Selecting the Right Money Manager for Your Investment Needs

A money manager is key if you want a better shot at high returns in traditional and alternative investment markets. We have seen all too often that the missing piece to many investors’ financial puzzles is a reputable wealth manager with a keen eye for detail and an intuitive grasp of the market’s ups and downs. Along with traditional stock market experience, savvy money managers often include various extras such as insurance services, estate planning, and tax advice. Perhaps most importantly, they help you set and achieve realistic financial goals within a manageable budget. Building and managing wealth with a competent money manager will also help an investor meet the requirements for accredited investor status. Which in turn will allow an investor to take part in Rule 506(c) offerings.

We know how crucial it is to obtain sound investment advice, especially amidst global chaos and uncertainty caused by the Coronavirus pandemic.  Let the five practical tips below serve as the foundation for your money manager search.

1. Consider Your Money Manager Types Carefully

You might be wondering, ‘What type of money manager is best for me?’ Typically, our clients’ best wealth managers tend to be registered investment advisers who have private equity experience. Among other things, these financial professionals can show you how to find proof of assets, which is a required step for specific private placement offerings. You can verify that the professional in question is a registered investment adviser with either the Securities and Exchange Commission or your state government. Financial advisers are a dime a dozen; however, several key differences elevate registered investment advisers above much of the competition.

Notably, registered investment advisers are background-checked and subject to review. Keep in mind that all agreements they make with you must be in writing. Registered investment advisers also follow a fiduciary standard, and in the next section, we will show you why that’s important.

2. Look for an Adviser Who’s Also a Fiduciary

The law requires fiduciaries to recommend investments that are in the client's best interest. If an adviser cannot avoid a conflict of interest, they must disclose it to the client.

The fiduciary standard offers retail investors some serious financial protection. Contrast this fiduciary responsibility with the behavior of some stockbrokers, who are allowed to recommend investments that earn them higher commissions, even if an identical, lower-fee option is available to you. Oh, and speaking of fees…

3. Pay Fees Over Commissions

You may want to choose a fee-only adviser over one who earns a commission on specific products. This decision will further increase an adviser’s transparency while decreasing or eliminating conflicts of interest.

Sadly, approximately 20% of investors have no clue about what they pay in fees, as cited by the U.S. News & World Report. Make sure you are not one of them. According to the article, investors typically pay around 1% in fees, and investors who pay double the fees will pay an extra $250,000 USD over their lifetime.

4. Choose Carefully Using Form ADV

Choose an adviser or firm with a proven track record with the specific types of services you want – especially in the private placement market. For the scoop on fees and services covered, review their Form ADV before entering into any agreement. This important document shows specific services provided, fee structures, disciplinary actions, conflicts of interest, and more. Locate an adviser's Form ADV, or that of a wealth management firm, at the Investment Adviser Public Disclosure website, or check your state regulator’s website.

As you peruse an adviser’s Form ADV, you’ll learn about their clientele and assets under management (AUM), as well as the educational and work histories of key advisers at a firm. Form ADV will also show their fiduciary status.

5. Life Transitions and Money Managers Go Hand in Hand

Let's face it: the moment you welcome a new baby into the world, you probably won’t be drooling over your investment portfolio. Yet, financial advisers are indeed helpful when your life circumstances change, especially if the change happens suddenly. Having a baby, getting that next big promotion, walking down the aisle, or christening your new home are all events that could signal a need for a new financial strategy managed by a competent professional. Even if you already have a financial adviser or other types of a money manager, you may find that your relationship with them needs to evolve to keep pace with all the changes in your life.

Now that we’ve reviewed some important steps to take when seeking a wealth manager or firm, we need to mention some key warning signs that you might be dealing with a shady one. Watch for these five common red flags. If you notice any of these, you need to reverse your course and find a replacement.

1. Vague or unstated qualifications. If an adviser hesitates when discussing their background or their credentials seem a bit off, beware! Instead, look for someone proud and excited about how their career has prepared them to oversee your finances personally.

2. No Form ADV available. It’s worth noting that a reputable adviser will usually offer to show you this form. If they don't, and if you cannot locate the form yourself using government resources, stay clear! You wouldn’t want to live without this important investor protection.

3. An adviser who is all talk. One major warning sign is a money manager who charmingly talks a good talk but doesn’t back up their claim to fame. Instead, let them show you legitimate examples of healthy returns on investment, and make sure they suit your risk tolerance.

4. A firm offering you robo-advisers only. While these firms may tempt the DIY investor with significantly lower fees, it’s important to remember that the performance of even the best algorithms will probably just mimic the performance of the stock market as a whole. Automated wealth management tools are available at many reputable firms, but they should supplement human knowledge, expertise, and research rather than a substitute for it. Furthermore, if you’re anything like our clients, then you’re looking for a chance at higher returns, and so you’re eager to give good stock market alternatives a closer look.

5. A pushy adviser. Finally, don’t let the adviser pressure you into high-risk investments, especially if the investments don’t even serve to diversify your portfolio. This is especially practical advice when dealing with the private placement market, which comes with some unique risks and doesn’t always have straightforward financial disclosures available. When considering a new investment or reevaluating a current one, carefully review financial statements, and listen to your gut.

Top Money Management Firms to Consider

Now that we’ve gotten the red flags out of the way, it’s time to highlight three of the top money management firms, according to ADV Ratings' 2020 ranking of the world's largest. First up is UBS Wealth Management, a Swiss firm with $2.6 trillion USD in assets under management and operating in 50 countries, as cited by Investopedia. Next, Investopedia cites Credit Suisse, another Swiss firm with $1.25 trillion USD in AUM. Interestingly, although the firm previously offered investment-banking services, it transferred them to Wells Fargo in 2015. Number three on the list is Morgan Stanley Wealth Management. With $1.24 trillion USD in AUM, the company has 250 advisory firms and over 15,600 wealth managers in nearly 600 branches across the U.S.

From insurance to investing, and from the private placement to public offerings, the financial landscape can seem like a minefield. Fortunately, the right money manager can work with you to create a sound investment plan that diversifies your portfolio. Additionally, for all your verified investing needs in the private placement market, consider utilizing our confidential and thorough attorney services.

Updated 6/24/2023

These are great tips and we feel there are a few more pointers that should be considered when seeking a money manager.

Seek Specialization in Alternative Investments

While traditional stock market experience is valuable, it's essential to find a money manager who specializes in alternative investments. Alternative investments, such as real estate, hedge funds, private equity, or commodities, can provide diversification and potentially higher returns. Look for a money manager who has a track record of success and expertise in the specific alternative investment areas that align with your financial goals. Niche opportunities like Rule 506(c) and Rule 506(b) funds are great ways to diversify your portfolio, having a solid money manager guiding you through these unregulated private markets is paramount.

Emphasize Communication and Regular Updates

Effective communication is key to a successful partnership with a money manager. Ensure that your chosen money manager prioritizes clear and frequent communication, providing you with regular updates on your investments and addressing any concerns or questions you may have. Regular reviews of your investment strategy can help you stay informed and make necessary adjustments based on market conditions and your evolving financial goals.

Evaluate the Technology and Research Capabilities

In addition to human expertise, it's crucial to assess the technological capabilities and research resources of a money management firm. Advanced technology tools and research platforms can enhance decision-making processes and provide valuable insights into market trends and investment opportunities. A firm that embraces innovative technologies and conducts thorough research can potentially offer a competitive advantage in identifying profitable investment options.

Remember, while these tips can help guide your search for a money manager, it's important to conduct your own due diligence, carefully review any agreements or contracts, and consider seeking professional advice when making investment decisions.