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MONEY: How to Choose a Money Manager

Inquire about the ā€œFā€ Word and seven ā€œCā€ Words



The time and effort you spend selecting a money manager could make the difference in whether you spend your retirement in a canoe or on a yacht. Look for a fiduciary with experience, credentials, reasonable fees and clients similar to you, as well as ability and a desire to communicate. The money manager you select also needs a personality suited to relate to you effectively enough to capture your own values, beliefs and goals.

Fiduciary: A fiduciary is a person legally appointed to hold assets in trust for another person. The reason fiduciary duty is so important is that the person who looks after the assets on the other person’s behalf is to act in the best interests of the person whose assets they are in charge of — over their own interests. This means not churning for sales commissions or simply selling without respect to appropriateness of products. It’s important that you ask if they are acting as your fiduciary.

Comparison shop: You don’t have to shop until you drop, but do take the time to inquire of financial professionals, family and friends regarding the money manager leaders in the community and nationwide. Ask your library reference person to guide you through recent journals and publications listing and discussing top money managers. Often, this can be done online. You might make your own checklist for what’s important to you as you compare money managers.

Competency: Look for money managers with experience. They need to have at least five years of experience managing money. Will they take time to learn your goals, and will they be in tune to your lifestyle to know when you’ll need to withdraw money for education funding, weddings or travel?

Credentials: This alphabet soup is worth sorting out to understand the value of reputable credentials, such as RIA for registered investment advisor; CFA for chartered financial analyst; CFP for certified financial planner; and CPA for certified public accountant. A CPA with expertise in financial planning is also a PFS for personal financial specialist.

Cost: Request an estimate of the overall cost of what you want to accomplish. Ask for a breakdown of fees and how they will be disclosed to you. Avoid fees that are transaction based. Instead, look for money managers who take a small percentage from the size of the accounts they manage. It’s in their interest to see your account grow. Most managers have a sliding scale where the fee becomes lower as the funds grow under management.

Clients: Request a client list of names you may contact. Inquire of the money manager, if they specialize in certain categories of clients, such as athletes, educators, doctors, lawyers, widows or widowers. Taking the time to actually contact a few of their clients with financial situations similar to yours to request recommendations and levels of satisfaction will be worth your efforts.

Communication: How often and in what manner does the money manager communicate with clients? How accessible will they be when you have questions? How quickly are phone calls returned, and by whom? Many money managers will have an online presence so you can instantly see your account, but what about questions you need answered related to what’s going on with your account?

Chemistry: You need personal rapport with your money manager. That’s why it’s important to set up an appointment, and make a personal visit to their office for a face-to-face meeting to determine if the type of chemistry you prefer is there. By all means include anyone else with whom you share your financial life in those meetings. Initial overview meetings are usually free. If you have a large sum of money to be managed, you might consider splitting it among more than one money manager. I once spoke to a group in Colorado Springs, Co., who used four different managers. Each manager presented to the group annually to be evaluated as to whether they’d be renewed. Splitting your assets under management might prevent a Bernie Madoff experience with all of it.

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