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SELECTING AN INVESTMENT MANAGER:
QUESTIONS ARE KEY
When searching for a suitable investment manager, asking the
right questions is key.
Essentially, what you are trying to determine is whether the
manager’s investment philosophy and strategies are consistent
with your investment goals, and if you are comfortable with
the manager’s credentials, performance history and accessibility.
Good communication is crucial, so your rapport with the manager
is also an important ingredient.
A one-on-one interview with your prospective manager is the
first step. This should be followed by an examination of the
firm’s presentation materials, legal registrations and
contacting the manager’s client references.
Questions you should ask a potential manager:
• How
long have you been managing portfolios? What are your
professional credentials?
• How will you communicate with me? How often? Will
you be readily available if I have a question?
• How has the performance of your stock and bond portfolios
measured up to their comparable benchmarks?
• What decision-making criteria do you use in managing
your portfolios?
• How do you manage risk?
• Do you take taxes into account?
• What is your annual turnover rate?
• How is the annual fee determined? What are the commissions
charged on trades?
• What
is the firm’s client retention rate?
• Have you ever been cited by a professional or regulatory
governing body for disciplinary reasons?
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Ask the manager for client references. Here are the questions
you should ask:
• How long have you been a client?
• Have you been happy with the relationship?
• Does your manager respond promptly to questions
or concerns you may have regarding your portfolio?
• Have there been administrative problems? How have
these been handled?
• Have
the firm’s other employees with whom
you have interacted been helpful?
• Has your portfolio been invested in line with your
goals and guidelines?
• Have you been satisfied with the way your portfolios
performed?
• Have the fees and commissions been in line with
your expectations? |
A thoughtful manager should ask you such questions as:
• What are your goals and investment guidelines?
• What type of return expectations do you have?
• What are your cash flow needs?
• What tax bracket are you in?
• What level of liquidity is required?
• Do you have an estate plan or financial plan? |
And lastly. . .
Questions to ask yourself:
• Did the manager communicate clearly with me? Did
he answer all of my questions directly and openly?
• Did he listen to me?
• Did I feel undue pressure to act?
• Does the manager have the required skills to do
a good job? |
Conscientiously doing your homework at the beginning of the
interview process should significantly increase your chances
for a successful outcome and financial security. So, take
your time.
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