It is generally accepted that ‘performance’ is the overriding factor in selecting an investment manager. In my opinion, there are other factors of equal importance when choosing the right investment manager. The four ‘Ps’ which need to be considered are: people, philosophy, process, and price. I’ve compiled some helpful tips and important questions to ask yourself when determining which investment manager is right for you.
Who will be the professional investment manager who makes decisions regarding my investments? What is his or her experience and track record? Who is monitoring my investment portfolio and making appropriate changes? Can I have ongoing dialogue with him or her about my investments? It’s important to note that in larger investment firms and banks, the key account managers frequently change and any well-established, personal and trust-based relationship is easily interrupted.
A critical and close examination of the manager’s overall investment philosophy should be paramount when choosing an investment manager. Investment styles go in and out of favour but the consistency of the investment manager’s philosophy and focus should be a stringent requirement in assessing the advisor’s integrity and soundness. Does the investment manager follow a long-term investment horizon? Does the investment philosophy match my investment principles? We all know that the costs associated with making frequent trades can absorb profits!
An investment manager’s investment process is the execution of their defined investment philosophy. In other words: what they do is a reflection of what they believe. What research material does the investment manager use to define the investments? Has the investment strategy been clearly defined? Is the investment proposal meeting my expectations and my financial requirements? What is the process to implement the agreed upon investment proposal? Will the purchase of the investments be spread over a time period to make use of market volatility? How often will I receive an investment report?
Price is always an important consideration. While the old adage that you get what you pay for holds true to some extent, higher fees to not necessarily equate to superior financial investment advice. What are the investment manager’s fees? Does the investment manager receive return commissions/compensations from fund managers’ banks? Could there be a conflict of interest because of these-third party benefits?
The Bottom Line
Good investment managers are compared to life coaches because they can help you with many complex financial decisions throughout your life. We at IAP Investment & Trust Services AG have built long-lasting relationships with our clients and provide diversified family and wealth management services to many of our customers.