The Complete Guide to What We Do
Juggling investments with a small portion of savings is a fun pastime for many. When you hit the jackpot (which doesn’t happen often), it makes you really happy. Plus, losing the small amount you invested doesn’t really have much of an impact on you. However, is it possible to use investments to sustainably grow your wealth? In our guide for people with $10 million+, we discuss how the top investment managers use intelligent strategies to help their affluent clients achieve their dreams and live the lifestyle they want.
Pillar Wealth Management is a firm that has found lots of success in helping clients with $5 million to $500 million find true financial serenity. If you wish to learn more about how we do that, you can contact us via a free meeting.
In this article, we will be discussing some of the most common questions we face regarding investment management.
You can expect answers to:
– What are the top investment managers?
– Why are investment managers important to ultra-high net worth investors?
– How do investment managers charge?
– How should I choose top investment managers for high net worth?
Keen to learn? Let’s get started.
Table of Contents
What Are the Top Investment Managers ?
Investments refer to the acquisition of an asset or security for the purpose of income generation or wealth appreciation. In simple terms, you invest money in an asset or security to earn money or benefit from the increase in the value of that asset or security.
In theory, the idea of an investment is brilliant. You ‘invest’ a certain amount of money, and you get more money back. It’s like a dream come true!
Unfortunately, things aren’t quite as simple as that. The flip-side of the investment coin is that each investment carries a specific risk. In the investment world, return and risk have a very high correlation. Higher potential returns from an investment will also usually signal an increased risk of losing your money.
There are various types of risks like market risk, competitive risk, industry-specific risk, project-specific risk, and international risk. Usually, most individuals just class risk into systematic and unsystematic risk. Unsystematic risk is the risk associated with a particular investment, whereas systematic risk is something that affects the whole market.
Managing these risks and earning a return on your investments is definitely something many investors try to do themselves. Some are even successful. However, when you have a lot of money to invest (let’s say $5 million to $500 million), it gets a lot more difficult to efficiently manage your investments. You’re rarely able to get the right balance. Plus, if you spend all your time managing your investments, when will you live the life you want?
This is where the top investment managers really shine through. Their job is to help investors, like you, effectively spread their money across investments and get the right balance of returns and risks.
Though an investment manager role is a very specific one, there are a few types of financial advisors that provide services related to investment advice and management. Here are the four services we feel you should know about when looking for the best investment managers.
Investment advisors are typically the financial advisor most people go for when looking for advice regarding their investments. These individuals or groups specialize in helping individuals figure out their next moves regarding buying, selling, and holding their current investments.
They do this by evaluating your current portfolio, asking about your return goals and risk tolerance, and fitting you into pre-set investment plans. It’s a pretty simple procedure. They take the numbers you give them, do some calculations, and give you the return you “should” be making.
According to that return, they’ll start suggesting what securities you should work with. The worry we often have with some investment advisors is that many of them are non-fiduciary and unlicensed professionals. Though this is not an issue for average investors who’re looking for standard investment advice, it typically isn’t enough for affluent investors. Your wealth requires attention from experienced individuals who have knowledge and expertise in working with investors of your caliber. For further insight into why advisor experience matters, check out our ultimate guide.
Investment advisors can’t really be considered investment “managers” because they rarely handle your money. All they’ll do is give advice on the securities you should buy or sell. You’ll need to go to someone else for the transactions.
Investment management involves both investment advice and investment handling. While investment advisors cover the advice portion, you can say that brokers cover the latter.
Investment brokerage firms are the hallmark of Wall Street. If you’ve seen some of the Hollywood movies, you’ll know what we’re talking about. Though they’re very popular, they also provide a very limited service.
The main role of investment brokers is to conduct the buying and selling of securities for their clients. They will simply just sell or buy the products you ask them to. The decision rests in your hands. Investment brokers provide the occasional investment advice by recommending certain securities or relaying market news, but most choose to just do as they’re told.
Much like advisors, brokers will typically be unregistered non-fiduciary advisors. One of the main differentiating points for brokers is how they get paid.Rather than charging an annual service fee like most advisors, brokers instead make their money from commissions.
This creates two potentially big problems for affluent investors.
- Commissions can often create a conflict of interest. If a certain security is set to earn your broker more commission, the company’s interest may lie in promoting that product to you. Similarly, the company’s interests can also be served by your correspondents encouraging you to make more transactions (since they earn money on every movement you make).
- Commissions will typically be more expensive to you in the long run. Though commission costs look tiny when you look at one or two transactions, tallying them up over a year or more usually shows how much they can stack up. Commission costs usually end up being higher than any annual fees fiduciary advisors may charge you. Further information about advisor pay structures and their effects on portfolio performance is provided in our guide.
Most people will agree that neither investment advisors nor investment brokers can be the top investment managers for affluent investors since they aren’t fiduciaries or have enough expertise.
Robo-advisors are a hot topic in investor circles. People wonder if AI and Machine Learning can truly beat human investment managers and provide a low-cost, easy investment service to investors.
Robo-advisors work via complex computer algorithms that have been fed decades of historical market data. Using the past and ever-increasing piles of present-day data, robo-advisors can help guide your investments. They typically operate in ETFs and index funds, allowing them to offer lower rates than other market services.
However, robo-advisors are still not something we recommend to investors due to the lack of human interaction. Plus, the robo-advisor will provide almost no financial planning. For investors with over $5 million, managing their wealth efficiently and planning their finances is complicated and essential. It’s not something they can do themselves.
A computer program can never provide the sort of personalization you get from an experienced advisor. In addition, a robo-advisor won’t prevent losses from:
– Not remembering to put contributions into your investments
– Not increasing contributions
– Selling low or buying high
You can read our handy guide for investors with $10 million-plus in liquid assets for further insight on why robo-advisors don’t work for affluent investors.
If robo-advisors aren’t the best investment managers, then you might be wondering what options are left for high net worth and ultra-high net worth individuals. Our experience tells us that wealth managers are often the best choice of investment manager for affluent investors.
Wealth managers provide a complete financial management package for investors. Not only do they provide total investment management, but they also help investors with things like:
– Insurance Planning
– Tax Management
– Risk Management
– Financial Planning
– And more!
The only caveat is that the best wealth managers don’t work with just anyone. You typically need to be a high net worth or ultra-high net worth investor if you want to avail a wealth manager’s services.
In the case of Pillar Wealth Management, we only work with a very exclusive set of individuals who have at least $5 million to $500 million to invest. We’ve helped countless families streamline their investment portfolios and live more financially secure lives.
We do more than just invest for returns. We take your goals into account and create personalized investment strategies that optimally balance your portfolio’s risks and returns. We won’t blindly chase returns because we understand that it isn’t always a priority for most investors. Our aim is to bring true financial serenity to your life.
Want to learn how we can take your investment stresses away? Book a free meeting with us right now.
Why Are Investment Managers Important to Ultra-High Net Worth Investors?
Ultra-high net worth individuals are those with over $25 million in liquid assets. Due to the size of their wealth, these individuals should only work with the best investment managers.
But why are investment managers important to ultra-high net worth investors? Can’t investors manage their own portfolio?
While there is nothing stopping you from managing your own wealth and investments, it’s usually not advised if you’re an ultra-high net worth individual. This is due to two reasons:
- The first reason is that it would be much safer to let someone who has expertise in this domain handle your investments because they will know how to best balance your risks and returns to meet your goals.
- The second reason is that it will take up a large chunk of your time. Managing a wealth of this size is no joke. If you were to sit down and control all your investments, you’d barely be left with enough time in your life to do the things you want with that money. Think about this: is money your ultimate goal, or is it enjoying your hobbies, building a legacy, and pursuing your passions?
Still not sold on why you should hire the best investment managers? Pillar Wealth Management’s hardcover book on “The Art of Protecting Ultra-High Net-worth Portfolios and Estates – Strategies For Families Worth $25 Million To $500 Million” can give you a better understanding of this topic.
How do Investment Managers Charge?
We touched on the topic of investment management fees and costs earlier. It’s vital that you’re able to understand the difference between the fees and costs charged by investment managers.
There’s a stark difference between how the top investment managers make their money and the costs incurred by non-fiduciary managers. Here’s a handy summary of what you need to know
How the top investment managers make their money
Fiduciary managers will only charge an annual service fee from their clients. There will be no other hidden charges or costs that sap away at your wealth. The fee is usually charged as a percentage of the value of the wealth being managed. For example, the average fee for fiduciary wealth managers is 1%. This fee can often be negotiated for ultra-high net worth investors.
In fact, the top investment managers actually work with you to eliminate any unnecessary costs that are plaguing your wealth. They’ll help you with tax loss cultivation, managing passive vs. active management fees, and so on.
How the investment managers shouldn’t make their money
There are a few methods of being paid that are not only costlier to you as an investor but also create conflicts of interest that can hinder your portfolio performance. If a manager or advisor uses any of these compensation methods, you may be better off looking elsewhere.
Examples of these costs include:
- Bond sale spreads
- Margin interests
- Performance-based fees (an extra bonus for high returns)
- Internal investment costs
- Product-based compensation, etc.
If you’re confused about why these costs can pose problems to affluent investors, we can explain all the details of investment manager compensation in a meeting.
How Should I Choose Top Investment Managers for High Net Worth?
Knowing what you know now, you’ll probably be wondering, “how should I choose top investment managers for high net worth?” Fear not, because we’ve got a handy list of qualifications prepared to help you out.
Considering the previous information, we’ll stick to the recommendation that most affluent investors would do well with a wealth manager’s services. To choose the best one, look for an investor who:
- Has a history of successfully conducting investment and wealth management for affluent investors.
- Has exquisite ability to gauge your goals and center your investment and wealth management activities around them.
- Plans to create an effective and consistent asset allocation strategy while focusing on protecting your portfolio against losses from market volatility. More detail on risk minimization is provided in our short guide.
- Has a fiduciary duty to clients. As we mentioned earlier, fiduciary managers will uphold the highest quality and moral standards.
- Can objectively remove emotion from their investment processes.
Working with the top investment managers can help you upgrade your lifestyle and live with a sense of peace that you may have thought was impossible. By using the information in this article and interviewing various managers, you should be able to find someone who can truly bring you financial security.
When it comes to affluent investors (such as those with $5 million to $500 million), a fiduciary firm like Pillar Wealth Management could be the right choice. With a rich history of effectively preserving and growing the wealth of many high net worth and ultra-high net worth clients, we have the right experience and expertise for the job. Book a free meeting with us to get started.
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