It can be difficult knowing which portfolio manager is right for you. There is a ton of information out there, some of it contradictory, some of it incomplete, and a lot of it vague. It makes understanding the difference between wealth management companies tricky, and something as important as your investments shouldn’t be “tricky”.
You want a company with consistent, repeatable processes, strong performance, firm investment philosophies and great people. What you want, in essence, is the four P’s. Picking investment managers is step one in growing your wealth, so the process of consideration needs to be thorough. With that in mind, here are the four areas of consideration you should make:
People
Who is managing your portfolio? Is it a diverse team that works well together, one helmed by a strong manager? Or is the team disjointed, uniform in their industry background and poorly managed. Considering the people behind the company can offer powerful insights to the company’s stability and succession planning. If you have a portfolio manager in mind, find out their background and experience.
Process
The financial markets are uncertain, and as a way of weathering that uncertainty, a portfolio management company ought to follow resilient, clear and repeatable processes. Their research, their decision making process (both in buying and selling), their techniques for risk management and diversification all need to be repeatable and clear. No matter the market conditions, the investment team needs to be disciplined and consistent in order for you to reap the benefits of a wealth management company or investment manager.
Performance
As important as the people and processes are, you can’t discount the data. While performance shouldn’t be the only metric you use to judge a portfolio manager, it should certainly be considered. Look at an investment firm’s calendar year returns and annualized returns to get a good picture of both their short- and long-term performance. You may not be able to predict the future, but you can use the past as a reliable indicator.
Philosophy
The fourth ‘P’ isn’t ‘price’, although there’s no denying that the cost of a portfolio manager relative to competitors should be a concern. No, the fourth ‘P’ is ‘philosophy’: a set of unshakeable principles that guide a company’s investments. Without a strong investment philosophy, it’s difficult for a portfolio management company to develop strong processes, and without strong processes, it’s hard to have good performance. Of course, to bring everything full circle, you need strong people in order to develop a strong philosophy.
Knowing how to get clear answers when asking about the people, processes, performance and philosophy of a portfolio management company can also be hard. To get reliable answers, turn to a wealth management service, like Wealth Management Canada; they vet portfolio management companies, and offer you a short list of the best ones, based on your needs. They use the 4 P’s in their research, combined with a vast knowledge of the industry, and abundant experience.
If you’re serious about growing your wealth, consider the 4 P’s before choosing a portfolio manager, and work with a wealth management service to find the best one for you.