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If you’re looking for experienced professionals to help you with your investments and financial planning, turning to an investment management firm is a great idea. Such firms are set up to manage client wealth and advise on investment decisions to ensure clients grow their estates and realize financial success. But what does an investment manager do? Learn more about investment management firms here, and what they could mean for you and your wealth.

What Does an Investment Manager Do?

Investment management firms are tasked with managing and investing client wealth. Of course, each client is different, and their financial situations are often nuanced. Investment managers take a look at the whole financial picture, planning for both the short term and long term. Their four main duties are as follows.

Understand the client’s financial goals

Investment managers speak with clients to gain a strong understanding of their financial background, goals, and view on investment risks. Some clients want to invest a large amount of wealth in various stocks, bonds, mutual funds, or exchange traded funds (ETF) to provide retirement income. Others want to save for a specific goal, such as funding a grandchild’s college education. Investment managers make decisions based on these factors, ensuring all investments are made with the client’s best interests in mind. They also note the client’s view on risk, which determines whether they can go after high-risk investments such as high-yield bonds.

Research prospective investments

The financial landscape is constantly changing, and it’s an investment manager’s job to stay on top of fluctuations to ensure the best return on investment for their clients. Investment analysts have the job of monitoring evolving market conditions to help inform their decisions with respect to client wealth.

Create investment strategies

A portfolio isn’t strong unless it’s built upon a robust investment strategy. Investment management firms formulate investment strategies with their clients, or even do so on their behalf, to try to generate high returns. This usually involves spreading the client’s wealth across multiple investments to build a diversified portfolio. These investments usually possess various levels of risk, and can entail investment in property or venture capital.

Effectively manage taxes

As with most financial strategies, investing involves many complicated tax laws. Financial advisors can help clients make sense of those laws and implement tax-reduction strategies to minimize impact. These strategies may include: 

  • Tax-loss harvesting: Replacing an investment that has lost value with a similar investment to offset gains. 
  • Capital gain management: Selling securities to offset capital gains taxes. 
  • Municipal bonds: Investing in municipal bonds which are typically exempt from federal and often state taxes.

The Diverse Investment Management Industry

When looking for an investment management firm, it’s important to be acquainted with the various types out there. Some popular options include mutual funds companies, financial advisory firms, investment banks, robo-advisors, and private equity firms. 

  • Mutual funds companies: Mutual fund companies such as Vanguard, Fidelity, and E-Trade work by combining money into a pool with other investor funds. When your wealth is pooled with others’ wealth, you’re able to invest in stocks or other securities that may not have been available to you on your own. The advantage here is that you can easily diversify your portfolio by investing in funds that contain various stocks or bonds. 
  • Financial advisory firms: Financial advisory firms such as BlackRock, J.P. Morgan, and Dechtman Wealth Management exist to help clients create financial strategies in line with their financial goals and unique situations. They may help clients plan budgets, pay down debt, or maximize savings. 
  • Investment bank: The goal of an investment bank is to raise money to help organizations expand and improve their current operations, sometimes through mergers or bond offerings. These banks often assist companies by managing initial public offerings (IPOs). 
  • Robo-advisors: Robo-advisors such as Wealthfront, Acorns, and Betterment offer investment management with little to no human interaction. Funds are invested and managed according to predetermined algorithms developed by financial advisors, data scientists, and investment managers. While robo-advisors typically come at a lower cost than investment management firms, the drawback is the lack of human interaction, making it challenging to customize plans to your financial goals. 
  • Private equity firms: Private equity firms pool wealth from investors to buy companies and improve them. Once the company is in better standing, it is often sold to a large corporation or brought to the public through an IPO.

Who Works at Investment Management Firms?

When you work with an investment management firm, you’ll typically deal with people in four main roles: a financial advisor, a financial analyst, a mutual fund portfolio manager, and a trader. So how do those roles function? 

  • Financial advisor: A financial advisor assists clients with various types of financial planning, whether that’s building a savings strategy for retirement or devising ways to improve your bottom line. For them, the ultimate goal is to help clients build wealth and eliminate risk. 
  • Investment analyst: An investment analyst pays close attention to the financial market and diversifies your portfolio to make your money work for you. A good investment analyst will create a custom wealth management plan for you and your financial goals. 
  • Mutual fund portfolio manager: A mutual fund portfolio manager handles investments and finances on behalf of mutual funds. They implement investment strategies and keep up with day-to-day portfolio management.
  • Traders: A financial trader does the actual work of buying and selling stocks, bonds, mutual funds, and other investments for clients. 

How Do Investment Management Firms Turn a Profit?

Investment management firms generate profit by charging a percentage based on the financial assets they manage. They can also make money by earning commissions on products they sell.

Work With the Right Investment Management Firm

There are many options out there when it comes to investment management firms. In a complex financial world, it’s important that you choose the investment management firm that cares about your financial goals and wants to maximize your bottom line. Dechtman Wealth Management is an investment management firm that has helped Denver-area clients reach their financial goals for more than 37 years. Talk with a financial advisor today to learn more.

Important Disclosure Information

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Dechtman Wealth Management, LLC [“DWM”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from DWM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. DWM is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the DWM’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.dechtmanwealth.com.

Please Note: DWM does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to DWM’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Please Remember: If you are a DWM client, please contact DWM, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.  Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently.

Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

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