Understanding Investment Managers: Roles, Skills, and Responsibilities

What Is an Investment Manager?

Investment managers oversee financial planning, investing, and portfolio management for clients. They handle transactions, performance tracking, and strategic investment decisions. Firms like BlackRock and Vanguard dominate the field, where analytical and communication skills are essential. Unlike investment advisers, who offer guidance, investment managers actively execute trades and manage assets.

Core Duties of an Investment Manager

Investment managers can be one-person offices to large firms with global offices. They follow market activity closely to help dictate investment decisions for their clients. They may meet with clients individually or with relevant financial team members at a company.

Client portfolios can include assets in market sectors such as technology, utilities, healthcare, or energy. Investment managers consistently strategize to expand client holdings. Their fee is often based on a percentage of client assets under management (AUM). An individual with a $5 million portfolio handled by an investment manager who charges 1.5 percent annually pays $75,000 in fees.

In 2022, 72% of managers added more investment products, and the largest firms by AUM were BlackRock ($10 trillion), Vanguard ($8.5 trillion), and Fidelity ($4.2 trillion).

Distinguishing Investment Managers From Investment Advisers

An investment manager is one type of investment adviser, an individual or company paid to provide advice about securities to their clients. Asset managers, investment counselors, investment managers, portfolio managers, and wealth managers are investment advisers.  

Investment advisers offer tailored advice and may manage portfolios, plan finances, or broker stock transactions.

Essential Skills and Qualifications for Investment Managers

Investment managers commonly hold undergraduate degrees in business, statistics, finance, mathematics, or accounting and perhaps an MBA or professional certifications such as Certified Financial Planner (CFP). Graduates may enter the industry as an investment analyst and move to a manager role with experience. Investment managers typically share the following skills:

• Excellent communication skills
• Ability to obtain and sustain a client's trust
• Analytical skills to interpret market information
• Ability to understand financial data
• Work effectively under pressure

Pathway to Becoming an Investment Manager

Individuals interested in careers as investment managers should follow the same path as all regulated financial advisers:

• Complete a bachelor's degree program in finance, accounting, or economics. An advanced degree, like an MBA, is often an asset for future promotions and salary increases.
• Research job opportunities with banks, investment firms, and other financial institutions.
• Take the Series 65 exam through the Financial Industry Regulatory Authority (FINRA). FINRA is a private institution that writes and enforces rules for registered brokers and broker-dealer firms in the United States.
• Gain additional knowledge and training through certification programs such as Certified Financial Planner (CFP), or Personal Financial Specialist (PFS).
• Register with the SEC based on the regulations for your location, the size of the portfolios you will manage, and your level of certification.

How to Select the Right Investment Manager

The type of investment manager that investors choose depends on what stage they have reached in their financial planning process. A beginner investor may benefit by using a Certified Financial Planner (CFP) who can teach the basics of retirement planning. A seasoned investor interested in a wide range of securities may fare better with a portfolio manager.

Most investment managers outline their philosophy on their websites or in their disclosures. Data on investment returns and investment manager performance are often well-documented and ranked by media sites and financial watch groups.

Investors should consider fee structures when comparing investment managers. Fees and expenses typically include management fees, performance fees, custody fees, and commissions.

The Bottom Line

Investment managers oversee financial planning, investing, and portfolio management for individual and institutional clients, aiming to maximize returns through informed decisions and trades.

They usually earn fees based on assets under management (AUM) and often advance from analyst roles, holding credentials such as the CFA or CFP. While all investment managers are investment advisers, their active management role brings them under SEC regulation. Selecting a manager whose strategy aligns with an investor's goals is key to long-term success.