Investment managers are individuals or organizations who handle activities related to financial planning, investing, and managing a portfolio for their clients.
From the day-to-day buying and selling of securitiesand assets to transaction settlement and performance measurement, investment managers oversee investments and act on behalf of their clients.
Key Takeaways
- Investment managers are individuals or organizations who handle activities related to financial planning, investing, and managing a portfolio for their clients.
- Clients of investment managers can be individual or institutional investors.
- Investment managers devise strategies and execute trades within a financial portfolio.
- An investment manager is one type of investment adviser.
- The largest global investment management companies include BlackRock, Vanguard Group, and Fidelity Investments.
Roles and Responsibilities
Investment managers can range in size from one-person offices to large multi-disciplinary firms with global offices. They follow market activity closely to help dictate investment decisions they will make for their clients, ensuring that portfolios are balanced and meet each client's needs.
Investment managers may meet with clients individually, or if managing the investments of a large business, the relevant financial team members at each company. Their fee is often based on a percentage of client assets under management (AUM). An individual with a $5 million portfolio handled by an investment manager who charges 1.5 percent annually would pay $75,000 in fees per year.
Client portfolios can include assets in market sectors such as technology, utilities, healthcare, or energy. Investment managers consistently strategize to expand product offerings for their clients.
In 2022, 72% of managers increased the number of investment products they offer to clients, and the 3 largest investment management companies globally based on AUM were BlackRock at $10trillion, The Vanguard Group at $8.5trillion, and Fidelity Investments at $4.2 trillion.
Investment Manager vs. Investment Adviser
An investment manager is one type of investment adviser. An investment adviser is an individual or company who is paid for providing advice about securities to their clients.
"Investment adviser" is a legal term that refers to an individual or company that is registered with either the Securities and Exchange Commission (SEC) or a state securities regulator.
Asset managers, investment counselors, investment managers, portfolio managers, and wealth managers are all considered types of investment advisers.
While they all provide tailored investment advice, investment advisers can manage investment portfolios, offer financial planning services, provide licensed brokerage services to buy or sell stocks, or a combination of all these services.
Skills and Qualifications of Investment Managers
Investment managers commonly hold undergraduate degrees in business, statistics, finance, mathematics, or accounting as well as an MBA or professional qualifications such as Certified Financial Planner (CFP). Graduates may enter the industry in an investment analyst role and move to a manager role with experience. Investment managers typically share the following skills:
- Excellent communication skills
- Ability to obtain and sustain a client's trust
- Analytical skills to interpret market information
- Ability to understand financial data
- Work effectively under pressure
$131,607
The average annual salary of an Investment Manager as of September 2022.
How to Become an Investment Manager
Individuals interested in careers as investment managers should follow the same path as all regulated financial advisers:
- Complete a bachelor's degree program with a major such as finance, accounting, or economics. An advanced degree, like an MBA, is often an asset for future promotions and salary increases.
- Research job opportunities with clients such as banks, investment firms, and other financial institutions.
- Take the Series 65 exam through the Financial Industry Regulatory Authority (FINRA).FINRAis a private institution that writes and enforces rules for registered brokers and broker-dealer firms in the United States.
- Gain additional knowledge and training through certification programs such as Certified Financial Planner (CFP), or Personal Financial Specialist (PFS).
- Register with the SEC based on the regulations for your location, the size of the portfolios you will manage, and your level of certification.
Choosing an Investment Manager
The type of investment manager that investors choose depends on what stage they have reached in their financial planning process. A beginner investor may benefit by using a Certified Financial Planner (CFP) who can teach the basics of retirement planning. A seasoned investor interested in a wide range of securities may fare better with a portfolio manager.
Most investment managers outline their philosophy on their websites or in their disclosures. Data on investment returns and investment manager performance are often well-documented and ranked by media sites and financial watch groups.
Investors should consider fee structures when comparing investment managers. Fees and expenses typically include management fees, performance fees, custody fees, and commissions.
Is an Investment Manager the Same As an Advisor?
The term financial advisor (with the letter "o") is a generic term that refers to a broker or a registered representative. However, the term investment adviser (with the letter "e") is a legal term that refers to an individual or company that is registered with either the Securities and Exchange Commission or a state securities regulator.An investment manager is a type of legal financial adviser.
Do You Need CFA for Investment Management?
Certification as a Chartered Financial Analyst (CFA) is not a legal requirement forinvestment managers, but clients may likely prefer to work with an adviser that holds an industry-specific certification such as CFA, CFP, or Chartered Investment Counselor (CIC).
What Is the Difference Between an Investment Manager and a Fund Manager?
Investment managers focus primarily on individual securities and bond investments while fund managers work with mutual funds comprised of multiple securities and assets, often tailored to a particular market sector.
The Bottom Line
Investment managers are individuals or organizations who advise clients through financial planning, investing, and portfolio management. They commonly hold undergraduate degrees in finance, mathematics, or accounting and may have advanced degrees or professional certifications, and their fee is often calculated as a percentage of the portfolios they manage. An investment manager is a type of investment adviser, an individual or company who is paid for providing advice about securities to their clients and is regulated by the Securities and Exchange Commission.
