Third Party Money Managers and the Smarter Way to Invest for Retirement

In the first part of this two-part blog series, we discussed some of the fundamental investing tactics that investors use to buy and sell stock, including comparing price-to-earnings ratios and analyzing macroeconomic trends. Today, we’ll look at the role third party money managers can have in creating a successful investment portfolio to fit your goals.

You may recall a trend that swept the nation in the late 90’s called “day-trading.” These were people who saw the stock market making gains virtually every dayand realized that practically anything they invested in would make money. Day-traders quit their real jobs to stay home to buy and sell stocks online all. But when the market corrected, many of those starry-eyed investors lost all their profits - and then some. They learned a valuable lesson: trading stocks is hard and should be left to the real experts.

That’s why our CommunityAmerica financial advisors don’t trade stocks. Maybe this surprises you, but here’s why it’s actually a good thing.

One of our strengths as your advisor is in the overall planning and due diligence of your financial plan. We work with you to create your ultimate, comprehensive financial plan and then we spend our time finding the best providers to fill each need to ensure the plan is executed properly. This allows us to monitor and manage all of the pieces of your financial plan such as income planning, wealth transfer, required minimum distributions, capital gains and tax loss harvesting justto name a few. Plus, it puts us on the same side of the table as you, allowing us to stay objective instead of trying to justify our own investment decisions. If someone isn’t performing, we replace them with a better firm.

Let’s look at stocks as an example. We recognize that our ability to pick and choose stocks to make our clients money is not something we can do better than third party money managers. So we partner with the best third party money managers to manage your investment portfolio. If we see that things aren’t going according to plan, we make the appropriate changes, which may include moving your portfolio to a new money manager.

But who are these third party money managers?

Third party money manager is a loose term used to describe investment firms who specialize in investing on behalf of others. Financial advisors allocate their clients’ money to these third party firms to invest and make money. Your advisor selects a firm based on the designed asset allocation that is deemed appropriate for your specific goals.

As you can imagine, there is a significant amount of resources that go into successfully buying and selling investments on a consistent basis. It takes significant research, economic stock market where-with-all, a stable of financial analysts, elaborate trading systems and capital to run a successful third party money management firm. Most advisors simply do not have the time, expertise or resources to compete with that, which is why we spend our time finding the best fit for your portfolio and then monitor their performance as part of your larger financial plan.

Finding the proper asset allocation and the right money managers is part of my job as your financial advisor. If you are curious about our investment strategies, the reasons we implement them and how they might work for you, please feel free to get in touch below. Mike Keeton is an investment advisor with CommunityAmerica Financial Solutions who primarily works out of the North Oak and St. Louis branches. To meet with Mike, please request an appointment below.

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