Common Misconceptions Of Investment Managing

Those who are considering a new investment advisor may be jumping to some unnecessary conclusions due to some unethical business practice that may have previously affected them. Potential clients have a few things that are generally misunderstood, and this article will go in depth about those issues and how to clear them up.

The first topic we will discuss are fees. It's generally believed that the client will receive a better deal if the manager charges a lower management rate. People think this because usually the managers who are the best in the business, as in the ones who will nearly always get the best rate of return, will be charging you more. When looking at the whole picture, you will probably benefit more from having a great manager, even thought you will need to expect the higher fee. For more details about investment management colorado, follow the link.

Misconception number two, that portfolio turnover is a negative thing. Years ago, when there was a secular Bull Market from 1982 to 1999, this was a typical issue that most managers had to deal with. It's very difficult to employ the Warren Buffet model of buying and holding for a long time, and a very small amount of investors can actually do that. Let's face it, most of us are not extraordinarily rich where losing or gaining a million dollars here or there doesn't make that much of a difference. It's hard to avoid a superior adviser having a high turnover rate, however, it should be checked that the turnovers were part of a smart business strategy.

Trade transparency is a common misconception as well. The Madoff scandal is what drew attention to the issue of trade transparency. Two key factors at play in this scandal allowed it to go on for years without anyone starting to get suspicious. The first factor is that Madoff was the adviser for the account and he was the custodian for the account who was responsible for the assets - this is a dangerous business scheme. The second thing is that he was extremely vague in his statements to clients about the money that was being made, it was nearly impossible to gather from the statements. A responsible and ethical adviser will provide transparency in statements given to clients. For example, a client will clearly be able to see the dates that shares were purchased and the amount at which they were purchased at?

Client referrals is the last thing we will discuss and it may be the touchiest of all the topics so far. Many investors think that is normal business practice to request referrals, but they do not know that it is against SEC regulations if advisers were to give out that information. The client's privacy is being compromised when investors are asking for referrals. The investor would probably not like all of the investment details made available to strangers which is essentially no different that asking for referrals. Check out the link to get more information on colorado private banking.