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Investment Managers That Do Not Get It

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Many investment managers do an excellent job and serve an essential role in helping their clients attain financial security, and I applaud them. However, there are some that do not do well, and that is what I want to write about today.

The role of an investment manager should be to help their clients achieve their goals. Occasionally this conflicts with the way an investment manager handles the portfolio they are entrusted with. Here are some illustrations of what I mean.

  • Some assets managers organize an investment portfolio based on the assets they are given to manage rather than a coordinated allocation based on the client’s total investable assets.
  • Every investment manager should work off of an investment plan based on the client’s goals. Some help prepare an investment policy statement to clarify what will be done, i.e. the amount of assets in each type of account such as in individual or joint names, in employer plans and traditional and Roth individual retirement accounts.
  • A risk profile should be developed and excessive risk should be avoided.
  • Some managers try to maximize asset growth while taking on a greater risk than is necessary even if the client has attained a sufficient asset base to provide them with the necessary cash flow that their plan calls for.
  • For people inching toward retirement, cash flow requirements should supersede asset growth. Some managers try to maximize asset growth rather than concentrate on attaining the appropriate amount of cash flow.
  • Taxes play a role and in determining the asset allocation, the tax cost needs to be factored in.
  • You should only use an investment manager that says they follow the Department of Labor Fiduciary rules. This means that they only act in the best interests of their clients. If they do not so act, why should anyone use them?

Your goal should be attaining financial security. If you are on such a target, then good for you. If not, then perhaps you should discuss it with your investment manager.

While this is about investment managers, this should also be used as a guide to self-monitor your own investments. After all, your future will depend on it!

Do not hesitate to contact me with any business or financial questions at emendlowitz@withum.com or fill out the form below.

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