Centra Blog

Increasing your Financial IQ

What is “Money Management?”

Some investors are puzzled when a financial professional recommends third-party asset managers to supervise their portfolios. Why would they recommend turning over the active management of the portfolio to someone else?

Why? Because it may be in the best interest of the investor. The portfolio management capability and resources of a single financial professional or small financial consulting group can pale in comparison to what an outside money manager might provide.

It can be a value-added service. Most financial advisors devote their time to helping their clients address retirement and legacy planning issues. A third-party money manager allows them to spend more time focusing on these issues instead of which fund family and/or funds to be buying or selling.

Before a suggestion like this is made, the financial professional should evaluate the risks and goals associated with the investor prior to committing client capital, to ensure that the proposed move is appropriate for a client. They should also look at the third-party manager’s approach – its performance, how it hedges and why, what kinds of investments are being added and subtracted, how timely any changes in strategy have been deployed, and how often it communicates.

This is simply part of fiduciary responsibility. Before a financial professional can suggest a third-party asset manager to a client, they must study the makeup of the organization, its fund managers and its team, and product offerings.

A potential “step up” for the investor. Bringing in a third-party portfolio manager may help an individual investor access more sophisticated institutional investment strategies. Many of these management firms favor “open architecture” – an investor’s portfolio can include a wider variety of mutual funds, ETFs and separately managed accounts. Some allow the client and the financial professional the opportunity to monitor the portfolio in “real time” (or something approximating it). So “hiring out” the management of a portfolio could prove to be a wise choice.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

*Centra Financial Services Professionals are registered representatives of CUNA Brokerage Services, Inc. Representatives are registered, securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, which is not an affiliate of the credit union. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. CUNA Brokerage Services, Inc. is a registered broker/dealer in all fifty States of the United States of America. FR-3418901.1-0121-0223