Fantastic questions to ask your investment manager
Call me biased, but I believe all investment managers (or anyone that manages money for you) should do so in the most simple, low-fee, efficient manner possible with an absolute adherence to fiduciary best practices. Wow Sean – what does that mean exactly? I will explain via questions you should ask your current investment manager.
- CAN YOU PLEASE EXPLAIN YOUR INVESTMENT STRATEGY IN SIMPLE TERMS? Your investment manager’s approach should be both simple to implement and simple to explain to you. Complexity has proven to be problematic in the form of excess leverage, inverse (expensive) investment products and the inelegant use of option strategies.
- CAN YOU PLEASE EXPLAIN ALL THE FEES CHARGED TO MY INVESTMENT ASSETS? The industry standard is to charge clients 1% on investment assets. This equates to obviously $1,000 per $100,000 of assets or $10,000 of fees per $1,000,000 of assets. But wait there’s more! Trading fees, mutual fund management fees and exchange-traded fund management fees should also be added up. Banks are notorious for charging you the 1% management fee PLUS the mutual fund management fee on that bank’s proprietary mutual fund. Thus, fees can exceed 1.75%-to-2.00% at banks which is simply too high for marginal investment management.
- DO YOU ACT AS A FIDUCIARY WHEN MANAGING MY INVESTMENT ASSETS? A fiduciary is simply someone who places your needs above theirs. Registered Investment Advisors, such as me, are legally required to act as fiduciaries at all times. Brokers (also known as Wealth Managers, Vice Presidents, Relationship Managers) are not required to be fiduciaries. Know who you are dealing with because if you don’t – their interests (high fees, low service) are likely superior to yours (low fees, high service).
- WHO SELECTS AND IMPLEMENTS THE INVESTMENTS FOR MY ASSETS? The Relationship Manager or Vice President you often speak to is NOT the one who actually selects and implements (trades) your investment assets. The Portfolio Manager is the title given to folks who invest assets and they are often in another office in another city and usually in another state. You want as few folks between you and your assets as possible because EACH PERSON is a COST. Truly efficient management is speaking to the person (the portfolio manager) who actually manages your assets (Registered Investment Advisors like me are portfolio managers). Relationship Managers are a cost – a big, unnecessary bureaucratic cost that can be avoided.
I hope that you consider an independent investment manager at some point. You will appreciate the difference. Sean Miller, 434-825-0000 firstname.lastname@example.org