Hiring An Investment Manager: Key Considerations For Success

Investment managers are in high demand, but how do you hire one?

First, it's important to understand the different types of investment managers. There are registered representatives, registered investment advisors, financial planners, wealth managers, and robo-advisors. Each has a different role and regulatory body.

Next, evaluate your financial situation, including your net worth, expenses, and financial goals. This will help you determine what type of investment manager you need and if you can afford one.

When choosing an investment manager, consider their qualifications, credentials, and experience. Ask for references and check their background to ensure they are reputable and have a successful track record.

Finally, discuss fees and ensure you understand the cost structure before hiring. Some investment managers charge a percentage of assets under management, while others use a fee-only or commission-based system.

By carefully evaluating your needs and doing your research, you can find an investment manager who is well-suited to help you achieve your financial goals.

Investment managers can help you to continuously and quickly invest cash in your investment accounts

One of the most common issues with managing your own investments is the temptation to try and time the market with your cash. Many investors sit on cash in retirement investment accounts, but this money can't be accessed until you're 60 years old. If you're 60, you likely have a 30-40 year retirement ahead of you. To make the most of compound interest, you need to keep your cash invested continuously and quickly, and an investment manager can help you do this.

Investment managers can also help you to make decisions about which investments to add to or delete from your portfolio. They can provide context for these decisions and ensure they align with your financial plan, rather than being driven by emotion.

When choosing an investment manager, it's important to evaluate their experience, technical skills, and communication skills. You should also consider whether they are a good fit for your particular industry, company, and project.

Some investment managers are also financial planners, providing holistic financial advice on topics like cash-flow management, taxes, insurance, and estate planning. Others work with high-net-worth clients to address their financial planning and investment management needs, as well as coordinate the services of other professionals, such as lawyers and accountants. This is often referred to as wealth management.

Investment management isn't just about handling specific assets in a portfolio. It includes ensuring the portfolio continues to align with the client's goals, risk tolerance, and financial priorities. Investment managers can help you to make decisions that reflect what matters most to you.

They can help you stay accountable to savings and investing goals

Investment managers can help you stay accountable to your savings and investing goals by providing accountability and recommending tweaks to your financial plan. They can also help you make adjustments and not ignore important financial decisions.

For example, if you have a financial plan but are not sticking to it, an investment manager may be able to offer the accountability you need to get your plan back on track. They can also suggest changes to your plan to help you achieve your goals.

Additionally, an investment manager can help you course-correct and make appropriate changes when things don't go according to plan. They can provide guidance and support to help you navigate financial decisions and ensure you stay on track.

It's important to remember that things rarely go exactly as planned, and an investment manager can help you navigate the bumps along the way. They can provide valuable insights and recommendations to keep you moving towards your financial goals, even when faced with challenges or unexpected events.

By seeking the help of an investment manager, you can benefit from their expertise and experience in staying accountable to your savings and investing goals. They can offer guidance, support, and accountability to help you achieve your financial aspirations.

They can be your thinking partner when it comes to adding or deleting investments from your portfolio

When it comes to adding or deleting investments from your portfolio, an investment manager should be your thinking partner. They can help you make informed decisions by providing a decision-making framework that is not based on emotions.

A good investment manager will be able to put investment decisions into proper context and bring the decision back to you and your financial plan. They will consider the tax impact of any changes and help you understand the potential consequences.

For example, let's say you are considering adding a new investment to your portfolio. Your investment manager will be able to help you evaluate the potential risks and rewards of this new investment in the context of your overall financial goals. They will also be able to advise you on the tax implications of adding this investment and how it could affect your portfolio's performance.

On the other hand, if you are thinking about deleting an investment from your portfolio, your investment manager can help you assess whether this is the right decision based on your financial plan and goals. They will also be able to guide you on the tax consequences of selling the investment and how it could impact your portfolio's diversification.

By having an investment manager as your thinking partner, you can make more informed and rational decisions about adding or deleting investments from your portfolio. They will help you consider the potential risks, rewards, and tax implications of any changes, ensuring that your decisions are aligned with your financial plan and goals.

They can help you make and execute financial decisions

Investment managers can help you make and execute financial decisions in a variety of ways. Here are some key ways in which they can assist you:

Continuous Investment of Cash:

Investment advisors help ensure that your cash is continuously and quickly invested across your accounts. They prevent you from attempting to time the market with your cash, which is a common issue with DIY investing. By keeping your cash invested, they maximise the power of compound interest, crucial for long-term financial goals like retirement planning.

Accountability and Course Correction:

A good investment advisor will help you stay accountable to the savings and investment goals you set. They will also guide you in making necessary adjustments when things don't go according to plan, helping you course-correct and make appropriate financial decisions.

Thinking Partner:

A reliable investment advisor serves as your thinking partner when adding or deleting investments from your portfolio. They provide a decision framework that isn't based on emotions, helping you make well-informed investment choices. A fiduciary advisor, in particular, is legally bound to act in your best interests.

Action and Execution:

A proactive investment advisor ensures you don't just make financial decisions but also execute them promptly. Whether it's rebalancing your portfolio, making allocation changes, or reviewing fund expenses, they facilitate timely action, keeping you moving forward.

Asking "Why":

An investment advisor should help you reflect on the "why" behind your investment decisions. By questioning your motivations, they ensure that fear or greed doesn't drive your choices but rather, that they align with your financial goals and what matters most to you.

Hand-Holding:

If you know what to do rationally but struggle to stick to your investment strategy, an investment advisor can provide the hand-holding you need. They will help you stay the course, especially when the markets are volatile, guiding you to make rational decisions and avoid impulsive moves.

Financial Planning:

Investment advisors assist in creating a comprehensive financial plan that matches your current and future wealth with your spending goals and time horizons. They help you set short-term and long-term financial goals and develop strategies to achieve them.

Investment Guidance:

If you're unsure how to invest your money, an investment advisor can guide you. They can advise on how much to invest, where to invest (e.g., 401(k) or IRA), and when to rebalance your portfolio based on market changes. They also help you understand the tax consequences of withdrawing from retirement accounts.

Managing Debt:

Many people struggle with debt, and an investment advisor can help develop a debt payoff strategy. They can advise on prioritising and managing debt to ease your burden and improve your overall financial health.

Peace of Mind:

For those with limited financial knowledge, an investment advisor can provide peace of mind. They explain financial concepts and strategies in a personalised, understandable way, reducing anxiety and helping you make informed choices.

While you can manage your finances independently, an investment advisor offers expertise, accountability, and guidance. They help you navigate complex financial decisions and keep you on track toward your financial goals.

They can help you remember your why by asking why questions regarding your investments

Investment managers can help you remember your "why" by asking "why" questions regarding your investments. This is important because the primary drivers of investment decision-making are fear and greed. Before you make an investment decision, having someone on your side of the table asking you "why" is extremely valuable and helpful. Your advisor should be the one asking you these questions and helping you make decisions that reflect what matters most to you.

Investment managers can also help you continuously and quickly invest cash in your investment accounts. One of the most common issues with do-it-yourself investing is thinking you can time the market with your cash. Over and over, investment managers encounter clients who have been sitting on cash (to varying degrees) in retirement investment accounts. Remember, you can’t access this money until you are 60 years old. Also, remember that if you are 60 years old, you likely have a 30-40 year retirement ahead of you. Compound interest only works when you let it work. That means keeping your cash invested continuously and quickly, and a financial advisor will help you do this.

Additionally, investment managers can help you stay accountable to savings and investing goals you set for yourself. When you are going it alone, it’s easy to make excuses, blow past personal finance deadlines, and feel like you are doing alright when you really have too many blind spots. A great financial advisor will help you stick to your investment plan.

Finally, investment managers can help you make decisions about adding or deleting investments from your portfolio. Every investor faces decisions from time to time on whether to change a certain investment fund in their portfolio. How do you know when is the right time to make a change? What is your decision framework for making big investment changes? What is the tax impact of the decision? For most investors, the framework is largely emotional. Your advisor should be your thinking partner when it comes to investment changes. A fiduciary financial advisor will be able to help put investment decisions into proper context and bring the decision back to you and your financial plan rather than your emotional opinion of the investment.

Frequently asked questions