Why Invest With a Professional Money Manager, As Distinct From Mutual Funds, Financial Planners & Stockbrokers (aka "Financial Advisors" and "Financial Consultants")

      There are three primary reasons to choose a professional money manager for securities investing: (1) the quality of the money manager's expertise and Registered Investment Advisor status, (2) the individualized management of each client's independent accounts and (3) notably, the fact that a professional money manager is not compensated by commissions, unlike stockbrokers and many financial planners.
 
      Investment management and advice from a professional money manager is aimed toward finding the best investments for the client and is not biased in favor of potentially lower quality investments that pay commissions. It offers the personal attention of an independent licensed investment analyst who specializes in and has in-depth experience, education and training in the field of securities investing. With this expertise and through professional access to informational resources unique to the trade, the money manager personally tracks and researches opportunities in the market and has intimate knowledge of the companies invested in. In addition, the money manager personally makes the trades and stock selections in each client's privately maintained stock portfolio, as authorized trader on each account. The professional manager's expertise, time and resources allows investment in a diversified portfolio of up to 20 thoroughly researched stocks, thereby reducing risk as compared with investing in a limited number of stocks.
 
      Each client's personal stock portfolio is separately maintained with custodian of assets, TD Ameritrade Institutional, member SIPC, which has an additional $150 million in private account fraud protection insurance. At the outset, the money manager and client develop a management plan specific to the client's circumstances, risk tolerances and goals, and the manager remains always available to personally discuss the client's investments. A professional money manager's personalized expertise, research, knowledge of the client and direct management of the client's stock portfolio is a unique alternative to other services within the financial industry.
 
      Professional money management is distinguished from investing through stockbrokers (also known as "financial advisors" and "financial consultants"). The major difference is that stockbrokers are not Registered Investment Advisors, as is Bullbear. Registered Investment Advisors have a fiduciary duty to act fairly in the best interests of their clients. (1) Conversely, stockbrokers are free to recommend investment products that have large conflicts of interest, such as mutual funds that pay the stockbroker (financial advisor / financial consultant) large sales commissions (called "loads"), often as large as 5% of the client's money up front. There often is a powerful incentive to recommend the investment product that pays the stockbroker the largest commission instead of recommending the best possible investment for the client. This conflict of interest does not have to be disclosed because there is no fiduciary duty of stockbrokers to act fairly in the best interests of the client.
 
      Another major difference that distinguishes professional money managers from stockbrokers is their level of personal knowledge and the quality of their advice. Typically it is the stockbroker's job to sell stocks to brokerage clients using the research and recommendations of other analysts within the stockbrokerage; stockbrokers typically do not conduct their own in-depth research and tracking of investment opportunities nor do they usually have the in-depth specialized experience, education and training in securities investing that a money manager will have.
 
      Professional money management is also distinguished from using a financial planner. As with stockbrokers, financial planners often also sell commission based mutual funds and therefore often have the same conflict of interest as stockbrokers. It is legal for financial planners to sell commission based mutual funds as long as the conflict of interest is disclosed in the fine print, even though the client typically trusts the financial planner to give unbiased advice and recommend only the best investments. Additionally, financial planners generally do not have the specialty background in or spend the exclusive bulk of their time researching and managing stock investments. Rather, the vast majority of stock oriented recommendations they make are for mutual funds managed by others, resulting in the client paying a double layer of fees. The financial planner will generally receive an annual management fee of approximately 1% and/or take up to a 5% commission from the client's account for the sale of mutual funds to the client, in addition to the expense and management fees charged by the mutual funds themselves, usually at an additional 1-2% per year.
 
      Professional money management is also distinguished from mutual funds. With money managers, each client's account is separately maintained and individually managed according to the client's particular circumstances, risk tolerances and goals. By contrast, in mutual funds thousands of client's assets are joined together into large funds that generally only provide blocks of choices of conservative, moderate or aggressive groups, or large cap, small cap, international and other specialty groups which may not be appropriate for each client's unique situation or be properly diversified. Also, mutual funds are so large that it is difficult for them to move quickly as the market changes or to move quickly to take advantage of smaller market opportunities that are accessible to the smaller manager.
 
¹ Rattiner, J., "Fiduciary: One Word, Many Views", Journal of Financial Planning, November 2005