There are times when it makes sense to find someone to help manage your money. After all, professionals can help you maximize your contributions, help with taxes and have a significant impact on overall portfolio performance.
However, you don’t just want to pick any money manager. The person or company needs to be someone who understands your needs and you can trust to act on your best interest.
There are several key issues to take into consideration when hiring a manager for your hard-earned money. Read on to find out five questions to think about to help you pick a money manager.
What’s Their Experience or Expertise?
A money manager that has been at it for many years may have experience in both bull and bear markets. These managers have seen firsthand the ups and downs that come with investing, and may be able to help guide you through the thick times and the thin. Don’t be afraid to ask how many years they’ve been in the profession and the types of people they’ve worked with.
Are They Fee-Based?
Many of today’s money managers conduct business on a fee-only basis. In other words, they simply charge a percentage of assets under management. This may potentially help keep your manager’s motives in line with your own. Managers who also sell commission-based products may be more focused on the commission they get instead of whether the product is right for you. A fee-only manager’s incentive is to grow your capital over time and earn higher fees in the process.
What Are Their Fees?
Generally speaking, the more assets you have under the advisor’s care, the lower the fee. Keep in mind that over the long run, fees can have a major impact on net overall returns. For example, the difference between choosing a money manager that charges 2% on assets versus a manager that charges 1.25% on assets can make a huge differnce as the years pile up.
What Is Their Approach to The Market Like?
Different money managers may have very different approaches to the markets. Some may stick with a more standard stocks and bonds approach while others may utilize alternative investments as well such as precious metals or managed futures. Consider your tolerance for risk and volatility as well as your timeline when choosing a manager and strategy. You don’t have to stick with only the investment vehicles that you know, but make sure that the money manager you go with can guide you through each transaction you make.
Can I Talk to Their References?
References and reviews can often be found online quite easily. If you wanted to buy a new car, you would likely check consumer reports or read reviews online about it. Why should picking a money manager be any different?
Check online for client reviews or ask the manager for some references. Taking the time to do some due diligence can pay big dividends and also help you avoid setting yourself up for disappointment. Also, consider checking with various organizations such as the SEC or the state for any major complaints or issues.
Choosing the right money manager can make all the difference. As with any large expenditure, take your time and do not be “sold” or make any rash decisions. Make sure that you ask as many question as you need to make a decision that helps you achieve your financial goals.
