Investment management is someone else making buying and selling decisions for your money, usually for a fee
An investment manager is a person or firm that buys and sells stocks, bonds, mutual funds, or other assets on your behalf. You give them money, they decide what to buy and when to sell it, and they charge you a percentage of what you have with them — typically between 0.5% and 2% per year, though this varies widely. The manager's job is to try to grow your money faster than you could on your own, or to manage the risk so you sleep better at night.
Investment management is different from just owning investments yourself. If you buy individual stocks through a brokerage account, you are making the decisions. If you own a mutual fund or exchange-traded fund (ETF), a manager is making decisions inside that fund, but you are not paying them directly — the fund company takes a cut from the fund's returns. When you hire an investment manager directly, you are paying them to watch your money full-time and react to market changes.
Key Takeaways
- Investment managers charge a percentage of your total assets each year, so a manager handling $500,000 at 1% costs you $5,000 annually whether the market goes up or down.
- Some managers are fiduciaries, meaning they are legally required to put your interests ahead of their own; others are not, and the difference matters when conflicts arise.
- You can hire a manager through a bank, a standalone investment firm, a robo-advisor, or a financial planner, and each route has different fee structures and minimum account sizes.
- Investment managers do not may provide returns, and many underperform simple index funds over long periods, so understanding what you are paying for is essential.
How investment managers charge you
Most investment managers charge an assets under management (AUM) fee, which is a percentage of the total money you have with them. If you have $100,000 and the fee is 1%, you pay $1,000 that year. If your account grows to $150,000, you pay $1,500 the next year. If it shrinks to $80,000, you pay $800. The fee comes out of your account automatically, usually quarterly.
Some managers charge a flat dollar amount per year instead, or an hourly rate for planning work. A few charge based on how much profit they make for you — called performance fees — though this is less common for individual investors and is heavily regulated. Always ask what you will pay before you hand over money, because fees compound over decades and can eat a significant portion of your returns.
Fiduciary versus non-fiduciary managers
A fiduciary is legally required to put your interests before their own. If a fiduciary manager can make more money by recommending an expensive fund that is worse for you, they cannot do it — the law forbids it. A non-fiduciary manager only has to recommend investments that are "suitable" for you, which is a much weaker standard. They can recommend a product that pays them a higher commission even if a cheaper option would serve you better.
Most registered investment advisors (RIAs) are fiduciaries. Many brokers and insurance agents are not, though some choose to be. Before hiring someone, ask directly: "Are you a fiduciary 100% of the time, or only when managing retirement accounts?" The answer tells you how much you can trust their recommendations.
Types of investment managers and where to find them
A robo-advisor is a software platform that builds a portfolio based on your age and risk tolerance, then rebalances it automatically. Vanguard Personal Advisor Services, Betterment, and Wealthfront are examples. Fees are usually 0.25% to 0.50% per year, and minimum account sizes are often $0 to $25,000. A robo-advisor will not call you to discuss your life changes, but it costs less and works well if you want hands-off management.
A traditional investment advisor or wealth manager is a person or team that meets with you, learns your goals, and builds a custom strategy. They typically require $250,000 to $1 million in assets to take you on as a client, and they charge 0.75% to 2% per year. You get personal attention and someone who knows your full financial picture.
Banks and brokerage firms also offer investment management, though their advisors may not be fiduciaries and may push their own products. Financial planners sometimes manage money as part of a broader planning relationship. The key is to understand who you are hiring, what they are required to do by law, and what it costs.
What managers actually do day-to-day
A manager's core job is asset allocation — deciding what percentage of your money goes into stocks, bonds, real estate, and other asset classes. They might decide you should be 60% stocks and 40% bonds, then pick specific investments within each category. As markets move, your stock portion might grow to 65%, so the manager rebalances by selling some stocks and buying bonds to get back to 60%.
Managers also monitor economic news, earnings reports, and interest rates to decide whether to shift your overall strategy. Some actively trade frequently; others buy and hold for years. Some use computer models to spot patterns; others rely on research teams and personal judgment. The approach varies enormously, and there is no agreement among experts about which works best.
Why you might hire a manager, and why you might not
Hire a manager if you have a large amount of money, complex financial situations (inheritance, business sale, multiple properties), or strong emotional reactions to market swings that make you sell at the wrong time. A good manager can help you stick to a plan when fear or greed tempts you to make mistakes. They also handle the paperwork and tax planning, which saves time.
Do not hire a manager if you have less than $50,000 to invest, because fees will eat too much of your returns. Also skip it if you are comfortable managing your own money or if you are willing to own low-cost index funds and leave them alone. Research shows that most active managers do not beat index funds over 10+ years after fees, so paying for active management is a bet that your manager is in the minority who do.
Questions to ask before hiring
Ask a potential manager: What is your fee structure, and what does it include? Are you a fiduciary 100% of the time? How long have you been managing money, and what is your track record? What is your investment philosophy — do you pick individual stocks, use index funds, or something else? How often will we meet or talk? What is your minimum account size?
Also ask for references from current clients and check their registration with the SEC or your state's securities regulator. A manager who is evasive about fees or fiduciary status is a red flag. You should feel comfortable asking questions, and the answers should be clear and specific.
Frequently Asked Questions
Can an investment manager may provide I will make money?
No. Markets go down, and even skilled managers cannot prevent losses. Anyone who promises may provide returns is either lying or selling you something very low-yield like a bond or CD. A manager's job is to manage risk and try to beat a benchmark over time, not to eliminate risk.
What is the difference between an investment manager and a financial planner?
A financial planner looks at your whole life — income, debt, insurance, retirement, taxes, estate planning — and builds a comprehensive strategy. An investment manager focuses only on buying and selling your investments. Some people are both, but they are different roles.
How do I know if my manager is actually good?
Compare their returns to a relevant benchmark — for example, the S&P 500 for a stock-focused manager — over at least 10 years and after fees. If they beat the benchmark consistently, they are doing well. If they match or underperform it, you might save money in a low-cost index fund instead.
What happens to my money if the investment manager goes out of business?
Your money is held by a separate custodian (usually a bank or brokerage), not by the manager themselves. If the manager closes, your assets stay with the custodian and you can move them to a new manager. This is why you should always ask who the custodian is.
Do I need a manager if I already own mutual funds?
Not necessarily. Mutual funds already have managers inside them. Hiring another manager to oversee your mutual funds adds a layer of fees without necessarily improving results. If you own low-cost index funds, a separate manager is usually not worth the cost.