NOW YOU CAN ACCESS TOP MONEY MANAGERS
It used to be that professionally managed investment accounts were only for the ultra rich investor. Only those with money like Bill Gates had access to these money managers but the average joe didn’t. Initial investments of $10-$20 million were the norm. But over the last few years, due to advances in technology that automate portfolio management, these types of managed accounts have become both accessible and increasingly popular with investors that don’t have huge sums. Now investors can tap into the top institutional money managers for a modest minimum of $50,000.
Full Service Investment Advice
For clients who are more hands-on in nature, working with an experienced financial advisor may be the way to go. But for investors who lack the knowledge, desire, and time to stay on top of their portfolios, managed accounts are a great solution. Investors are able to gain top notch professional management at a reasonable cost. These money managers work with very specific, mathematically-based investing models, and even if the average investor had access to them, the costs to implement them would be prohibitive.
Discretion and Transparency
An important advantage of having a managed account is that the portfolio manager has discretion over the account. This becomes very important when a decision needs to be made quickly. In the more classic broker/client relationship, the broker needs to get the client’s approval before initiating any transaction. The time it takes to get the client’s okay can often be costly, especially if it is hard to reach the client. All activity is completely transparent — transactions are done within the framework of the client’s own brokerage account. There is no pooling together of monies; rather, the account is in the client’s own name.
Choosing a Money Manager
It’s important to keep in mind that there are over 20,000 professional money managers in the U.S. alone. So for an individual, trying to research which manager is most appropriate is a tough job. In addition, many firms today still maintain high minimum account balances — in the millions of dollars — to open an account. One solution to these problems is by working with a licensed investment advisor via a brokerage firm. Many brokerage firms have research teams whose sole area of expertise is analyzing portfolio management firms. This is an invaluable service because it saves the client countless hours of research. Additionally, they often have special agreements with the portfolio management firms, enabling clients to use the managers but with much lower minimums. A third advantage in using money managers through a brokerage firm is that the advisor is able to oversee the manager that the client is using. If the manager fails to perform as he should or if there has been a change of management, your advisor can relay that information to you and you can switch managers at no cost.
All Inclusive Wrap Fee
Managed accounts usually charge an annual fee, called a “wrap fee”, which is based on the amount of money under management. Generally, all trading costs of the portfolio manager are included in the fee. This puts the client and the manager on the same side of the table and eliminates any conflicts of interest a manager may have by selling products and receiving commissions for them. As the value of the account goes up, the manager makes more money; conversely if the value drops the manager makes less.
Speak with Your Advisor
To see if managed accounts are for you, speak with your investment advisor to determine if they are an appropriate vehicle to use in your portfolio.
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc., or its affiliates.
Aaron Katsman is author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, SIFMA. For more information, visit www.aaronkatsman.com or email aaron@lighthousecapital.co.il
