Why might you want an investment manager?
Mainly, it’s to help you make smarter investments with your money. Their job is to take your cash and invest it in a portfolio that helps you earn more money over time. It’s a pretty important job as you’re trusting them to actually make a profit over time. If they’re bad at their job, you could lose all of the money you invested.
To prevent this from ever happening, you need to know what to look for when hiring an investment manager:
Experience
How long has this person worked as an investment manager? Ideally, you want them to have as much experience as possible. Someone with 10 years in the role is likely to be better than someone that’s just started. They’ll have seen more things and learnt from any previous mistakes along the way. Always opt for experience whenever your money is concerned!
Performance
Following on from above, experience matters as it can give you a better idea of the investment manager’s track record. You should have multiple years of performance data to look at that shows you how successful they are at managing investment funds. This is also a chance to see if they follow any standards relating to performance. Some investment managers undergo GIPS consulting to meet a set of voluntary standards that show the full disclosure and fair representation of their investment performance. Managers that do this are more trustworthy as they’ve gone out of their way to give you a fair overview of performance.
Methodology
How does the investment manager plan to invest your money? A lot of the ins and outs of the process will go over your head, and that’s fine. After all, if you knew it all, you wouldn’t need an investment managed. Primarily, you want to learn what they’ll be investing in. A few red flags include portfolios or assets that are highly volatile. For example, if your investment manager proposes crypto investments, just walk away before you lose a lot of money.
Price
Of course, you need to know how much they cost. Fees differ from manager to manager based on different factors. Clearly, the more experienced ones with a proven track record will demand higher fees. That’s okay, but be sure you aren’t being ripped off. If two people have similar levels of experience and similar success rates, yet one charge way more than the other, don’t go for the expensive one. You’re not getting great value for money, so always do some research and see what the general going rate is for investment managers of a similar experience level.
If you need help managing your finances, an investment manager is a brilliant solution. Lots of people hire one after getting a large sum of cash. Perhaps you’ve inherited money or just sold your home and have more money than you can make sense of. Spend time looking at the different options and understanding what makes a good investment manager. Now, you’re ready to confidently hire someone that will look after your money.
Comments
One response to “What To Look For When Hiring An Investment Manager”
Thanks for the tips, Alain! As a financial advisor, I always advise potential clients that if an advisor is not able to explain their fees/compensation to you – run away. It’s either they don’t actually know (yes, many advisors are not able to explain fees), or they don’t want you to know.