MONEY MANAGEMENT

What is the Difference between a Money Manager and a Broker?

Money managers and brokers differ in two significant ways.

First, brokers typically have a more narrow focus than money managers. Brokers usually specialize in stocks, mutual funds, bonds, money markets, and similar investment opportunities. Money managers are familiar with and able to provide advice regarding these types of investments, but many also help with investment and financial decisions that aren’t tied to the stock or bond market. As mentioned, money managers sometimes offer estate planning, which brokers usually don’t get involved in.

Because money managers may not spend as much time studying the stock market as brokers do, many money managers hire people who have specialty knowledge in stocks and mutual funds to help them monitor changes in the markets and look for opportunities to share with their clients.

Second, brokers and money managers frequently have different fee schedules. Brokers usually charge clients fees based on transactions, adding a fee to each purchase or sale that clients make. Money managers, in contrast, tend to charge a flat, percentage-based fee that’s assessed annually. This fee remains the same regardless of how much activity a client's account has.

Charging a percentage-based fee, rather than transaction-based fees, ensures that money managers’ motives are always aligned with the interests of their clients. As a client’s portfolio grows, a money manager’s income also grows because the percentage-based fee equates to a larger sum.

Who Can Benefit from These Management Services?

Anyone who has financial assets may benefit from the types of management services that money managers provide. While there are many tools available today that give everyone access to investments, there still is no substitute for the knowledge and wisdom that come with a long career helping clients manage their assets well.

Since money managers usually charge a percentage as their fee, many managers only accept clients who have a minimum level of assets. The level, however, varies from manager to manager.

When Should People Begin Talking with a Money Manager?

People can inquire about money management services at any time. Professionals who offer these services are typically happy to explain how they benefit their clients, and they can help individuals determine whether hiring a money manager makes sense right now. If hiring a money manager isn’t the best choice, managers can typically also recommend another professional who may be a better match at the current time.