What Is a Money Manager?
Let me explain what a money manager is. I'm talking about a person or financial firm that handles the securities portfolio for an individual or institutional investor. These managers typically employ experts in research, investment selection, asset monitoring, and deciding when to sell. In exchange for a fee, they have a fiduciary duty to choose and manage investments wisely for you, developing a strategy and trading securities to meet your goals. You might also hear them called portfolio managers, asset managers, or investment managers.
Key Takeaways
Here's what you need to remember: A money manager oversees securities portfolios for investors. They get paid based on a percentage of assets under management, not commissions on trades. Their fiduciary duty means they always put your interests first.
How a Money Manager Works
When you work with a money manager, you get personalized service, a custom portfolio, and continuous management. Unlike transaction-based setups, fee-based management aligns your interests with the adviser's—no more wondering about a broker's motives for buying or selling. The manager earns from a percentage of your assets, so both of you benefit when the portfolio grows.
Reasons to Use a Money Manager
You should consider a money manager because they have the training to pick the right investments for your portfolio. Many hold a Chartered Financial Analyst designation, which equips them to analyze company fundamentals through financial statements. They might even specialize in sectors, like automotive, giving them an edge in stock selection. Plus, they access tools like executive interviews, research reports, analytics, and modeling software, increasing the chances of successful decisions. For example, interviewing a CEO could reveal a unique competitive advantage.
How Is a Money Manager Paid?
Money managers charge fees from 0.5% to 2% annually, based on portfolio size. For a $1 million portfolio at 1%, that's $10,000 yearly. Some also add performance fees of 10% to 20% on profits—for $250,000 in gains at 10%, you'd pay an extra $25,000. According to the U.S. Bureau of Labor Statistics, the median annual salary for these managers was $134,180 as of May 2020.
Real-Life Example of a Money Manager
Take firms like Vanguard Group Inc., Pacific Investment Management Co. (PIMCO), and J.P. Morgan Asset Management—they handle retail investors' funds. On the individual side, think of Warren Buffett at Berkshire Hathaway or Bruce Berkowitz at the Fairholme Fund.
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