Selecting an investment manager requires vetting. Firms differ vastly in approaches, fees, and services. Research aids in choosing one aligning with needs. Thorough research aids in selecting the right investment firm partner. Experience, resources, and service vary greatly between providers. Proper due diligence leads to satisfied clients meeting financial goals. This guide outlines five important investment management factors for evaluation.
Investment Philosophy
Determine preferred strategies like active or passive management. Active managers research companies closely, while index funds track broader markets. Consider growth or value styles. Review sample portfolios to understand risk levels. Philosophy impacts long-term performance and volatility. Determine preferred strategies beforehand such as indexing versus active trading. Firms conveying philosophies match clients’ goals better in the long-term. Realistic discussions assess risk tolerance too since methodologies differ vastly. Compatibility establishes foundations for beneficial relationships.
Experience Level
New companies may lack proven performance tracking. Well-established leaders demonstrate weathering various markets capably. Research the background and credentials of portfolio managers themselves too when interviewing final candidates. Longevity signals the ability to meet commitments in changing climates.
Asset Size
Greater AUM reflects bigger support infrastructure. However, very large shops risk offering impersonal service. Medium companies properly staffed focus fully without a mass-market approach. Determine level matching personalized attention, resources, and negotiating power sought. Adaptability serves best.
Fees and Expenses
Management fees, commissions, and fund expenses reduce returns. Understand all costs upfront. Fees less than 1% annually are competitive for individuals. Institutional clients pay less. Compare total expense ratios between similar funds. Lower costs keep more profits invested.
Minimum Account Size
Minimums range from $25,000 to millions. Bigger accounts receive priority services. Determine needs and invest ability. Discount “householding” may apply by combining family accounts. Online advisors have no minimums typically. Consider growth potential meeting future minimums.
Services and Technology
Evaluate client portals, financial planning tools, customer support, and reporting. Paperless options increase convenience. Research trading platforms for easy fund transfers. Video conferencing aids meetings anywhere. Robo-advisors provide automated advice at low costs.
Track Record
Review long-term, risk-adjusted returns net of fees. Back-tested strategies show consistency over market cycles. Consider manager tenure and retention. Interview portfolio managers probing investment processes ensuring repeatability. Check credentials and regulatory compliance records.
Due Diligence Interviews
Meet proposed managers in-depth. Assess knowledge, communication styles, and responsiveness. Pose hypothetical scenarios gauging investment decision-making. Ensure cultural fit and understanding of goals. Confirm references and conduct background checks before transferring assets. Ongoing oversight ensures meeting evolving needs.
Support Services
Determine the role expected from advisors. Dedicated financial planners help navigate life goals alongside returns ideally. Evaluate technologically advanced client reporting and portal access qualities carefully too. Multiple locations nationally aid convenience potentially depending on circumstances. Full-service relationships matter most to many.
Conclusion
Thoroughly researching prospective firms results in the right partner selections. Focused diligence considers qualitative and quantitative factors above all. Prioritizing philosophical alignment, experience proving succession through changing times, and tailored personal attention within resource means at fair valued rates ultimately lead to identifying optimum partners serving decades of life. Comparing philosophies, costs, services, track records, and intangibles aids decisions. With careful due diligence, entrusting investments to qualified managers positions portfolios for success over decades. Proper vetting paves the way to achieving financial objectives.
