What Is an Investment Manager & 7 Reasons to Hire One
If you are just getting started investing, you have a big decision to make. “Should I go it alone, or should I just hire an investment manager to do it for me?” It may cost you a little bit to have a professional on your side. Still, it may be worth the cost if you are able to find a good investment manager.
In this post, we are going to take a look at seven reasons why you should hire an investment manager.
What Is an Investment Manager?
Investment managers fulfill two objectives when managing your money. First, they take your personal objectives, suitability status for different kinds of investments, and your time horizon (i.e. how soon you will need the money from your investments) into consideration when crafting a specific investment portfolio for you.
Then, these professionals do the real hard work. They select the investments that fall within the necessary criteria to meet your objectives. Also, they observe the constraints placed on them. Typically, an investment manager will charge an annual fee to do this. This fee varies depending on a number of funds that you have placed with him or her.
What Do Investment Managers Do? Reasons to Hire
Reason 1: They Live for Investing
Investment managers don’t just go to school to learn about the economy and markets. They literally eat, drink, and breathe investing all day long. Some individual investors like ourselves may be incredibly savvy and/or intelligent. Still, it is almost impossible to work an ordinary day job and still be as in touch with the financial markets as these professionals are.
It is because of this hands-on, day-to-day interaction, amongst other reasons, that an investment manager is usually more suited to handle your money than you are.
Reason 2: Your Goals are Aligned
You will find that your goals and that of your investment manager are inextricably aligned. It used to be that most managers would work on a commission basis. That means they would make money when they executed trades for your portfolio. Obviously, this was not a good set-up because it encouraged managers to make big trades even when it didn’t make sense.
Now, because of new consumer protections that are in place, most managers work on a fee basis. This means that they charge a percentage of your assets each year to manage your portfolio, which means that they make more money as your portfolio grows larger. In this way, your goals are aligned with your manager.
Reason 3: They Can Be Great Market Timers
While this point should be taken with a grain of salt, there were a couple of investment managers during the 2008-09 crisis who entirely protected their clients from losing money by making very timely investment decisions. In fact, a select few managers had such great foresight that they even made money during the tumultuous downturn!
Often, a well-rounded investment manager will have an active investing strategy that will, in theory, at least give them a chance to avoid major market downturns that most ordinary investors would never see.
Reason 4: They Can Combine Funds to Find New Deals
At times, certain investments are only available to those investors who can meet the minimum investment requirements posed by that selling group. These minimum requirements can make it very difficult, if not impossible, for your ordinary Joe Blow investor to become involved with what would otherwise be great investing opportunities.
However, make sure to team up with a good investment manager. This way, you will often be able to pool your funds with other investors’ funds under the investment manager’s stewardship. This will grant you access to those elusive investments.
Reason 5: An Investment Manager May Have Access to Private Offerings
Private investment companies will often offer “private offering” investment deals to their favorite investment managers. This happens with those that they know will be able to find investment capital for the offering. These private offerings are not available to the general public and cannot be purchased on a public stock exchange.
However, if you have access to an investment manager that has good connections, you may find that new forms of investment will open up to you through his personal channels. At many times, these kinds of investments can perform far better than current market returns. However, these investments do come with risk, so you should always, as with any investment, do your own suitability checks.
Reason 6: Investment Managers Usually Work in a Skilled Team
Many investment managers don’t just go about their business on their own; rather, they will often work together with a team of other qualified, licensed professionals. These professionals can bounce ideas off of each other and test theories together. Therefore, their collective knowledge becomes worth far more to you than the fee that you are paying for a single investment advisor.
While, again, you may be extremely intelligent, it is unlikely that you will have this level of acumen and wisdom surrounding you on a daily basis. This means that hiring an investment manager is, to some degree, safer than investing on your own.
Reason 7: They Will Work to Educate You
This point may not be true for all investment managers. Still, most have a true passion for teaching their clients. They want to help clients become better investors in their own right. This teaching can serve as an invaluable tool to you in later years. It is especially useful if you decide that you need to move on to a new manager or do it on your own. It often comes as a part of a monthly phone call, quarterly brochure, or quarterly conference update.
Summing It Up
As I already said above, the value of the right investment manager will usually outweigh the costs of using his or her services. Hopefully, reading this article has served to give you some insights about why an investment manager may be a good purchase for you to make. If you would like to learn more, I encourage you to seek out local investment advisors in your area. Also, ask them more about their services, costs, and what they can provide you with.