Who is a Portfolio Manager?
Under the securities regulations, a Portfolio Manager is a firm that manages investment portfolios on behalf of its clients, generally with discretionary management authority to select investment securities and/or funds that meet the specific needs of the clients.
Invisor is a Portfolio Manager currently registered with the provincial securities regulators in the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, and Quebec to offer portfolio management services to its clients. Invisor will be seeking similar registration with the other provincial regulators in Canada in due course.
How does a Portfolio Manager help you?
A Portfolio Manager gives you the ability to take control of your investment goals by allowing you to focus on your needs, risk tolerances, personal situation and preferences. A Portfolio Manager then develops an investment plan tailored to your specific needs that is included in a written agreement. Your investment plan is the basis upon which your Portfolio Manager selects an appropriate mix of investments that suits your needs and makes discretionary adjustments to your portfolio. A Portfolio Manager reviews your investment plan with you at least annually to ensure it is up to date and reflects your current needs and situation.
In a nutshell, a Portfolio Manager takes the pain of managing your portfolio on a day to day basis, away from you, which helps you follow a discipline and remain on track to achieving your investment goals.
Benefits of working with a Portfolio Manager
There are several benefits of working with a Portfolio Manager as opposed to working with just an investment/financial advisor.
- Fiduciary Responsibility
Portfolio Managers have a fiduciary duty to act with care, honesty and good faith, always in the best interest of their clients. Investment decisions therefore must be independent and free of biases. As a result clients are able to place a higher level of trust on Portfolio Managers.
- Professional Qualifications & Registration
As fiduciaries, securities regulation requires the highest level of education and experience in the investment industry. Both the firm and the individual who is managing your investments are registered and monitored by provincial securities commissions. Firms are registered under the category of a Portfolio Manager and individuals that manage your portfolios are registered under the categories of Advising Representatives or Associate Advising Representatives (that work under the supervision of an Advising Representative). Registration is only granted to individuals who have the requisite professional qualifications and relevant investment management experience.
- Legal Requirements of Firms
Firms registered as Portfolio Managers must meet strict financial reporting, capital and insurance requirements to further protect your investments.
- Investment Plan and Written Agreement
An individual written agreement will be established to set out how you will work with your portfolio manager, including ongoing communication, types of investments that will be included in your portfolio, reporting, fees, risks and other issues related to your own circumstances.
- Portfolio Approach
As the name suggests, Portfolio Managers adopt a portfolio approach to investing their client assets, as opposed to selecting or recommending an investment on an isolated basis. Under a portfolio approach, a Portfolio Manager constructs a portfolio of securities and/or funds that complement each other in achieving a certain target asset allocation in accordance with your investment plan. As a result, clients realize the maximum benefits of diversification and the ability to stay on track with their investment plan in an optimal manner over time.
- Personalized Management of Your Portfolios
Portfolio Managers provide ongoing management of your investment portfolio, including rebalancing your investments to the strategic asset-mix when required, based on your objectives, risk tolerance, time horizon, asset allocation and any restrictions outlined in your investment plan. You typically give authority to your Portfolio Manager to make investment decisions based on your investment plan without getting prior approval from you for each transaction (called ‘discretionary management’).
- Management Fees
Portfolio Managers typically charge a percentage of the market value of investments they manage, known as a management fee. This fee is transparent and generally much less than retail management and distribution costs, which are often embedded as a cost of doing business. It’s important to note that your money must reside at a custodian financial institution for an extra layer of protection and safety. Fees are fully transparent on client statements and typically go down as a percentage of your portfolio as your assets grow. Fees are NOT paid by commission based on volume of buying or selling investments and are significantly lower than typical mutual fund fees. Portfolio Managers also generally do not earn any fees or commissions from fund companies whose products they choose to hold within client portfolios.
- Lower Total Cost of Ownership
Since Portfolio Managers have a fiduciary duty to act with care, honesty and good faith, always in the best interest of their clients, they select products independent of any biases or conflicts of interest. This results in the client holding a portfolio of investments that are most suited to their needs and personal situation, maximizing their risk-adjusted return, and minimizing their total cost of ownership.