As noted in the last issue, investing is not for the faint of heart. It takes time and an ability to integrate an expansive range of information--as well as a steady head and a strong stomach. This combination often means that seeking outside help makes the most sense. But how do you go about finding an investment manager that's the right "fit" for you?
Before interviewing your first prospective manager, make a list of questions that are important to your specific situation. You will quickly discover that you can listen to a multitude of well-honed and entirely different pitches--each of which sounds plausible. However, the long-run success of your financial relationship will be how perceptive your manager is at determining what inspires, scares, and motivates you. To get you started, here are questions from three key areas.
Chemistry is vital. After all, you'll be sharing some of the most intimate details of your financial affairs with this person. The primary questions you are trying to answer include: Who will manage my account. How experienced are they? What motivates them? How are they compensated, and how will this drive their actions? Do they understand me? Do I trust them? More specifically, ask:
You will want to determine if the manager and firm have an investment process that is well thought-out. You'll also want to know if they have modified their investment "style" or considered modifying it, and for what reasons.
Investigating a firm's overall philosophy will help you better understand why the firm was formed, its current and targeted size, its defined niche, and its pricing structure. Be sure to ask:
While these considerations are by no means exhaustive, they should enable you to better control any given presentation and gather the information you need to make an informed decision. After each meeting, you should also think about who did more talking (you or them), whether the potential advisor(s) asked appropriate questions and listened carefully to your answers, and whether they have a true grasp of what you expect. At all times, remember that it's ultimately your money, not theirs.
Carol M. Clark, CFA, is a partner and investment principal of Lowry Hill, a private asset management firm that provides proprietary investment management and financial services to families, individuals, and foundations with wealth greater than $10 million. The firm manages approximately $6 billion in assets for nearly 300 families and more than 60 foundations from offices in Chicago, Minneapolis, Naples, and Scottsdale. She welcomes questions and comments at email@example.com.
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