Moneytree Wealth Management

What does investment management do?

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Investment management is exactly what it sounds like - the handling of assets and investments, but it’s also much more than that. The reason why investments are different for everyone is because we all have different goals, living situations, and appetites for risk.

The role of an investment manager is therefore to discuss investment objectives, formulate an investment plan, and then execute this plan on behalf of the client. This can be for a business owner or simply personal.

An underestimated aspect of investment management is that it’s a two-way street; the client must communicate effectively and describe their goals so bespoke strategies are mutually agreed upon.

What tasks does an investment manager undertake?

An important aspect of hiring a personal investment manager is the mental relief of not being solely responsible for your investments. With such a transfer of responsibility, or rather, sharing it, you can make better decisions as you’re less stressed.

Investment managers are thus responsible for buying and selling assets according to the agreed investment plan. The ultimate goal of any certified wealth manager is to help create an optimal portfolio that reflects the risk appetite and nuanced situation of their client.

Here are some of the tasks that an investment manager will undertake:

  • Discussing and executing a financial plan
  • ISA, savings, insurance, and pension advice
  • Asset allocation and portfolio rebalancing
  • Business wealth management: selling a business and succession planning, employee protection, corporate lending, business protection advice
  • Retirement, estate, and tax planning
  • Capital gains planning 

Whilst business wealth management appears to be very different from personal wealth management, the two are far from mutually exclusive. Shareholder protection, for example, is an important part of relevant life plans given that a business can be a large part of one’s own retirement plan.

Clearly, business wealth can quickly become personal wealth in the event of a sale, so selling a business is an important role of a business wealth manager. However, it’s important to note that being an owner of a business isn’t required to hire a certified wealth manager.

When to hire an investment manager for your personal wealth management

Knowing when to hire an investment manager is a little like assessing the need for an accountant. A struggling sole trader in his first year of trading, who has only turned over £15,000 in the financial year, may decide against the need for an accountant. It would certainly be a time-saver for the sole-trader, but it wouldn’t save them much money. However, once the business begins to pick up, the need for an accountant grows.

Many ask “am I rich enough for an investment manager?”, but it follows a similar logic to the accountant example. The more wealth the client has, the more important it is to have an expert managing it - and the more wealth that can be created from the portfolio. The larger the tax liabilities and the more investment accounts that exist, the larger the scope and impact are for inefficiencies.

Beyond simply having wealth, here are some other reasons why people turn to an investment manager:

  • Struggling with the time and/or stress of personal wealth management
  • Having a growing business that’s increasingly in need of efficient business wealth management
  • Dealing with complicated situations such as tax strategies, inheritance, and retirement income
  • Experiencing a sudden change in wealth or financial responsibility, such as having a child or coming into money
  • Not being confident in making investment decisions that have a large impact on your future

Why investment management is important for wealth management

Investment management is crucial to achieving financial goals. This starts by setting better goals, which investment managers are good judges of.

A third party is also a good way to mitigate the threats that our own emotions pose. Humans are liable to panic selling, following the herd, heuristics, mental accounting, and many other decisions that deviate from objectivity. A certified wealth manager will ruthlessly stick to a plan and will not succumb to temptation, greed, or anxiety - partly because it’s not their money.

Finally, we are all after the same thing: higher returns. Unless you’re CFA-certified and spend 37.5 hours a week managing investments, you’re likely not going to have the same level of expertise. Personal wealth management is straightforward for low earners, but it quickly becomes a difficult thing to optimise for high earners and high net worth individuals.

Types of investment managers

There are different ways of managing wealth, and such differences in service come at various costs.

Robo-Advisor

Robo-advisors are quickly gaining in popularity due to recent developments in technology. These are essentially an automated service that quantifies your situation (i.e. your risk tolerance) and a computer program makes investment decisions as a result.

These are convenient because they’re quick to set up and are relatively cheap (around 0.5%). However, their limitations lie in not being very bespoke to your situation, a failure to understand nuance, and are often described as being an expensive version of an index fund.

Traditional Wealth Manager

Investment managers exist within wealth management companies. Such a traditional wealth manager will likely be a brick-and-mortar business in which they meet face-to-face with clients, discuss their life, goals, and finances, and will help manage their wealth in order to achieve these goals. This often comes under the umbrella term ‘financial planning’ or ‘financial advisor’.

However, such wealth managers are also becoming online businesses. The same responsibilities are still taken on by the wealth managers, but it’s a remote, over-the-phone experience that can be either more accessible or more limiting depending on the client’s outlook.

These cost a little more than the ~0.5% robo-advisor fee, coming in at closer to ~1%. However, there is a lot more scope for tax savings, retirement planning, and more sophisticated investments than with robo-advisors.

If you are weighing up whether or not you could benefit from a wealth manager, please get in touch with a Moneytree Wealth Management advisor. Whilst we do not manage the investments directly, Moneytree Wealth Management provides expert advice and guidance to help achieve your financial goals.

Haleam Muhashash

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