Is an Investment Manager Right for You?
by Chad L. Coe, CWS
If you want to stay in the best shape physically, you hire a personal trainer. Likewise, if you want the best healthcare, you consult with the foremost physicians. Unfortunately, most people never take advantage of such specialized services, as they usually require investing a large sum of money. Receiving the best in anything is often costly.
The good news is that gaining access to some of the most highly respected investment managers no longer follows this costly trend. While professional money mangers used to require a minimum investment of $1 million, today some financial advisors at financial services firms can offer their clients access to investment managers for a much lower minimum investment, typically $100,000.
The logical question is: “If these firms are so good, how can they offer such low minimum investments?” In such arrangements, the financial advisor acts as a consultant between the investors and an elite group of top investment managers. This gives more people access to top rated investment managers and offers investors a comprehensive approach to total portfolio planning and management. But before you jump at this new opportunity, consider these three important steps to work toward success.
1) Define your investment objectives and risk tolerances.
Any investment strategy should start with a goal in mind. Analyze your current financial status, your liquidity needs, your short and long-term objectives, and your tolerance for risk. By setting up your “big picture,” you can gain a sense for how all your assets—your cash, stocks, bonds, real estate holdings, retirement savings, etc.—need to work together so you can achieve your financial goals.
2) Choose the right money manager for your needs.
Depending on your financial needs and goals, you may be an aggressive, conservative, or moderate investor. No matter what your style, there is a money manager for you. Talk with multiple managers about your short and long-term goals. Look for one who has an investment philosophy that compliments your own. Finally, analyze the prospective manager’s track record. You may ultimately decide that you require more than one investment manager to handle different aspects of your portfolio.
3) Continually monitor your money manager’s performance.
Be sure you and your investment manager meet quarterly to review performance reports that give an objective, statistical analysis of your portfolio’s progress. These reports should detail all your asset holdings and compare your rate of return with appropriate market indices as well as your investment objectives. Also review your portfolio’s volatility to be sure you’re still operating in the appropriate risk category.
Ideally, your financial services firm should offer this type of program with an annual “wrap” fee based on a percentage of assets in the account. This is an all-inclusive fee that covers consultation, investment manager selection, portfolio management, quarterly monitoring, all commissions, custodianship of securities, and automatic sweep of uninvested funds into a money market account. Also, Asset allocation strategies do not assure a profit or protect against a loss in declining markets. No strategy can guarantee the objective or goal will be achieved.
To discover a suitable asset allocation strategy for your needs, contact
Chad Coe, RFC is President of Coe Financial Group, Inc. in Deerfield, IL Contact him at 847 444-9444 or chad@coefinancial.com.
Securities Offered Through First Allied Securities, Inc. A registered broker dealer, MEMBER FINRA/SIPC
