How to Find an Investment Manager: 4 Tips for Choosing an Investment Professional that’s Right for You

How to decide when to speak with an investment manager

There are generally three reasons why you might want to work with an investment manager to optimize or update your investment portfolio:

1. You need help with specific services such as investment and planning, tax strategies and advisory, accessing complex investment vehicles, estate planning and cash flow analysis.

2. You don’t feel confident in your ability to adequately manage your funds, such as if your portfolio includes multiple accounts across several institutions or if you have complex financial needs or goals.

3. You want new perspectives on your existing financial strategy and would benefit from the opinion and advice of a third party with a deep knowledge of the financial industry.

Regardless of why you’re looking for an investment professional, the most important first step is to create a short list of your financial goals to ensure your advisor’s expertise is aligned with your unique needs and situation.

For example, are you specifically looking for investment strategies and advice to grow your portfolio and preserve wealth? For just yourself or on behalf of an institution you’re a part of? Do you need help with comprehensive planning, risk management solutions, retirement plan services, tax mitigation strategies, wealth management services or other complex needs?

Understanding which services you’re looking for can help you narrow the pool of potential investment managers and advisors with more specific areas of expertise.

Investment management is about more than netting the highest returns

After creating a list of your goals, you should note that investment management is about more than picking the stocks with the highest returns and hoping for the best.

Instead, think of investment management as the practice of aligning your portfolio with a custom-tailored strategy that identifies and helps you work toward your unique financial and personal goals.

For this reason, you should always take a comprehensive look at your selected investment managers and review not only their prior performance in managing client funds but also the other forms of value you will receive from the partnership.

For example, do they provide any supplemental services? Do they have impeccable communication skills that culminate in a superior client experience? In what ways do they stand out from other investment managers, and do you find these differentiators to be appealing in relation to managing your investment portfolio?

Evaluating an investment manager is a complex and detailed process. In conducting your due diligence, you should look at all the factors that go into the relationship, from the firm’s investment history to its processes, operations, personnel and investment options to the terms of the relationship itself.

Investment management firms and minimum investible asset requirements

As one final prerequisite to consider before starting your journey to find an investment manager or other financial advisor, you should note that many private investment and wealth management firms will only work with individuals who have a minimum of $1,000,000 in investible assets.

These minimums ensure that the conventional percentage-based cost of hiring an investment manager can cover the services provided through the relationship.

For this reason, the first step you should complete when performing your due diligence is to research the minimum requirements for investing with a particular investment manager or firm to ensure they’re the right fit for your financial needs.

4 Tips for choosing an investment manager that’s right for you

As mentioned, choosing an investment manager can be a complex process, especially considering the difficulty involved in understanding how investment managers stack up against other financial professionals.

One way to simplify this process is to focus on the four key elements that matter most when choosing an investment manager:

1. What are their credentials and areas of expertise?

2. What is their investment philosophy, and how do they plan to grow and manage your portfolio?

3. What is their fee structure, and how will they bill you for their services?

4. Do they provide any additional services that may offer value, or are they part of a larger firm or network that may help you meet your financial goals (such as the investment management services branch of a bank)?

1. Research the different credentials, accreditations and titles that apply to investment managers

The term “investment manager” is often used synonymously with other titles such as “financial advisor.” However, it’s important to note that there are specific differences between the two when it comes to managing your finances.

Specifically, a “financial advisor” is a catch-all phrase that refers to several professions in the financial world, including investment managers, financial planners, stockbrokers and more.

Professionals in this field generally hold various credentials to prove their expertise in investment management and other aspects of finance, such as being a Certified Financial Planner (CFP), Certified Wealth Strategist (CWS) or Certified Trust and Fiduciary Advisor (CTFA).

When performing your due diligence, make sure to research any potential investment manager to confirm their credentials using professional directories such as FINRA’s BrokerCheck tool or the Security and Exchange Commission’s (SEC) Investment Advisor Public Disclosure website.

Similarly, make sure their expertise aligns with your needs, both by reviewing their job title (“investment manager,” for example) and any expertise signals you can find about them online (such as a profile on the firm’s website with details on their areas of focus).

2. Take the time to understand the investment manager’s philosophy

The investment philosophy your investment manager ascribes to is the cornerstone of their offering.

Their philosophy will outline their approach to managing your funds as well as the basic assumptions and factors they consider when making decisions about your portfolio.

When reviewing potential investment managers, ensure that they have a clear and concise investment philosophy that aligns with your approach to managing your finances. Most importantly, make sure you understand this philosophy and the effect it will have on the growth and risk profile of your investments.

Carefully read through any materials they provide and ask as many questions as needed to fully understand what your investment manager is proposing.

Ensuring you both understand and agree with your advisor’s proposed strategy is critical to the effective management of your investments, meaning it should play a central role when choosing an investment manager who works for you.

3. Make sure you understand both the fee structure and the effects such fees can have on your portfolio

Your investment manager may adopt a variety of fee structures for their services, ranging from the common percentage-based fee structure to flat fees or hourly rates.

In a percentage-based fee structure, your investment manager will charge you based on either a percentage of the assets under management (AUM) or a performance-based fee, which charges a percentage of the portfolio’s total return (or excess return over its benchmark).

In a flat-fee or hourly rate structure, you will pay a set, fixed cost for services provided by the investment manager. Note, however, that this structure is much less common than the percentage-based or performance-based options listed above.

No matter which fee structure your investment manager uses, it’s important to note that the fee you’re paying should be evaluated based on the difference between the fee and the value provided by the advisor.

The key is balancing the cost of working with an investment manager with the benefits and value received from their services, whether that’s in increased growth, a reduction in risk, or the additional services provided through the relationship.

4. Review any additional services the investment manager will provide

Finally, it’s important to review potential investment managers in the context of the financial ecosystem that surrounds them.

As mentioned above, finding the right investment manager is about more than simply looking for high returns. Instead, you should view your advisor as a key resource in helping you develop and execute a plan for improving your financial well-being.

Often, investment managers will be a part of a larger office with the resources to take on other services and needs, such as cash flow planning, tax mitigation, estate planning, trust and estate services, financial planning and more.

Similarly, make sure you understand their reporting procedures, and ensure there will be a clear and frequent line of communication while they manage your funds.

Work with an investment manager who can address your unique investment needs

Investment management is the practice of aligning your investment portfolio with your personal and financial goals.

Finding the right investment manager can be a complex and time-consuming process, especially when you factor in all the elements you need to consider when performing your due diligence.

The four topics listed above provide a great place to start in your search, but it’s important to note that the manager selection is a multi-faceted process.

For this reason, it’s important to sit down with your potential options as a means of learning about their investment philosophies and collect as much information as you can about how they plan to approach your portfolio.

Information is key in selecting the right investment manager for your situation, meaning that your primary goal early in the process should center on fact-finding and learning as much as you can about your options.

If you’re interested in the investment management services offered by Associated Bank, or you just want to speak with a financial professional about your options, reach out to us online or over the phone to find an advisor near you.