Investment Managers: What Additional Services Do They Offer?

Investment managers are responsible for handling the financial planning, investing, and portfolio management activities of their clients. They devise strategies, execute trades, and monitor performance to achieve their clients' financial goals while managing risk. In addition to these core services, investment managers may also provide other services to their clients.

Some investment managers are also financial planners, offering holistic financial advice on topics such as cash-flow management, taxes, insurance, and estate planning. This is often referred to as wealth management, which takes a more comprehensive view of a client's financial needs.

Investment managers may also coordinate the services of other professionals, such as lawyers and accountants, particularly when serving high-net-worth clients. They can assist with complex issues such as inheritance, retirement income planning, tax strategies, and legacy planning.

Additionally, investment management firms may provide a range of operational services, including internal audits, research, dealing, settlement, marketing, and preparing reports for clients.

The specific services offered by investment managers can vary, depending on the size and nature of the firm, as well as the needs of their clients.

Financial planning

Investment managers or financial planners work with clients to define their financial objectives, which may include saving for retirement, purchasing a home, investing in a business, or simply growing their wealth. They assess the client's risk tolerance, understanding how much risk they are comfortable with to ensure the investment strategy aligns with their personality and goals.

A crucial part of financial planning is determining the client's current financial health by evaluating their income, expenses, savings, investments, insurance, and any existing debt. This analysis helps identify areas for improvement and ensures the client's financial foundation is solid before devising strategies.

Once the financial planner understands the client's goals and financial situation, they can develop a comprehensive plan. This typically includes investment strategies, such as recommending specific investments like stocks, bonds, mutual funds, or alternative investments that match the client's risk profile and goals. They may also provide advice on tax strategies to ensure tax efficiency and potentially reduce the client's tax burden.

Financial planners also help clients with budgeting and cash flow management, ensuring their income is directed appropriately to meet their goals and cover essential expenses. This may involve creating a spending plan, tracking expenses, and finding ways to reduce unnecessary costs.

Another critical aspect of financial planning is insurance planning. Financial planners assess their client's current insurance coverage, including life, health, property, and liability insurance, to ensure they have adequate protection against potential risks. They may recommend additional coverage or suggest policy changes to ensure the client's assets and loved ones are protected.

Finally, financial planners also assist with estate planning, helping clients structure their assets to ensure they are distributed according to their wishes upon their death. This includes creating wills, trusts, and beneficiary designations, as well as planning for any potential estate taxes or other expenses.

Overall, financial planning provided by investment managers is a comprehensive service that helps individuals and institutions make the most of their money, providing peace of mind and helping them achieve their financial aspirations.

Wealth management

Wealth managers may be employed by small-scale businesses or larger firms, and their expertise may vary depending on the firm. Some wealth managers may have specific designations, such as CFP (Certified Financial Planner), CPA (Certified Public Accountant), or CFA (Chartered Financial Analyst).

The fees for wealth management services vary and are often based on a percentage of the client's assets under management. However, some wealth managers charge flat fees, hourly rates, or performance fees.

Tax strategy

Investment managers can help their clients develop a tax strategy as part of their service. This is part of their overall financial planning and advisory role, which can include banking, budgeting, and other financial duties.

A tax strategy will be informed by a client's goals, risk tolerance, and financial priorities. For example, a retiree living on a pension fund will have a different risk profile and tax strategy to a young, aggressive investor.

A tax strategy will also be influenced by the types of investments a client has or wants to have. These could include stocks, bonds, real estate, commodities, alternative investments, and mutual funds.

As part of their service, investment managers can advise on the tax implications of different types of investments and the best way to structure a portfolio to optimise tax efficiency. This could include, for example, taking advantage of tax breaks on certain types of investments or ensuring a client's portfolio is aligned with their tax bracket.

Investment managers can also advise on the timing of buying and selling assets to minimise tax liabilities. For example, they might recommend holding onto an asset for longer to take advantage of long-term capital gains tax rates or timing the sale of an asset to make the most of losses that can be used to offset taxable gains.

In addition, investment managers can help clients understand the tax implications of investing in different types of accounts, such as taxable brokerage accounts or tax-advantaged retirement accounts. They can also advise on strategies to reduce tax liabilities, such as tax-loss harvesting, where losses from certain investments are used to offset taxable gains from others.

Finally, investment managers can work with a client's accountant or tax adviser to ensure their investment strategy is integrated with their overall financial plan and tax strategy. This might include coordinating the timing of investment transactions with other financial events, such as retirement or the sale of a business, to minimise the overall tax burden.

Risk assessment

Investment managers provide risk assessment as part of their service. Risk assessment is a crucial aspect of investment management, as it helps determine a client's financial goals and the level of risk they are willing to take. Here are some ways in which investment managers conduct risk assessment:

Understanding Client's Risk Tolerance:

Investment managers assess their client's risk tolerance by discussing their financial goals, investment horizons, and comfort level with market volatility. This information helps them gauge how much risk a client is willing to take and guides their investment strategies.

Analyzing Investment Risks:

Investment managers and their analysts research and analyze potential investments to identify risks. They consider factors such as market volatility, industry trends, company financials, and economic conditions to assess the potential for gains or losses associated with each investment option.

Diversification and Asset Allocation:

Diversification is a key risk management strategy. Investment managers create diversified portfolios by spreading investments across various asset classes, sectors, and industries. This diversification ensures that a client's investments are not overly concentrated in any one area, reducing the impact of potential losses.

Regular Monitoring and Rebalancing:

Investment managers continuously monitor the performance of investments and the market conditions. They rebalance portfolios as needed to maintain the desired level of risk and align with the client's goals. This may involve buying or selling assets to adjust the portfolio's allocation.

Risk-Adjusted Performance Measurement:

Investment managers use sophisticated tools and models to measure risk-adjusted performance. These models, such as the Sharpe ratio or information ratio, help evaluate the returns generated relative to the level of risk taken. This analysis allows clients to understand if the returns justify the risks taken.

Client Education and Communication:

By conducting thorough risk assessments, investment managers can make more informed decisions and create investment plans that align with their clients' financial goals and risk tolerance. This risk assessment process is an ongoing part of their service, as market conditions, client circumstances, and investment options evolve over time.

Portfolio management

Investment managers, also known as portfolio or asset managers, are responsible for creating and overseeing their clients' portfolios, making changes as needed, and communicating regularly about performance. They select and manage a group of investments that meet their clients' long-term financial objectives and risk tolerance.

The process typically begins with an assessment of the client's financial goals and attitude to risk. This includes determining how much the client has to invest, their desired return on investment, their investment time horizon, and their risk tolerance. Based on this information, investment managers develop investment strategies and select specific investments that align with the client's goals and risk profile.

By employing various investment strategies, conducting thorough research, and consistently monitoring market trends and portfolio performance, investment managers enable their clients to optimise their investments and navigate the complexities of the financial markets.

Frequently asked questions