When I recently offered a client the services of a money manager, he was surprised and asked, “You’re my financial guy, so why don’t you trade my account? Do you have some secret tool in your back pocket?”
I’ve heard this question quite often, and the answer is that having a third-party money manager alongside a financial planner can help clients get the best of both worlds. They benefit by having someone help with their big-picture financial situation (retirement plans, budgeting, asset allocation, and more), and at the same time by having a team of investment professionals make all of the day-to-day investment decisions based on the clients’ overall goals.
Start with strategic plans and then focus on tactics to make money
A financial advisor looks at what his client needs and wants. The advisor creates a financial plan based on the client’s goals, risk tolerance, cash flow, and current and anticipated assets. Once an asset allocation model is determined, the specific investments that fit into each piece of the puzzle need to be decided: What growth stocks should I buy? What corporate bond pays the best interest? Which are the best foreign stocks for me?
That’s where the money manager comes in. A money manager does the “how” and makes the specific determinations of how to invest the client’s funds. The manager chooses the actual investments and then manages them on a day-to-day basis. With the daily oversight and decision-making out of the financial advisor’s hands, the advisor can concentrate on building and maintaining the strategy and making sure it continues to meet the client’s needs.
A financial advisor and a money manager don’t compete with each other; they complement each other. As a financial advisor, I have access to many different money managers that I can bring to the table for my clients. Depending on the level of risk the clients want, and the types of investments they need, I try to match them up with a suitable money management company.
So don’t worry if your financial advisor recommends using a money manager. If you want to find out more about money managers and asset management firms, go to Profile-Financial.com/money-managers
Douglas Goldstein, CFP®, GFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
Published February 11, 2015. Updated February 2023