One of the more popular services that Weigh House offers is ManagerSEARCH, which introduces frustrated investors to portfolio managers that are aligned with their interests. I sat in on a ManagerSEARCH last week and was impressed by the process. Aside from the fact that Weigh House pre-screened the managers who came calling and provides a detailed summary report of their unique distinctions, there are other benefits: A Weigh House consultant chairs the meeting, asks relevant questions, and aims to keep the managers focused on what’s important to the investor. Moreover, having Weigh House in the room means investors are not going to be pressured into buying something they do not want. After all, Weigh House receives no remuneration from any of the managers.
But what exactly is a portfolio manager (often referred to as investment counsel)? If all you’ve ever used are mutual funds, you may not be familiar with their services. Historically for the wealthy, portfolio managers manage your money on a discretionary basis. This can be done either in your own segregated account or in a pooled fund. Pooled funds are similar to mutual funds, with the major differences being a minimum investment of $150,000 and disclosure in the form of an information circular as opposed to a prospectus. The Investment Counsel Association of Canada has a good summary* of the differences between investment counsel/portfolio manager firms and all the other types of advisers, including those who in a perfect world would be coined salesmen.
To me, the biggest difference is lower fees. Portfolio managers charge you a fee which typically runs around 1.25-1.5% of assets per year. Balanced mutual funds typically charge you north of 2.25%. You’ll recognize many of the firms that offer investment counselling services since they also offer mutual funds.
Another thing that I like about portfolio managers is greater versatility in investment approach. No disrespect to mutual fund providers (and — errr — those in the transportation industry) but I’ve often viewed mutual fund managers as little more than glorified bus drivers. That’s because mutual funds are typically required to stay fully invested. That works great in a bull market but when market conditions change do you really want to have your money with somebody who must always keep their foot on the gas pedal?
With discretionary portfolio managers there’s greater breadth of strategies. Like mutual funds, some will stay fully invested at all times. Others may be more tactical in their investment philosophy and even go to cash if they feel conditions warrant.
Given that Weigh House represents many clients — and the managers know they’re competing one-after-another — they’ll typically offer fee rebates directly to the customer. In the ManagerSEARCH I witnessed, two cut their per annum fee by a meaningful amount, while one offered a one-time discount. Moreover, while many portfolio managers rarely accept less than $1 million under management, some will reduce this requirement to $500,000 for Weigh House clients.
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*As if all the ambiguous job titles in this industry were not confusing enough, since September 2009, the legal registration for discretionary managers has changed. Previously (as per the report) it was “investment counsel/portfolio manager.” Now it is “portfolio manager.”
