Here is a fictional — but realistic — dialogue between a hypothetical successful money manager (a financial professional who invest client’s money for a fee) and a potential customer.  We’ll call this potential customer “you”.

 

Money Manager to You

It’s a pleasure to meet you.  I would love the opportunity to manage your money.  The financial and investing world can be dangerous and crazy.  But I know what I’m doing and I have 20 years’ experience.  Why do it yourself, when I can do it for you?  Your money will be under the supervision of my capable staff and me.

I went to an extremely selective college and received an MBA from a prestigious business school.  I currently manage over $1 billion of other people’s money.   I would be delighted to meet with you in person to review your account at least twice a year.  We may meet in my office on Rodeo Drive, in my waterfront home in Newport Beach or at my lovely vineyard in Napa Valley off Highway 29.

I will invest your money in a blended portfolio of stocks, bonds, futures, options and currencies, including cryptocurrency.  I use a combination of fundamental and technical analysis, top down and bottom up plus algorithms – lots of quant (math) techniques too.  I divide your portfolio into value, growth, momentum and risk arbitrage.

On average, after my fees, your portfolio will, over time, increase an average of +9% annually before taxes, although prior performance is no assurance of future success.  You pay my fees (1% of your portfolio) quarterly, regardless of market conditions.   Unfortunately, during years when your account is down, I cannot return any fees (no claw-backs).  You may call my secretary Bonnie for my Sharpe Ratio, Sortino Ratio and Treynor Ratio.

You to the Money Manager

So if I understand what you’re saying, you will charge me in good times and bad. If you lose my money, you won’t return any of the fees I pay you.   You aren’t telling me what my taxes will be.  And on average, over time, I could do better putting my money into a simple index fund and reinvesting the dividends or distributions – where tax consequences are small.  Also, my money may be in the clutches of your staff, and I don’t know them.

You have 3 expensive houses and I live in an apartment.

Are you nuts?

 

Takeaways

Most professional money managers, over time, don’t beat the benchmarks for their performance.  Money managers often charge high fees and also cost you in taxes.  But they guarantee nothing and don’t return your fees if they do a bad job.  Most money managers really don’t have a cogent approach to the markets.  And they make investing seem a lot more complicated than it is.  But many money managers make a lot of money.

You can probably manage your own money a lot better than a professional money manager, if you know what you are doing.   Our mission is to provide you with investing and trading knowledge and knowhow.  This way,  you’ll really know what you’re doing.