What is a Money Manager?

A money manager is like a mechanic...

A customer might go to the same mechanic for many years. The mechanic knows their customers’ cars inside and out — When something needs a quick tweak and or a major fix. The customer relies on their mechanic’s professional expertise and judgment. A money manager is similar in that they know all about your investment portfolio. They typically know when something needs adjusting, and can buy and sell securities on your behalf to create the ideal asset allocation in your portfolio.

Money managers serve their clients in a particular way — By managing their investment portfolios. Unlike other financial professionals, who may help clients with a variety of financial services, money managers focus solely on investments.

First, a money manager (sometimes called a portfolio manager) helps their client develop an investment strategy. They talk with their client to determine their investment goals and, from there, home in on a strategy. The conversation typically includes details about the client’s risk tolerance and what they plan to do with their investment earnings.

Once they determine their client’s goals, the money manager oversees the investment portfolio, including buying and selling securities.

Finally, money managers analyze the performance of their client’s investments. Using this information, they can determine the best next steps. For example, they might suggest changing your portfolio’s asset allocation based on risk tolerance, especially as you get closer to needing the money in the investment accounts.

Depending on your financial situation, you may be more or less inclined to hire a professional money manager. A money manager may be helpful for a number of reasons.

Like any professional, a money manager can have deep knowledge about investing compared to the average person. They may also have a degree or professional designations that give them a level of authority in the industry. For example, some money managers have a Chartered Financial Analyst (CFA) certification, which requires them to pass exams about different investment management principles. Because it’s their job, a money manager is also more likely to be able to devote time to follow investment trends and opportunities in the stock market.

Finally, a money manager may have more resources at their disposal than many of us do. They have access to professionals, like analysts, who can provide them with the latest information about the market. And they may have access to up-to-date research, data, or financial software as part of their job of managing investment portfolios.

There are many types of professionals that work in the financial services industry. Here are a few of the most common roles and how they differ from one another.

Similar to a money manager, a financial advisor is a professional who offers guidance and expertise to clients. But while a money manager focuses specifically on investment portfolios, a financial advisor might help a client with a variety of financial needs, like tax planning, estate planning concepts, managing investments, planning for retirement, and achieving savings goals. In other words, they typically help their clients with their whole financial picture, not just their investment goals.

Money managers and financial advisors also tend to work with different types of clients. Generally speaking, many money managers may work with clients with a larger portfolio, such as $1M or more, while financial advisors may work with clients with smaller assets.

The education and experience between the two professionals might also vary. Many employers require little to no work experience to hire someone as a financial advisor, whereas someone hoping to become a money manager usually needs to have more extensive relevant work experience. This could include other financial professions, like experience working as an accountant or a financial analyst.

Financial advisors come from a variety of different backgrounds — There’s no single standard education or career track. Most money managers, on the other hand, typically have a bachelor’s degree in finance, accounting, economics, or business administration. Many also have a master’s degree or a certification as a Chartered Financial Analyst (CFA), which gives them investment expertise. This means a typical money manager has to go through a series of tests and work experience to build an expertise in investing principles.

There are a few factors worth considering when choosing a money manager. First, it’s helpful to know your goals. Different money managers may cater to different types of clients with different risk tolerance. For example, if you prefer a low-risk, low-return investment strategy, you may not want to hire a money manager who prefers a high-risk approach. In other words, you may want a money manager whose strategies match your goals.

It’s important to know whether a money manager is a fiduciary. A fiduciary is someone who is legally and ethically obligated to act in their client’s best interests. If they fail to do so, they could be held liable in court. Many attorneys, trustees, and some financial professionals are fiduciaries.

If you do hire a money manager, it may also be a good idea to check in with them regularly about your investment’s performance and any changes in your goals.