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Lowell Herr
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Retired physics instructor and now editor of the ITA Wealth Management investment blog. http://itawealthmanagement.com
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ITA Wealth Management
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ITA Wealth Management
  • Requirements For Selecting A Money Manager 1 comment
    Jul 9, 2012 8:48 AM
    What To Look For When Selecting A Money Manager

    While I am a strong advocate of "do-it-yourself" investing, there are situations were a money manager is useful. How does one select a manager? Here are a few suggestions.

    1. Seek a trusted friend and ask them who they use as a money manager. Ask around.

    2. Is the manager certified? In "The Bogleheads' Guide to Investing" there are nearly two pages of professional designations. Look for someone who has passed the Certified Financial Planner (NYSEMKT:CFP) exam.

    3. Don't use a stock broker as a money manager. There is a conflict of interest between giving advice and selling stock or actively managed mutual funds from the brokerage house.

    4. Look for a fee based only manager.

    5. If the manager is going to charge a percentage of the money managed, check the rate schedule. The larger the amount of money under management, the lower the percentage. Be wary if the percentage exceeds 50 basis points or 0.50% per year. If the fee is 90 or 100 basis points, look elsewhere for a manager unless unusual servers are provided.

    6. What kind of reporting is provided? If the manager is unable to provide Internal Rate of Return (IRR) results for the portfolio, look elsewhere. The TLH spreadsheet, when used properly, provides this information.

    7. Ask the money manager what they are using as a portfolio benchmark? Is the benchmark customized to fit the portfolio? If not, why not? The TLH spreadsheet provides this information.

    8. Will the money manager work with you to build a portfolio that will meet your risk requirements? Once more, the TLH spreadsheet will not only provide portfolio volatility information, but will do it using a semi-variance calculation where only the downside volatility is of concern. For more information research the Sortino Ratio on this blog.

    9. Before you hire a money manager, read a few of the Top Ten Investment Books recommended on this blog.

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  • Right Blend Investing, LLC
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    I think that it is unrealistic for an advisor to charge 50 basis points for money management.


    I'm a fee-based advisor and I charge 1%. I've found it difficult to serve clients below $1 million at 50bps, unless they are in a model portfolio. Even then, it's not easy.


    The compliance costs alone are a killer, as well as the time and energy to draw up an Investment Policy Statement, perform due diligence, and meet regularly with the client.


    Active management costs money, and I have no qualms about charging for it. I am a fiduciary, and worth every penny--just ask one of my clients.


    For the situation you describe, perhaps someone is best off with hourly advice, which I also offer. But that's another story.
    9 Jul 2012, 04:55 PM Reply Like
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