| Understanding the differences between | | | | So where can the average person turn for |
| financial advisors, financial planners and | | | | sound thoughtful investment advice? I would |
| investment managers can be challenging for | | | | highly recommend seeking an independent |
| the average person. | | | | investment manager with considerable |
| | | | analytical and academic experience. In |
| Finding a suitable investment professional is | | | | addition to having substantial investment |
| not easy. The number of different titles | | | | experience, an investment manager should |
| alone is enough to make your head spin. But | | | | either have an advanced degree from a |
| in a nutshell, there are basically three | | | | well-regarded school or be a CFA |
| different types of investment professionals: | | | | charterholder. You will, however, have to do |
| financial advisors, financial planners and | | | | your homework in order to find one of these |
| investment managers. | | | | managers willing to manage a smaller account. |
| | | | |
| Financial Advisors. These investment | | | | |
| professionals, also known as brokers, | | | | What to Look For |
| financial consultants, wealth managers and | | | | |
| wealth advisors, are paid primarily to sell | | | | 1. Independent investment management firms. |
| investment products and services. In other | | | | Money managers who are independent have fewer |
| words, these professionals are primarily | | | | conflicts of interest. |
| sales people and/or relationship managers. A | | | | |
| relatively small percentage of these | | | | 2. An investment manager with considerable |
| professionals have substantial analytical or | | | | analytical and/or academic experience. |
| academic investment experience. Hence, some | | | | Managers should be CFA charterholders and/or |
| financial advisors obtain an account and then | | | | have good academic backgrounds. |
| outsource the investment management function | | | | |
| to another department within their firms. | | | | 3. Portfolio managers who are accessible. |
| | | | Communication is very important, especially |
| Financial Planners. These investment | | | | when financial markets are volatile. |
| professionals are also sometimes known as | | | | |
| Certified Financial Planners, wealth managers | | | | 4. Small firms. At a small firm, you |
| and wealth advisors. Financial planners are | | | | generally know who is managing your money. |
| generalists who help clients by providing | | | | |
| advice regarding investment management, | | | | 5. Firms with conservative investment |
| retirement planning, tax planning, estate | | | | approaches. Taking excess risk very often |
| planning and other areas. Some financial | | | | has a negative impact on your portfolio. |
| planners also outsource a substantial portion | | | | |
| of their investment management and other | | | | 6. Portfolio managers who are good |
| responsibilities to other professionals. | | | | listeners. Meetings with a manager are |
| Some financial planners do not have very | | | | important only if the manager listens to you. |
| strong investment backgrounds. In fact, many | | | | |
| financial planners come from other | | | | 7. A portfolio manager should have |
| professions such as accounting, law and | | | | experience in both good and bad markets. |
| sales. | | | | Down market experience is especially |
| | | | important, as mistakes can be very costly |
| Investment Managers. These investment | | | | during bad markets. |
| professionals, also known as money managers, | | | | |
| portfolio managers and investment advisors, | | | | 8. Money managers who treat you with |
| traditionally have extensive analytical and | | | | respect. A manager should never make you |
| academic experience. Investment managers | | | | feel like you are asking a stupid question. |
| often hold advanced degrees and may also be | | | | |
| CFA charterholders. Many investment managers | | | | Who to Avoid |
| work as investment analysts during the early | | | | |
| parts of their careers and then advance to | | | | 1. Most financial advisors, also sometimes |
| more managerial type roles. Investment | | | | known as brokers, financial consultants, |
| managers are normally paid primarily to | | | | wealth managers and wealth advisors. |
| invest money based on the investment | | | | |
| objectives of their clients. | | | | 2. Some financial planners. These |
| | | | professionals sometimes come from other |
| It is not easy to find a high quality | | | | professions and may have limited analytical |
| investment manager willing to manage assets | | | | or academic investment training. |
| below $750,000. Today, some of the larger | | | | |
| money management companies are only willing | | | | 3. Most accountants offering investment |
| to manage smaller accounts within a cookie | | | | services. Some accountants offer their |
| cutter framework. Large firms sometimes | | | | existing clients investment services despite |
| place smaller accounts on models and delegate | | | | having somewhat limited investment |
| some of the investment management | | | | experience. |
| responsibility to people with limited | | | | |
| investment experience. | | | | 4. Any investment professional who |
| | | | guarantees returns. |