Med-Wealth

Why Deal Directly with a Portfolio Manager

Why Deal Directly with a Portfolio Manager

Why Deal Directly with a Portfolio Manager
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  • The vast majority of individuals licensed to provide investment advice in Canada exercise limited influence on portfolio composition and performance;
  • The principle difference between an investment advisor and Portfolio Manager is the latter’s ability to exercise discretionary authority in making trades rather than seeking approval for each trade.
  • This fact makes adding value from a potential return perspective more plausible with a Portfolio Manager than with an investment advisor.
  • Bank branch advisors have a limited skill-set, training and knowledge, and recommend only their own bank’s product-line;
  • Big-bank brokerage firms or investment dealers -
    • licensed advisors are better trained but are still limited to recommending in-house ‘Private Wealth portfolio solutions’ centrally managed by the institution or well-known retail mutual funds.
    • These advisors are relationship managers that help with financial planning issues and selection of your overall portfolio’s asset mixture between stocks and bonds, based on a standard questionnaire. An important role – but they have limited capacity to create superior investment-returns due to a lack of discretionary authority;
  • A Portfolio Manager (PM)
    • holds the highest licensing designation offered by industry regulators, requiring higher industry-focused, educational (CIM or CFA) and experience credentials.
    • CIM = Chartered Investment Manager; CFA – Chartered Financial Analyst;
    • has the ability to use discretionary authority in the creation and management of customized model portfolio solutions; thus possessing the greatest ability to potentially enhance portfolio-performance;
    • Only a small fraction of all investment-industry licensed individuals hold the Portfolio Manager (PM) designation;
    • A higher standard of care:
      • Regular Investment Advisors (IAs) only need to ensure an investment recommendation meets the ‘suitability requirement’ (based on objectives, time horizon and risk tolerance).
      • Portfolio Managers - Fiduciary Duty – portfolio managers must always make decisions that are in the best interest of the client, in addition to ensuring investment suitability;