Financial Guide: What is a Money Manager?
When we finish school and enter into the working world, we appreciate the need for saving. For some, this is the time to be independent, get a house of your own, or stay with friends. There are lots of bills to pay at the end of the month. You realize very many bills are ‘eying’ your paycheck that may not even be enough.
There is nothing as frustrating as when you wake up Monday through Saturday, working hard only to wallow in debts! This might be a trend for some time unless of course you get a second job or downsize your way of life. If you cannot fully pay your credit card at the end of the month, it is a sign you are headed south. This is because every debt carried forward, you pay interest for it which makes the debt to accumulate.
At this point, you will need a money manager to assess your current financial health and advise accordingly. Yes, you need to pay him too, but at least he will give you a life lesson that will prevent you from sinking even deeper in debts. Are you wondering who a financial manager is? Well, get comfortable because you are in the right place. Keep reading.
Money Manager
To understand a money manager well, let’s first define money management. Money management is the process of money tracking, budgeting, investing, and evaluating taxes of one’s money. This is sometimes called investment management. Therefore a money manager is responsible for doing all that. He can do it as an individual, hire experts, or do the job as an institution.
A money manager can be defined as a financial firm or individual that runs the securities portfolio of an institutional investor or an individual. A money manager hires people with a wide range of expertise ranging from studying and selection of investment options, overseeing the assets, and deciding the appropriate time to sell them.
For a fee, the money manager has the fiduciary duty to select and manage investments truthfully for a client. It is upon him to formulate an appropriate investment strategy that involves purchasing and selling securities to meet the investment strategy. A money manager is sometimes called a ‘portfolio manager’ or an ‘investment manager’ or an ‘asset manager.’
How a Money Manager Works
A money manager gives their clients an individualized portfolio and a personalized service. As opposed to transaction-based management, money managers work on fee-based management. This means the client and their money manager are on the same side and hence a client can’t question the manager’s ability and decision to sell or buy their securities.
A professional money manager is not meant to receive commissions on a transaction rather he is paid a percentage of the assets under his care. Therefore, it is in the best interest of the client and money manager when the portfolio grows.
A money manager has to select and manage investments in a manner that puts the client’s benefits first, last, and always. This is called a fiduciary duty.
Reasons to Hire a Money Manager
Usually, money managers have expertise in a certain sector, say the automotive industry. If you are a business owner that needs any auto stocks advice, managers are the best people to run to. They have access to an abundance of tools and information like research reports, interviews with company executives, and analytics data. These resources and more allow money managers to implement investment decisions with a high chance of success.
For instance, after interviewing a certain company manager, a money manager may understand that that company has a unique competitive advantage. This information you might not access as just a business owner and therefore might make grave investment mistakes.
How a Money Manager is paid
Money managers charge a management fee that ranges from 0.5-2% annually according to portfolio size. Performance fees may range from 10-20% of the fund’s profit.
Last Remark
Money managers are an essential aspect of any business and individuals looking at making investments. He will help you to make an informed investment decision because he first assesses your current financial health, researches about market options then comes up with an option that has the client’s interests first. Since he is a paid percentage of the portfolio, it favors him too when it grows.