What Is a Money Manager, and What Do They Do?

When developing your investment strategy, you may find yourself in need of some help. Yet between financial planners, financial advisors and a money manager, it can be tough to pick the right resource for you. Each specialization varies ever so slightly, but tapping the right expert could make a big difference to your bottom line. It’s important to understand what a money manager is, how this expert differs from other financial professionals and how to determine whether you need one.

Consider talking to a financial advisor about the right investments to meet your long-term financial goals.

What Is a Money Manager?

Also known as portfolio managers or investment managers, money managers are people or organizations that provide personalized advice and handle investment portfolios. In addition to buying and selling securities to help a client reach their financial goals, the professional may settle transactions, measure performance and report to regulators on a client’s behalf.

Money managers can work on behalf of organizations, as well as individuals.

Money Managers vs. Financial Advisors and Financial Planners

A financial advisor is a very broad term and can mean a lot of different things.

At its most basic, a financial advisor helps clients manage their money. Terms like private wealth managers, financial counselors, financial planners and money managers can all be types of financial advisors. They may work at brokerage firms or banks, or they may work independently as their own business.

There are, however, different requirements and certifications for each kind of advisor.

Certified Financial Planner. A Certified Financial Planner™ (CFP®), for instance, can help you develop a budget, manage a windfall, plan for retirement and prepare for tax season.
Money managers. Money managers, on the other hand, tend to specialize in investing. They can select stocks, bonds and other financial assets for your portfolio based on your objectives and parameters.
Financial advisors. Like planners, financial advisors are also usually more generalist. They may buy and sell funds on your behalf, but they rarely make trading decisions without your direct instruction.

Why Should You Use a Money Manager?

Effectively managing an investment portfolio requires thorough research, which can be very time-consuming. Additionally, the market is only open from 9 a.m. to 4:30 p.m. Monday through Friday, limiting your investing hours.

Even if you’re an experienced and well-informed investor, you may be too busy to actively invest on your own. The last thing you want is to feel like you are missing out on investment opportunities. This is where a money manager comes in.

You may also consider a money manager if managing your portfolio overwhelms you or you don’t enjoy investing. A money manager can maximize the value of your portfolio without the emotional rollercoaster it is likely to cause you. If you have struggled with investing in the past, it may be time to stop making your own investment decisions and let an expert take the reins.

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 they have the expertise to pick the most appropriate securities for their client’s portfolios. In many cases, they have non-financial industry experience that provides an edge when it comes to choosing investments.

Money managers also typically have access to research reports, financial statements, analytics data and advanced financial modeling software. Their tools and resources help them make investment decisions with a higher likelihood of success.

How a Money Manager Is Paid

Unlike investment brokers, money managers earn a fee rather than commissions on transactions. In most cases, clients pay their manager a percentage of their managed assets.

In some cases, the money manager also has a fiduciary duty to act in their client’s best interest. The money manager typically charges a management fee ranging from 0.5% to 2% or more annually, depending on the amount of managed assets.

For example, a money manager who charges a 2% fee on $100,000 of managed assets earns $2,000 per year. However, money managers may have minimum asset requirements much higher than this, with a minimum fee that differs from their typical fee for smaller portfolios.

How to Select a Money Manager

Before you choose a money manager, take the time to do some research to determine which one may be the best option for you. Consider the type of money manager you may need, reviewing the background and experience of potential choices. Then, interview your best options to find the best fit.

1. Choose the Type of Money Manager

You should also take an honest look at your own financial plan and investment portfolio to help you determine what type of money manager you need. If you are a beginner to investing, you will likely prefer a different professional than someone who works in the financial sector but lacks the time to manage their own portfolio.

Those who require more robust planning may turn to a Certified Financial Planner that can help with basic budgeting and estate planning, as well as investing.

2. Review Money Manager Options

Once you’re clear on your own needs and preferences, evaluate your options.

A background check will verify a money manager’s regulatory qualifications and competencies. This will give you access to details about their experience, as well as any previous client complaints. Be sure to review how their client portfolios have performed in the last few years, and check to see if their clients have a similar financial background to your own.

It’s also important to understand how the money manager makes their money, as not all managers are compensated in the same way.

3. Interview the Best Options

Experts suggest speaking with a few of your best options. This allows you to learn more about their communication style, investment philosophy, propensity for risk and general demeanor.

Though it can be difficult to determine from one conversation, try to get a feel for the level of personalization and service you can expect. Your money manager may prefer certain types of client-manager relationships, and it is important to ensure they are a good fit for your needs and preferences. Money managers are accustomed to having different levels of autonomy over client portfolios, and you want to make sure they will keep your desires in mind.

Do You Need a Money Manager?

Some investors are capable of managing their own portfolios using diversified funds and a basic asset allocation strategy. Self-management may be a workable approach if you are comfortable selecting investments, rebalancing periodically and remaining invested during market downturns.

Time commitment is often a major deciding factor. Researching investments, monitoring performance, tracking economic developments and making adjustments requires ongoing attention. Investors with demanding careers or limited interest in markets may find it difficult to devote the necessary time.

Portfolio complexity also influences the decision. Taxable and tax-advantaged accounts, employer plans, stock compensation, concentrated positions and estate considerations can quickly complicate portfolio management. As complexity rises, coordination becomes more difficult without specialized expertise.

Risk management is another factor. Managing exposure across asset classes, geographies and sectors while maintaining appropriate diversification requires technical knowledge. A money manager focuses on balancing risk and return in a structured way.

Behavioral discipline matters. Many investors struggle with buying high, selling low or reacting emotionally to volatility. A money manager can impose process-driven decision-making that reduces impulsive actions.

Cost should be weighed against potential value. Professional management adds an ongoing fee. Investors must consider whether the benefits of oversight, discipline and technical skill justify that expense relative to lower-cost self-directed or automated options.

Bottom Line

A piggy bank sitting on a calculator, along with some loose change.

Investing is a risky endeavor that typically requires significant time and effort to get right. It can greatly improve your financial standing, but it can also leave you in serious debt if you aren’t careful. A professional, however, has the expertise and information to manage your portfolio. Money managers are one of several professionals who can help, providing investment advice, day-to-day trading, performance monitoring and long-term planning.

Tips for Money Management

A money manager can be a powerful resource when it comes to administering your investments. A financial advisor, on the other hand, can help you develop a well-rounded plan to improve your fiscal health. SmartAsset’s free tool matches you with financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Whether if it’s you or a money manager handling you portfolio, be sure to diversify your assets. By spreading your assets among a range of investments, you can reduce risk and maximize your chance for return. An asset allocation calculator can help you select a mix that aligns with your risk tolerance.