What are money managers and why is it more profitable for them to have their own broker?

 

The size and liquidity of the forex market offer opportunities to all investors interested in getting a return for their money. For example, if you are a busy person and your time is too limited to learn how to trade this market, you have the possibility to earn money without the need to do it directly.

To achieve this, you can use a money manager or also called a portfolio manager. What do I need? A money manager is an investment professional who is in charge of managing and administering the investment accounts of their clients (we will explain this in more detail later).

Hiring a money manager is perfect for beginning investors or people who don’t want or don’t have much time to follow the market. The key is to take advantage of the experience of an expert in investments in exchange for a commission for their services.

If you want to know more about this topic, this article will introduce you to the basics of what a money manager is, how a money manager operates, how they make money and suggestions on how money managers can save money by creating their own broker startup.

What is a money manager or portfolio manager?

The obvious question here is: what is a money manager? A money manager is a financial professional or financial firm that manages the business account and portfolio of an individual or institutional investor. The money manager charges a performance rate for the service.

Money managers are committed to choosing and managing investments wisely for their clients, including an investment strategy based on mutually agreed goals.

To hire them, you can do it through brokerage firms, banks or you can find them independently.

How does a money manager or portfolio manager operate?

To have a better understanding of the investment process of a money manager, we will explain it through a process:

1. The money manager meets with clients, gathers information and researches the market to stay updated. In this first step, the manager seeks critical information to design a strategy based on factors such as the investor’s risk tolerance, as well as the investment purpose and returns.
2. Once this information is gathered, the manager makes a portfolio plan that suits the client’s needs and evaluates the assets to be used. They manage investment options in assets such as: Forex, stocks, fixed income, real estate, infrastructure and private equity.
3. Once the information on the investor’s profile is available, the money manager sets objectives for the client and proposes a strategy to achieve them.
4. Finally, the money manager will make the necessary transactions based on the previously established objectives. Each investment will be made actively, with the mission of maximizing a person’s income potential.

How does a money manager make money?

You already know what money managers are, but how do they earn money? They usually do it through a fee. This fee can vary between managers, for example, some usually charge a one-time fee or monthly instalments. There are others that charge commission-based fees, such as 20% of profits.

However, the most common is to find managers that charge a fixed fee and a variable fee. They may charge you 2% as a fixed fee for the assets under management and 20% for the profits received.

Why is it better to create your own broker when you are a money manager?

Here we will cover another topic that is totally related.

Every money manager has to operate through a broker. Brokers are the intermediaries between those who trade, whatever the modality, and the market. Without brokers, there would be no trading and without traders, there would be no brokers, it is an ecosystem.

So, money managers can trade and manage their portfolios only through a broker, who necessarily charges the money manager.

The money manager must keep low commissions in order to offer affordable rates to the clients and attract a larger number of investors. One of the highest commissions is those payable to brokers, which increases the price of the portfolio management service.

The fees charged to managers by other brokers are usually quite high and are governed by the conditions imposed by these brokers. This undoubtedly leads managers to look for other options.

The solution is to set up their own broker. By doing this, the manager’s profit is 100% and under his own conditions. This creates more freedom for the money manager, who in turn can lower the commissions they charge to their clients for managing their portfolios.

You already know what money managers are and why it is more profitable for them to create their own broker. Now, in order to create a broker you need an experienced technology provider, with no liquidity problems to avoid losing clients, with an MT4/MT5 platform and all the necessary tools to make your broker work without problems.