Money managers are the major profession that analyzes how saving and investing in a business can be done with little or no risk. In recent years, the act of Savings and investments are gaining tractions among individuals, mostly the millennials (young working class of the society). The major argument for the savings and investments is the plan for retirement years. Many of these young individuals see the need to save in order to make provisions for the years after retirement. In advanced economies, investments and savings habit is dominant relative to the developing nations. According to a survey conducted by the Federal Reserve Board in 2018, it was revealed that the number of families with an investment plan in advanced economies averaged about 60%. However, the figure is relatively higher than the emerging markets, which averaged around 30%.
Another survey reveals that many individuals in emerging markets are willing to save but are discouraged by the uncertainties around returns on investments. Hence, they prefer to keep their funds in savings accounts with the banks. While this measure helps individuals to preserve funds, it is not healthy for the economy. The reason is that a nation can only be well-develop if it has a functioning financial system. It is, however, understandable that we all avoid losing money, as such, getting a money manager who helps you to manage your funds and as well maximum your returns on investment.
Who are Money Managers?
Money managers are individuals who assist other individuals or institutions in managing their funds or securities (investment portfolios). Money managers are mostly experts in investment research and portfolio management; they use different investment research techniques to arrive at the best possible investment options.
For individual investors, money managers are in charge of overseeing the investment securities, subject to the preference of the investors. This function is only limited to the management of individuals’ funds or securities to ensure optimal return on investment.
Meanwhile, in most institutions, money managers may combine investment management with other financial management functions. Sometimes, money managers serve as a mediator between the institution and its potential investors. Money managers also help firms in raising capital (through equities or debt raising) needed for continued business operations. In the above scenarios, money managers are termed Financial managers.
In return for their services, money managers do not get commissions on every transaction made. Instead, the fees and commissions charged are usually calculated as a percentage of the investible funds. For example, if a money manager manages a portfolio with a return worth of $500,000, based on an agreed commission charge of 5%. The money manager earns 5% of the returns on the invested fund. As such, the money manager would get 5% of $500,000, which gives $2500. With this arrangement, the money manager must grow the funds to ensure optimal returns as this affects the commission he earns.
Note that the 5% mentioned above is just an illustration, both the investor and the money manager agree on the percentage of returns that goes into the money manager’s account.
Difference between Money Managers and Financial Advisor
Money managers are, however, different from financial advisors. Although the two personnel (financial advisor and money manager) are interrelated as their job roles requires them to work hand-in-hand. Financial advisors have names such as investment advisors, wealth managers, financial planners, among others, reflect their essential role in investment planning and decisions. Financial advisors understand their clients and their investment choices, thereby creating the best investment plan for such clients.
Money managers, on the other hand, are in charge of seeing through the investment strategies, making sure the portfolios grow. They invest the funds in the portfolio (set of securities) and monitor the portfolio to ensure maximum profits. Some money managers deal with a particular asset class or safety, such as stocks, bonds, real estate, among others. Some other money managers invest in specific industries or sectors, following the personal information of the fund owners. Irrespective of the investment decision taken, the ultimate goal of the investment is to maximize returns on investments.
Roles of Money Manager
The role of a money manager in investment is very crucial. Money managers are very vital when it comes to investment planning and decisions; they ae much need for guiding individuals and institutions on investment and financial management. The significant roles of money managers include:
• The money manager determines the type of investment that suits individuals’ investment objectives. For instance, when an individual intends to save for the long term, a money manager would recommend the appropriate investment choice (mostly bond securities or alternative asset classes) for such an individual. Money managers can also propose equities, commercial papers, or treasury bills investment for short to near term investors.
• Money manager deal with several clients at a point in time. With this flexibility, clients have the privilege to interact with them without hesitation. This arrangement also encourages a cordial relationship with clients, thereby enhancing proper investment decision making.
• The money manager also determine the right mix of investment in a portfolio. Ordinarily, investment principles recommend that one should not put all his funds in a single asset class. As a result, it seems complicated to find a balanced portfolio or the right mix of investment. When the need arises for investment diversification and the identification of the right proportion of each asset class in a portfolio, they are the best plugs for this role. Money managers do their due diligence to ensure that the investment fund is not in contract with a single asset class.
• The money manager also helps in providing up to date market information that affects the financial market and the economy at large. While this information guides investors in proper decision making, the information also prepares them for future investment plans.
The need for money managers is essential, given the crucial role they play in guiding investors’ decisions and management of funds for investors. With the vast knowledge and expertise in them. Investors can go back to their beds with a relax mind without worries about market volatility and loss of funds. Also, money managers help you in achieving your investment goals to ensure the preservation of capital invested and good income flow.
In a nutshell, they help you to manage investment risks, optimize your returns on investment, and give the appropriate timing for your investments.