Managers Accepting Investments: Who's On Board?

Investment managers are individuals or organisations that handle activities related to financial planning, investing, and managing a portfolio for their clients. They can be part of a large financial institution like a bank, a trust, or a life insurance company, and they may also provide direct investment management services to third-party clients. Investment managers help their clients by devising strategies, executing trades, and providing financial advice. They can also assist with tax strategies and retirement planning. The type of investment manager an individual chooses depends on their financial planning process and goals. While some people may prefer to manage their investments themselves, others may find it beneficial to seek the expertise of a qualified investment manager to help them make the right decisions and accomplish their financial objectives.

Investment managers can help with financial planning

Investment managers handle financial planning, investing, and portfolio management activities. They can be individuals or organisations who act on behalf of their clients, helping them to achieve their financial goals.

Financial planning is the process of creating and managing a financial plan for personal or business goals. It is an important step towards securing your future and building wealth. Investment managers can help with this process by investing funds on behalf of their clients to help them grow their assets.

Investment managers can offer advice on where to invest a lump sum of money, and how and when to invest it. They can also advise on asset allocation, expected returns, risk tolerance and time horizons. They can help individuals decide on an investment strategy and create a financial plan.

For example, a financial advisor might help an individual with $5 million in investable capital to decide how to invest. A financial advisor can advise on how to get the best returns and avoid bad financial moves. They can also advise on tax-efficiency, estate planning and insurance needs.

Financial advisors can also help those who are too busy to manage their own investments, or those who are unsure about how to invest. They can provide a second opinion on how investments are positioned, and reduce the mental load for those who are stressed about their financial future.

Financial advisors can also provide a valuable service by acting as a voice of reason during volatile times, and preventing individuals from panic-selling during a financial meltdown.

Investment managers can help with hand-holding

Investment managers can be individuals or organisations that help clients with financial planning, investing, and managing their portfolios. They can be especially useful for hand-holding, which is when a client knows what they should do with their investments but needs help staying the course when financial markets fluctuate.

Hand-holding can be a valuable service that investment managers provide, but it may not be an effective value proposition to communicate when trying to attract new clients. This is because it requires prospective clients to admit that they have made mistakes in the past and need external support to prevent them from doing so in the future. Many people do not want to acknowledge their failures and may be put off by this messaging.

However, there is a subset of clients who are aware of their problematic investment behaviours and are actively seeking an investment manager to help them avoid these mistakes. For these clients, hand-holding can be a successful value proposition.

Overall, while hand-holding can be a useful service provided by investment managers, it may be more effective as a way to retain clients rather than attract new ones.

• Creating a financial action plan: Investment managers can help clients who are unsure about where to start by creating a financial action plan for them. This may involve setting up a risk-appropriate investment portfolio for a fee. Although clients may not like paying a fee, it is better than missing out on returns by keeping their money in cash.
• Reducing mental load: During volatile times, it can be reassuring for clients to know that someone is watching out for their money. This can reduce their stress and allow them to focus on other things.
• Protecting clients from themselves: Investment managers can help insulate clients from making bad financial moves, such as panic selling during a financial meltdown. The presence of an investment manager can make it more difficult to act on impulsive decisions.
• Providing a voice of reason: When every investment pitch sounds fabulous, having a voice of reason can be invaluable. An investment manager can offer an objective perspective and help clients make more informed decisions.
• Access to special deal flow: Some investment managers have access to exclusive deal flow that is not available to the average person. This may include early investments in successful companies or access to secondary shares.
• Reinvesting proceeds: Investment managers can help take the stress out of reinvesting proceeds by doing it for the client. Once the responsibility of investing is off their shoulders, clients may worry about it less.

Investment managers can provide above-market investment returns

• Expertise and Experience: Investment managers are professionals with extensive knowledge and experience in investing. They possess the necessary skills and qualifications to make informed investment decisions. Their expertise lies in understanding market trends, analysing financial data, and developing effective investment strategies. This expertise enables them to identify profitable investment opportunities and make decisions that maximise returns.
• Access to Information and Resources: Investment managers have access to a wide range of information and resources. They closely follow market activity and utilise advanced tools for research and analysis. By staying abreast of market trends and economic conditions, they can make timely and strategic investment decisions. Additionally, investment managers often have access to exclusive investment opportunities and deal flow that may not be available to individual investors.
• Risk Management: A crucial aspect of investment management is risk management. Investment managers employ strategies to mitigate risks and protect their clients' portfolios during market downturns. They monitor investments regularly and make adjustments as needed to minimise losses. This proactive approach helps preserve capital and enhance long-term returns.
• Customised Investment Strategies: Investment managers tailor their strategies to meet the unique needs and goals of their clients. They consider factors such as risk tolerance, financial capacity, and investment horizons when formulating investment plans. By understanding their clients' specific circumstances, investment managers can devise strategies that align with their clients' objectives, whether it's wealth preservation, capital appreciation, or a balance of both.
• Time and Dedication: Investing successfully requires a significant time commitment. Investment managers dedicate their time and efforts to monitoring the market, conducting research, and executing trades. They have the bandwidth to stay on top of investments, allowing them to act quickly on emerging opportunities or adjust strategies as market conditions change. This level of dedication can be challenging for individual investors with busy lives or other commitments.
• Behavioural Guidance: Emotional decisions often lead to suboptimal investment outcomes. Investment managers provide a layer of detachment, helping investors avoid impulsive decisions driven by fear or greed. They offer guidance and support, encouraging clients to stick to their financial plans during volatile markets. This hand-holding can be invaluable, especially for investors who struggle with staying disciplined during market fluctuations.

While investment managers aim to deliver above-market returns, it's important to remember that investment performance can vary, and there are no guarantees. Additionally, the fees associated with hiring an investment manager should be carefully considered, as they can impact overall returns.

Investment managers can create a financial action plan

Set Financial Goals

Financial goals can be short-term, medium-term, or long-term. For example, a short-term goal could be saving for an emergency fund, while a long-term goal could be saving for retirement. It's important to make these goals clear and achievable.

Assess Cash Flow

Understanding a client's cash flow—their income and expenses—is crucial for creating a financial plan. This information will help determine how much money is available for savings and investments.

Create a Budget

Based on the client's cash flow, investment managers can help create a budget that allocates money to different areas, such as necessities, wants, savings, and debt repayment.

Plan for Emergencies

A crucial part of any financial plan is building an emergency fund. Investment managers can guide clients on how much they should save to cover unexpected expenses.

Reduce High-Interest Debt

High-interest debt, such as credit card debt, can hinder a client's financial progress. Investment managers can advise on strategies to pay off this debt, such as debt consolidation or debt management plans.

Optimize Tax Planning

Tax planning is an important aspect of financial management. Investment managers can help clients understand tax credits, deductions, and strategies to minimize their tax burden.

Invest for the Future

Investing is a key component of financial planning. Investment managers can guide clients on how to invest their money to meet their goals, whether it's for retirement, buying a home, or other objectives.

Manage Risks

Identifying and managing risks is essential in financial planning. Investment managers can help clients understand the types of insurance they may need, such as life insurance or long-term care insurance.

Regular Review and Adjustment

Financial planning is an ongoing process. Investment managers should regularly review and adjust their clients' financial plans to account for life changes and market fluctuations.

By following these steps, investment managers can create comprehensive financial action plans that help clients achieve their financial objectives and maintain financial well-being.

Investment managers can provide advice on portfolio construction

Portfolio construction is the process of understanding how different asset classes, funds, and weightings impact each other, their performance, and risk, and how decisions ladder up to an investor's objectives.

• Setting Objectives: Investment managers can help individual investors set short- and long-term financial goals and create a financial action plan to achieve those goals.
• Understanding Risk Tolerance: Investment managers can assess an investor's comfort level with changes in investment returns and make intentional decisions about the risks being taken.
• Minimizing Costs: Investment managers can help investors account for taxes and fees early in the planning process to maximize the value of their portfolio's investments.
• Benchmarking: Investment managers can set a standard for measuring performance throughout the investment process, helping to navigate asset allocation.
• Budgeting: Investment managers can weigh the costs and risks of a portfolio to optimize returns.
• Investing: Investment managers can conduct due diligence before selecting an investment vehicle, considering exposure, risk, cost, and performance.
• Monitoring: Investment managers can assess results and adjust strategies as needed to ensure the portfolio remains aligned with the investor's goals and risk tolerance.

By following these steps, investment managers can help improve the possibility of better investment outcomes and achieve their clients' goals. It is important to note that investment managers typically charge fees for their services, so investors should consider the value they are getting for their fee.

Frequently asked questions