When I recently offered a client the services of a money manager, he was surprised and asked, “You’re my financial advisor, so why don’t you trade my account?
I’ve heard this question quite often, and the answer is that having a third-party money manager alongside a financial planner can help clients get the best of both worlds. They benefit by having someone help with their big-picture financial situation (retirement plans, budgeting, asset allocation, and more), and at the same time having a team of investment professionals make all of the day-to-day investment decisions based on the clients’ overall goals.
The what’s and how’s of financial planning
A financial advisor looks at what his client needs and wants. The advisor creates a financial plan based on the client’s goals, risk tolerance, cash flow, and current and anticipated assets. Once an asset allocation model is determined, the specific investments that fit into each piece of the puzzle need to be decided: What growth stocks should I buy? What corporate bond pays the best interest? How much money should I keep in a money market?
That’s where the money manager comes in. A money manager does the “how†and makes the specific determinations of how to invest the client’s funds. The manager chooses the actual investments and then manages them on a day-to-day basis. With the daily oversight and decision-making out of the financial advisor’s hands, the  advisor can concentrate on building and maintaining the strategy and making sure it continues to meet the client’s needs.
A financial advisor and a money manager don’t compete with each other, and if well chosen, complement each other. As a financial advisor, I have access to many different money managers that I can bring to the table for my clients. Depending on the level of risk the clients want, and the types of investments they need, I try to match them up with a suitable money management company.
