Investment Firm – How to Choose One?
If you have managed to accumulate $5 million or even $500 million in liquid assets and are a high-net-worth individual, you might think that all your financial worries are now over. However, if you don’t invest and grow that wealth to sustain your funds, you will find yourself facing financial troubles and an uncertain future very soon. If you want to avoid all that, you need to partner with the right investment company to help protect your assets and sustainably grow your wealth to last generations. If you are a high-net-worth investor with $10 million or more in liquid assets, we suggest reading our guide as well, which thoroughly explains how to find a financial advisor and how they can help you with your investment decision.
STRATEGIES FOR FAMILIES WORTH $5 MILLION TO $500 MILLION
7 Secrets To High Net Worth Investment Management, Estate, Tax and Financial Planning
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Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.
You can also save yourself all that time and contact Pillar Wealth Management directly. We are an independent wealth management firm that has been dealing with high and ultra-high-net-worth clients for more than three decades. We rely on years of experience and training, our wide range of financial and advisory services, and smart investment strategies to ensure that our clients reach all their investment goals.
In this blog, we’ll be discussing whether it’s worth hiring an investment firm, the types of investment companies out there, and how to choose the right investment firm. Let’s get started.
|Table of Contents|
|Is it Worth Hiring an Investment Company?|
What Does an Investment Firm Do?
How Do I Choose a Credible Investment Company?
Smart Asset Allocation
Choosing the Right Investment Firm
What Is an Investment Firm?
Investment companies in the US are registered and regulated by the Securities and Exchange Commission (SEC). An investment company is a business, corporation, partnership, or limited liability company whose primary activities are to issue securities and invest in securities.
An investment company pools together money from its clients and invests that money in securities. The clients will get a share of the profits earned by the securities in which they invest. Investment companies may buy and sell property, cash, and other funds.
Understanding Investment Firms
According to the SEC, there are three types of investment companies: mutual funds (known as open-end companies), closed-end funds, and unit investment trusts (UITs).
UIT and mutual fund shares are redeemable, which means they can be sold back to the company or to a broker acting for the fund. In contrast, closed-end fund shares are not redeemable, so they have to be sold to other investors on the secondary market.
A closed-end fund invests the money raised in its IPO in stocks, bonds, and other securities. It sells a fixed number of shares at any one time, and the shares are traded on a stock market such as NASDAQ.
A UIT will typically make a one-time public offering of a fixed number of securities; it may operate a secondary market. The termination of a UIT occurs on the date specified when it is created.
ETFs are not mutual funds. They are generally structured as open-end funds but may be UITs as well.
Other types of mutual funds are stock funds, bond funds, and money market funds. An index fund is a type of mutual fund or UIT.
A fund’s assets are diversified and managed by a fund manager. The manager is responsible for implementing the fund’s strategy and managing its trading activity, relying on extensive research and analysis of companies and markets. The manager’s skill can influence the fund’s performance. Investment strategies may be active or passive.
10 Largest Investment Management Companies
As of January 2022, BlackRock, Inc. had $10 trillion in assets under management. The company, which is based in New York City, was originally founded in 1988 as an institutional asset manager. BlackRock has offices in 70 countries and clients in 100 countries.
BlackRock is the world’s largest investment company. Its massive technology platform manages over $20 trillion in assets. In 2020, the company was approved to trade in China.
2. The Vanguard Group
The Vanguard Group was founded in 1975 and has its headquarters in Valley Forge, PA. The firm has about 18,000 employees and $7.2 trillion in assets under management.
Vanguard is the world’s largest provider of exchange-traded funds (ETFs), after BlackRock’s iShares, and the largest provider of mutual funds. Vanguard has some of the best low-cost ETFs on the market.
3. UBS Group
UBS is a Swiss company that operates in 40 countries with more than 23,000 employees. It has four divisions — Global Wealth Management, Personal & Corporate Banking, Asset Management, and Investment Bank.
UBS Wealth Way is a program that provides financial advice to wealthy individuals and families worldwide, transforming their aspirations into a strategy. The Wealth Way process begins with acquiring a comprehensive understanding of your goals, the people who matter to you, and your hopes and aspirations.
Fidelity Investments was founded in 1945. The firm has its headquarters in Boston, MA. Fidelity has approximately $4.5 trillion in assets under management. In 2021, its revenues exceeded $24 billion. It was the first major investment company to offer mutual funds to the public.
The company introduced its zero-expense-ratio mutual funds in 2018, along with four zero-expense-ratio equity funds.
5. State Street Global Advisors
State Street Global Advisors, founded in 1978, is the fifth-largest asset manager in the world. It is the investment arm of State Street Corporation, with headquarters in Boston, MA. The firm has over 30 offices globally with 500 investment professionals. In 1993, State Street Global launched the first-ever ETF, which is still in use.
State Street Global clients are employers, consultants, and endowments, seeking to maximize the returns on their investments while minimizing risks.
State Street Global owns and controls 142 ETFs and 26 mutual funds.
6. Morgan Stanley
Morgan Stanley is a multinational investment management firm founded in 1935. It has its headquarters are in New York City, with offices in more than 40 countries.
Morgan Stanley’s main business focuses on institutional securities, wealth management, and investment management.
Morgan Stanley acquired the E*TRADE platform in 2020 and Eaton Vance in 2021.
7. JPMorgan Chase
JPMorgan Chase & Company is a multinational investment bank founded in 2000 and headquartered in NYC. It is the largest bank in the US and the owner of JP Morgan Chase Bank and JP Morgan Securities. The bank provides private banking and wealth management.
JPMorgan offers mutual funds, ETFs, retirement funds, and 529 funds. It provides self-directed Investing, which allows the investor to make unlimited commission-free online trades through the company’s mobile app or at Chase.com.
Allianz SE is a German multinational financial services company; its headquarters are in Munich. Its main business activities are insurance and asset management. In 2001, Allianz completed its acquisition of Dresdner Bank.
Allianz operates in over 70 countries and has about 150,000 employees. It has also been ranked first among the world’s most important insurance brands.
9. Capital Group
The Capital Group was founded in 1931 and has its headquarters in Los Angeles, CA. It has over $2 trillion in assets under management.
Capital’s products, including about 36 mutual funds, are focused on active management while taking a long-term approach, protecting it from severe market changes. The company’s Growth Fund of America was the largest actively managed fund in the US as of 2020, with around $!50 billion in assets.
10. Goldman Sachs
Goldman Sachs was founded in 1869 and has its headquarters in New York City. The firm provides wealth management, asset management, and banking services to individuals, businesses, corporations, and institutions. The firm has over 40,000 employees worldwide. The firm began managing pension funds in 1988; it managed Microsoft’s IPO, which generated $61 million, and it now has a real estate division.
Is it Worth Hiring an Investment Company?
Hiring an investment company is not just worth it but actually necessary for preserving your wealth. When you have $500 million in assets, it can be easy to think that you will never run out of money and you don’t need any more to live the rest of your life. However, this couldn’t be further away from the truth.
There are so many factors that can affect your net worth, leaving you in financial distress by the time you reach retirement. For starters, there’s the time value of money. Those $500 million won’t be worth as much 40 or 50 years from now as the value of money will depreciate, leaving you with much less wealth to live on.
Moreover, life is entirely unpredictable, and you could find yourself in the middle of a divorce, lawsuits, or even a life-threatening illness. Any of these situations can use up a significant portion of your wealth, leaving you with nothing for retirement or even leading you towards bankruptcy. Similarly, there are taxes, market fluctuations, economy, inflation, and many other things that can affect your net worth. Start chatting with our wealth managers to learn about what else can affect your wealth.
A smart investment strategy is the only way to protect yourself from these and ensure that you live the retirement life you desire. Besides that, working with an investment company also allows you to enjoy many perks and benefits, such as those mentioned below.
1. Free Up Your Time
As a high-net-worth individual, even if you have the skills and knowledge to curate the right investment and portfolio strategies, you probably won’t have the time to look after all of it. You might be running several businesses or watching over your estates, or even simply enjoying early retirement.
Therefore, you won’t have time to look after all your investments as they do require a lot of attention and effort. You need to constantly watch their performance and adjust according to various internal and external factors. With investment management companies, you can leave the entire job to them and spend your time elsewhere.
2. Extensive Experience
One of the most critical reasons why an investment company is worth it for high-net-worth individuals and families is their extensive experience. Even if you have been investing in the past, you would only be familiar or experienced with investing your wealth in a certain way or in a certain set of assets.
On the other hand, investment firms deal with all kinds of ultra-high-net-worth clients with diverse backgrounds and unique goals. This equips them with more knowledge and experience with how to leverage investment opportunities, maximize portfolio returns and satisfy the clients’ goals.
At Pillar Wealth Management, our wealth managers and financial advisors hold more than six decades of combined experience with developing investment strategies, curating the ideal portfolios, and executing successful investments. Moreover, we use more than 100 years of market data to test and accurately predict the performance of our investments to protect our clients and help them attain financial security. Schedule a meeting with us to learn more about it.
3. Research and Due Diligence
Investment companies also carry out extensive research and due diligence before and after the investments to make sure all deals are entirely legitimate and aligned with the clients’ needs and goals. This ensures that the portfolio is always working towards the clients’ interests and shields them from any lawsuits or legal problems.
4. Tax Management
An investment company is also worth it because they can help you with tax management. Your investment decisions have a direct impact on your tax bill. All those stocks you invested in may have brought you amazing returns during the year, but they may have also resulted in a large tax bill.
An investment firm carefully analyzes all aspects of any investment decision, including how it will affect your taxes. As a result, they might move your investments across different assets that result in lower taxes.
They can also adopt tax-loss harvesting strategies to optimize your tax and other expenses. If your financial advisor isn’t discussing cost-saving strategies like these, you might be heading towards an uncertain retirement. Go through our extensive guide to identify other signs that your advisor may not be the one for you.
What Does an Investment Firm Do?
Another question high-net-worth individuals might be asking is what types of firms carry out these investment activities. There are numerous kinds of investment firms out there that are involved in different assets and products. Usually, investment firms are divided into three types.
There are unit investment trusts (UITs), closed-end funds, and opened-end funds, also known as mutual funds. While all three types focus on investing funds for their clients, how they execute those investments vary.
You may hear about some brokerage firms or wealth management firms such as Fidelity Investments, Vanguard, etc., in the United States. These companies offer you investment or asset management services.
This means that when investors work with a certain investment advisor, the advisor will recommend various securities and investments to the client. The fund managers will provide you with investment information about stocks, mutual funds (with varying transaction fees, based on the company), UITs (unit investment trust), real estate investment, index funds, ETFs (exchange-traded funds), and so forth.
You should understand that some of these investment options have a minimum investment condition. Working with the investment company gives you a choice to move your capital into one of these investment options based on your priorities.
However, it would be best if you remembered that by working with companies like that, there is a strong possibility you will end up getting generalized financial advice. This can happen because of the number of clients that they handle. Therefore, high net worth individuals like you should have personal advisor services for financial planning to get the best results – which you can get by working with a firm like Pillar Wealth Management.
How Do I Choose a Credible Investment Company?
This is one of the most difficult decisions you will have to make. There are so many big investment houses and brokers making all kinds of claims and promises. It may sound quite tempting, but in reality, these financial institutions offer a cookie-cutter experience to their clients without taking into account any of the crucial factors.
So then, how should a high-net-worth investor go about choosing a credible investment firm? You can refer to our excellent guide on choosing advisors for high-net-worth investors worth $10 million or more.
Alternatively, here are some of the factors you can evaluate and screen your choices on.
Smart Asset Allocation
Your asset allocation is the most basic yet important aspect of your overall investment strategy. Consequently, the first thing you should be looking for in any credible investment company is how they allocate assets in your portfolio.
A good investment firm will include several types of assets in your portfolio to allow you to reap high returns on your investments. This can include stocks, bonds, mutual funds, commodities, certificates of deposit, and more.
1. Active Vs. Passive Money Management
The investment and money management style of an investment company can also reveal a lot about their credibility and whether they are the right firm for you. Usually, most investment companies focus heavily on active money management. This involves the buying and selling of several assets within a year.
Active managers tend to work by timing the market and lean more towards any hot buys or latest trends in the market. While this does help generate high returns, it also comes with high risks, high transaction charges, high fees, and even high taxes. In comparison, passive managers tend to create a portfolio based on the market index and focus on long-term returns with lower risk. This results in lower fees and lower taxes as well.
At Pillar Wealth Management, we rely on an optimal balance between the two investment styles so that our clients benefit from high returns with the lowest costs.Read our handy guide to discover why this matters.
2. Risk Management
Investment and risk go hand in hand. Therefore, you can’t carry out your investments without a proper risk management plan in place. The market can be volatile and unpredictable. One simple fluctuation can bring down the value of all your assets, leaving you close to bankruptcy.
That’s why whichever investment firm you choose should be experienced and familiar with risk management to protect your assets. They should employ smart asset allocation strategies and keep a close eye on the market and overall economy to predict and plan your portfolio accordingly.
Discover how else you can protect your wealth by reading our book, The Art of Protecting Ultra-High-Net-Worth Portfolios and Estates – Strategies for Families Worth $25 million to $500 million.
You should also choose an investment firm that offers fiduciary services. This means that they don’t have any conflicts of interest and are entirely committed to serving your best interests. Any time they suggest a new product or asset, they will disclose all the benefits as well as drawbacks so that you can make an informed decision.
Comparatively, non-fiduciary investment advisors can prioritize their interests over your own. For instance, if they earn a commission on the buying and selling of assets, they might push those assets that will earn them better commissions rather than those that are better for you. Pillar Wealth Management is a 100% fee-only firm that offers fiduciary financial services.
4. Portfolio Diversification
Similar to asset allocation, portfolio diversification is also an important part of your investment strategy. It allows you to deal with the risk associated with certain assets and lets you compensate your losses by profits from other assets. With asset allocation, you divide your investments across different asset types such as stocks and bonds.
However, portfolio diversification allows you to further spread your investments within different assets. For instance, even when you’re investing in stocks, you should invest in several different types of stocks from different sectors and markets to spread out your risk.
A credible investment firm will also focus on providing you a customized experience. As mentioned earlier, some investment houses, private banks, and other financial institutions offer fixed investment packages based simply on your risk tolerance.
However, risk tolerance is only one factor that needs to be considered. The right investment firm will focus more on your financial goals and other targets in life to develop a personalized investment strategy. With such an investment plan, you will not only see high returns but will also get to accomplish your goals much quicker.
6. Portfolio Rebalancing
Your goals are the most important factor determining your investment strategy and portfolios. Therefore, it makes sense that as your goals change, so should your portfolio, and only the best investment firms will make sure of it.
In fact, not just your personal goals, even if you are going through other major life changes, such as marriage, divorce, having children, catching an illness, etc., or if the market or economy is changing, in all cases, you need to readjust your portfolio accordingly.
This will protect you from any unforeseen losses and also ensure that your portfolio performance is always maximized. We suggest reading our comprehensive guide to learn about other strategies to maximize your investment and portfolio performance.
Choosing the Right Investment Firm
Your investments are the foundation of your wealth and any subsequent wealth management activities. They are the tool through which you meet your retirement goals, carry out your legacy plans, control your expenses, and grow your wealth. So, you need the best investment firm working with you to accomplish your goals while protecting your assets.
One such firm is Pillar Wealth Management. We offer a range of investment, advisory and financial services to our high-net-worth clients. If you have $5 million to $500 million in liquid assets and are looking for an experienced investment partner, get in touch with us today.
Frequently Question About Investment Firm
Investment firms gather their customers’ pooled money to purchase securities and other investment vehicles. Most investment firms usually offer other financial advisory services.
An investment firm is organized as a business, corporation, partnership, or limited liability company whose main activities are to issue securities and invest in securities.
According to the Harvard Law School Forum on Corporate Governance, The Big Three—Vanguard, State Street Global, and BlackRock—collectively held a median stake of 21.9% in S&P 500 companies in 2021.
Investment firms are paid through customer fees that are calculated based on the value of the customer’s investments held by the firm. Customers also pay fees for trading securities.
Starting an investment company requires paying licensing and regulatory fees, paying for staff, office space, software, and equipment, amounting to about $50,000 to $100,000.
The products offered by an investment firm usually include stocks and bonds, mutual funds, index funds, and ETFs, as well as alternatives such as hedge funds and real estate.
An investment firm is also known as a fund company or fund sponsor because the products it offers are mutual funds, ETFs, and index funds. An investment firm may also sell alternative investments.
An equity firm or private equity firm invests in companies, raising capital for IPOs, recapitalizations, and mergers or acquisitions. They may take on operational roles to manage risk.
According to salary.com, in the US, the average top investment executive earns between $280,000 and $465,000.
Morgan Stanley and Goldman Sachs are among the firms that pay the highest salaries. Less well-known Centerview has been rated as the number one investment firm to work for.
To be 100% transparent, we published this page to help filter through the mass influx of prospects, who come to us through our website and referrals, to gain only a handful of the right types of new clients who wish to engage us.
We enjoy working with high net worth and ultra-high net worth investors and families who want what we call financial serenity – the feeling that comes when you know your finances and the lifestyle you desire have been secured for life, and that you don’t have to do any of the work to manage and maintain it because you hired a trusted advisor to take care of everything.
You see, our goal is to only accept 17 new clients this year. Clients who have from $5 million to $500 million in liquid investable assets to entrust us with on a 100% fee basis. No commissions and no products for sale.
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