An investment manager is a person or organization that makes investments in portfolios of securities on behalf of clients, in accordance with the investment objectives and parameters defined by these clients. An investment manager may be responsible for all activities associated with the management of client portfolios, from buying and selling securities on a day-to-day basis to portfolio monitoring, settlement of transactions, performance measurement, and regulatory and client reporting.
Investors must have an understanding of the various types of investment managers. Certified financial planners (CFPs) typically develop a holistic financial plan for investors that takes information such as income, expenses and future cash needs into consideration. A Financial advisor (FA) is a broad term; however, it often refers to a stockbroker. Portfolio managers (PM) directly invest investors’ capital with the objective of providing positive investment returns.
Investors need to determine what type of investment manager they require; this is likely to depend on what stage in the financial planning process they are in. A background check of the investment managers’ professional regulatory qualifications should be undertaken, reviewing previous complaints and making sure the manager has the necessary skills and experience required. An investment manager should be easily contactable and take specific needs into consideration. As financial needs are continually changing, investors must feel comfortable reaching out to their investment manager at short notice so service can be customized.
The investment managers’ performance should be reviewed and evaluated. It is prudent for investors to review at least five years of investment returns to determine the investment managers’ performance in various market environments. Fee structures should be considered when considering investment managers. Investment managers who have higher fees often outperform those that have a lower fee structure. Caution should be exercised for investment managers that have excessive low fee structures. Investment managers' fees and expenses typically include management fees, performance fees, custody fees and commissions.