What Is a Money Manager?
A money manager is a person or financial firm that manages the securities portfolio of an individual or institutional investor. Typically, a money manager employs people with various expertise ranging from research and selection of investment options to monitoring the assets and deciding when to sell them.
In return for a fee, the money manager has the fiduciary duty to choose and manage investments prudently for clients, including developing an appropriate investment strategy and buying and selling securities to meet those goals. A money manager may also be known as a "portfolio manager," "asset manager," or "investment manager."
Key Takeaways
- A money manager is a person or financial firm that manages the securities portfolio of individual or institutional investors.
- Professional money managers do not receive commissions on transactions; rather, they are paid based on a percentage of assets under management.
- A money manager has the fiduciary duty to choose and manage investments in a way that puts clients' interests first, last, and always.
How a Money Manager Works
Money managers provide their clients with personalized service, an individualized portfolio, and ongoing management. With fee-based management, as opposed to transaction-based management,the clientand his or her adviser are on the same side, which means clients no longer have to question the decisions of a broker to buy or sell their securities. A professional money manager does not receive commissions on transactions and is paid based on a percentage of assets under management. Thus, it is in the best interest of both the money manager and client to see the portfolio grow.
Reasons to Use a Money Manager
A professionally trained money manager has the expertise to select the most appropriate investments for his or her client’s portfolio. Money managers typically hold a Chartered Financial Analyst (CFA) designation that helps them assess a company’s fundamentals by analyzing their financial statements. A money manager may also have expertise in a specific sector. For example, the manager may have previously held roles in the automotive industry that provides an edge when selecting auto stocks.
Money managers have access to a plethora of information and tools such as interviews with company executives, research reports, analytics data, and advanced financial modeling software. Having these resources allows money managers to make investment decisions that have a higher probability of success. For instance, a money manager might discover that a company has a unique competitive advantage after interviewing its CEO.
$134,180
Median money manager annual salary in the U.S. as of May 2020, according to the U.S. Bureau of Labor Statistics.
How Is a Money Manager Paid?
Money managers typically charge management fees ranging from 0.5% to 2% per annum, depending on the portfolio size. For example, an asset management firm may charge a 1% management fee on a $1 million portfolio. In dollar terms, this equals a $10,000 management fee. ($1,000,000 x 1 / 100). Asset managers and hedge funds may also charge a performance fee, which is remuneration for generating positive returns. Performance fees typically range between 10%and 20% of the fund’s profit. For instance, if the fund charges a 10% performance fee and returns $250,000 profit, the client pays an additional $25,000 in fees ($250,000 x 10 / 100).
Real-Life Example of a Money Manager
Examples of leading money management firms that accept retail investors' funds include Vanguard Group Inc., Pacific Investment Management Co. (PIMCO), and J.P. Morgan Asset Management.
Famous individual money managers include Warren Buffett of Berkshire Hathaway and Bruce Berkowitz of the Fairholme Fund.
FAQs
A money manager is a person or financial firm that manages the securities portfolio of individual or institutional investors. Professional money managers do not receive commissions on transactions; rather, they are paid based on a percentage of assets under management.
What does a money manager do? ›
Money managers research and recommend investment strategies for clients in alignment with their individual goals, risk tolerance and investment period. They use asset allocation and diversification along with income, growth and value investing as part of their strategies.
What are the duties of a financial manager? ›
Financial managers perform data analysis and advise senior managers on profit-maximizing ideas. Financial managers are responsible for the financial health of an organization. They create financial reports, direct investment activities, and develop plans for the long-term financial goals of their organization.
How much is a money manager paid? ›
Money Manager Salary
| Annual Salary | Monthly Pay |
|---|
| Top Earners | $85,000 | $7,083 |
| 75th Percentile | $69,000 | $5,750 |
| Average | $61,351 | $5,112 |
| 25th Percentile | $44,000 | $3,666 |
Examples of the kinds of services that DMMs provide include: bill payment, check writing, bank account and credit card reconciliations, preparing budgets, filing medical claims, and organizing tax records. The scope of services provided varies, based on each client's individual needs and desires.
When should you use a money manager? ›
Experts say it makes sense to hire a financial advisor in the following circ*mstances:
- You don't have the time or inclination to manage your finances.
- You experience a major life event, such as a marriage, divorce, loss of a spouse, birth of a child, relocation or change in your employment status.
The six basic positions within the finance department, aside from clerks and bookkeepers, are financial analysts, senior financial analysts, directors of finance, finance managers, CFOs, and treasurers.
What do you mean by financial management? ›
Financial management is all about monitoring, controlling, protecting, and reporting on a company's financial resources. Companies have accountants or finance teams responsible for managing their finances, including all bank transactions, loans, debts, investments, and other sources of funding.
What do you need to be a money manager? ›
Financial managers usually need a bachelor's degree in a business-related field. Bachelor's programs typically span four years and comprise 120 credits. Courses cover financial accounting, investments, and risk management.
Is a money manager a good idea? ›
If you're a high-net-worth individual, you might need someone to give you personalized, tailored advice and make financial decisions on your behalf. That's a wealth manager. They have strong knowledge in managing investments, estates and tax planning and other financial topics.
To achieve certification, candidates must successfully complete the CDMM exam, experience, and ethics requirements and then continue an ongoing continuing education program to sustain their skills and certification.
Can anyone be a money manager? ›
Most money managers have earned the certification of a Chartered Financial Analyst (CFA) or other professional designation. They're trained to make investment decisions and have the expertise to pick the most appropriate securities for their client's portfolios.
What are the three things about money management? ›
Managing your money is key to achieving financial success. Understanding how to create a realistic budget, track your spending, and set attainable savings goals are essential steps in the process.
Who needs a daily money manager? ›
Daily Money Managers deliver essential personal financial services to seniors and older adults, people with disabilities, busy professionals, high net worth individuals, small businesses and others.
Is it worth it to use a money manager? ›
Not everyone needs a financial advisor, especially since it's an additional cost. But having the extra help and advice can be paramount in reaching financial goals, especially if you're feeling stuck or unsure of how to get there.
What is a money manager vs financial advisor? ›
A key difference between financial planners and wealth managers is that wealth managers manage literal wealth, while financial planners manage the finances of everyday clients who want to get ahead.
Is a money manager the same as a financial advisor? ›
Unlike a financial advisor, who helps maintain a client's overall finances, a money manager has a more specific job — To manage a client's investment portfolio. A money manager researches and recommends investment strategies for their clients.
Is it worth it to pay a money manager? ›
If you have less than $50,000 of liquid assets then you may also want to consider going at it on your own as the fees might not be worth it. With that said, financial advisors can bring a wealth of information and experience to the table that can make a huge difference in your potential return.
