When looking to hire an asset manager or financial advisor, many investors opt to put their investments into diversified portfolios with multiple asset managers. This common practice generally comes from the idea that diversifying your portfolio also diversifies your risk. However, it is far more advantageous to have just one asset manager.
One Cohesive Plan
The main reason for hiring an asset manager is to gain his expertise in managing a portfolio. You probably do not have the time or expertise to manage your portfolio on your own. When you hire multiple managers to focus on different sets of expertise, you are burdened with the same difficulty of keeping all the managers focused on your core strategy for investing. With one manager, you can have a single cohesive investment strategy from one expert. This provides a narrow focus on results that are a lot easier to measure than the results provided by multiple plans and managers.
By researching potential candidates to manage your assets, you can also look at each asset manager's cost in addition to the performance fees and the rate of returns. This provides one of the best ways to effect a cost savings in your portfolio. It essentially allows you to compare the fees from the asset manager while also focusing your investments into the areas that match up with your objectives, such as low-cost exchange-traded funds (ETFs). Of course, different managers and firms have different fee structures; trying to keep tabs on all the fees could be a bookkeeping nightmare as well. Having just one asset manager and just one fee structure will allow you calculate your real rate of return a lot more easily.
Less Due Diligence
With investments come the need to conduct due diligence, which is needed in a number of ways. Even if you settle on one asset manager, the investments in your portfolio still require your attention to ensure that they meet your investment objectives. If you add the need to vet the performances of multiple asset managers, the amount of time required to conduct due diligence could become onerous. The due diligence that you would conduct on one asset manager would involve a lot less of your time than would be required for multiple candidates if you were to hire multiple managers.
Better Individual Service
As with almost any business, volume makes a difference. You may save money by keeping all of your investments under one wealth management advisor, but it essentially guarantees that you will receive better service. Spreading out your assets across several managers means that the value of your business with each manager is significantly lower than its whole. By offering a large volume of business to one asset manager, you can ensure that the level of service that your asset manager provides is more favorable.
Easier to Switch Strategies
Keeping an eye on your portfolio is your asset manager's top priority. If that portfolio is at risk to industry-based corrections, one asset manager can react to market conditions a lot faster than multiple managers. If you want to change your investment strategies from growth to dividend yield or employ different investment strategies, it is also much easier to deploy a new strategy from within one firm.
Sometimes, more is not better. As long as your asset manager is properly vetted and meets a rigorous screening process, having just one manager can meet your needs and give you many advantages over having more than one. A good asset manager will help you meet your expected rate of return goals and understand any deficiencies in meeting those goals.