A portfolio manager is an individual who develops and implements investment strategies for individuals or institutional investors. Under the purview of financial services industry careers, portfolio management positions are available with hedge funds, pension plans, and private investment firms, or as part of an investment department of an insurance or mutual fund company.
Portfolio managers may be called investment managers, wealth managers, asset managers, or financial advisers, but a true portfolio manager position is focused on the analytical side of investing rather than the sales aspect.
- Portfolio managers develop and put in place investment strategies for investors (i.e., building and managing investment portfolios).
- Portfolio management typically requires at least an undergraduate degree in business, economics, or finance.
- Individuals best suited for this position have high degrees of efficiency in data interpretation and a penchant for research and analysis.
- The average annual base salary for a portfolio manager in the U.S., as of September 2022, was $108,010, according to Glassdoor.
- As part of their fiduciary duty, portfolio managers must meet with clients at least annually to review their investment objectives and asset allocations.
Portfolio managers are primarily responsible for creating and managing investment allocations for private clients. Some portfolio managers work with individuals and families, while others focus their attention on institutional or corporate investors.
In most cases, a portfolio manager follows a predetermined strategy for investment, dictated by an investment policy statement (IPS), to achieve a client's investment objectives.
Some portfolio managers craft the investment packages supplied to clients, while others simply manage client expectations and transactions. Portfolio managers have to buy and sell securities in an investor's account to maintain a specific investment strategy or objective over time.
Determine Client Needs, Goals, and Risk Tolerance
Clients are placed into investment allocations developed or managed by a portfolio manager after suitability is established. A portfolio manager determines a client's appropriate level of risk based on the client's time horizon, risk preferences, return expectations, and market conditions. To achieve this end successfully, portfolio managers perform an interview to fully understand a client's investment needs and ensure those needs are met.
Keep Up With Financial News and Economic Data
To successfully construct portfolios that are later used to position client assets, portfolio managers must maintain an in-depth understanding of market conditions, trends, and overall economic outlook. They must keep up with relevant investment and trade news by reading timely, expert finance, or investment publications.
Additionally, they must meet with investment analysts and researchers to gain a better understanding of market conditions and domestic and global developments that may impact client account balances or future investments.
Manage Client Relationships
A large part of a portfolio manager's job involves maintaining client relationships. Regular contact with investor clients regarding market conditions, updated investment research, and economic trends is imperative to sustaining a viable book of business.
Additionally, as part of their fiduciary duty, portfolio managers must meet with clients on at least an annual basis to ensure investment objectives have not shifted and current portfolio allocations are still in line with clients' initial requests.
Maintain Fiduciary Duty
Portfolio managers must periodically evaluate the performance of predetermined investment packages, as well as meet standards provided by regulatory organizations. For example, a portfolio manager must make timely changes to a portfolio that is no longer in line with initial investment objectives or allocation guidelines.
Similarly, because investment management is a highly regulated field, portfolio managers ensure compliance with investor disclosures, privacy laws, anti-money laundering requirements, and anti-fraud measures.
Education and Training
Portfolio management typically requires at least an undergraduate degree in business, economics, or finance. Most financial institutions also require experience in the financial services or investment field, with a focus on providing portfolio recommendations to clients or in-depth financial or market analysis.
Portfolio managers must also have the applicable Financial Industry Regulatory Authority (FINRA) licenses. The FINRA Series 7 license authorizes individuals to buy and sell securities on behalf of investor clients.
The Series 66, also known as the NASAA Uniform Combined State Law Examination, provides additional authority to offer recommendations and advice on investment accounts under a fiduciary relationship.
Portfolio managers who work with only institutional investors, or those who supervise other asset managers, are often required to acquire additional FINRA licenses.
Most portfolio managers also possess one or more industry designations or certifications. One of the most respected, recognized, and common designations is the Chartered Financial Analyst (CFA) designation, which provides a high level of training that marries academic theory with current practice and ethical standards in the investment analysis field.
The Financial Risk Manager (FRM) designation is also popular among tenured portfolio managers. Both industry designations and all FINRA licenses have ongoing continuing education components.
Individuals best suited for a position as a portfolio manager possess certain skills, including a high degree of efficiency in data interpretation and a penchant for research and analysis.
Additionally, an in-depth understanding of financial markets, economics, and portfolio theory is necessary to stick with the career long term. Individuals must also be customer-focused, with a desire and ability to communicate frequently with investor clients regarding their accounts and investment performances.
Similar to other career paths in the financial services industry, portfolio managers must continually prospect for new clients while maintaining strong relationships with their current investors.
Because portfolio management as a career requires substantial training, certification, or designation acquisition, as well as formal higher education, salaries for the position are relatively high. The average annual base salary for a portfolio manager in the U.S., as of September 2022, was $108,010, according to Glassdoor.
This compensation often comes in the form of an assets under management (AUM) fee for each investor client, which can result in a significant increase in total compensation as a client base grows and as investment accounts perform well.