go with.
  • Conflicts of interest: Be sure the advisor is not recommending investments that are going to benefit them and are upfront about any possible conflicts of interest. One way to do this is to choose fee-only advisors whose sole income comes from their clients.

Further resources

Some of the top asset management firms can be found here.

To find local investment managers, asset management, investment advisers and money managers by US state, click here.

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