Investing Tip:

What is a Money Manager?

There are a number of terms that are used for money managers: portfolio manager, investment manager, investment council, and investment advisor. But basically they all mean the same thing, a person or company that actually manages investments on behalf of the client.

What a money manager does is very targeted. A money manager is not a financial planner. A financial planner is concerned with all aspects of finance, including insurance, debt reduction, retirement planning, etc. A money manager has only two goals. 1) To preserve the client's assets and 2) To increase the client's wealth. A financial planner is like a family doctor, a generalist. A money manager is more like a brain surgeon. They do one job very well.

A money manager is also not a stock broker. The stock broker is a salesperson. His/her job is to sell financial assets to profit the brokerage firm they work for. They call their clients and sell them on a particular investment. The stock broker usually (though not always) earns a sales commission. The stock broker usually does not choose the investments. That's done by analysts at the firm. The broker's job is customer relations and sales.

A money manager doesn't talk a client into anything. The client and the manager agree on a course of action which the money manager does without bothering the client with sales calls. The client knows the money manager is working in the client's best interest for two reasons. First, ongoing discussion and documentation about the client's goals and risk tolerance. And by compensation. Generally a money manager takes a small sliver of the assets under management as their fee. That means the money management firm can only increase their fee by increasing the clients assets, not by selling something. The money manager and the client have the same goals: to preserve the assets and make them grow. Both the manager and the client benefit in that way.

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Donald Steinmann and Advanced Financial Management assume no responsibility for any actions taken due to comments made in The Investment Tip of The Week.

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"A good decision is based on knowledge and not on numbers."
-- Plato