What the HNW Should Ask Their Money Managers

I practice what I preach, because the portfolios I manage were established with my capital and I continue to add to them over time as I believe any managers who are worth their salt should have a substantial capital commitment to their strategies. This alignment of interest is often overlooked and should become one of the first questions all high-net-worth  investors should ask any current or potential money manager. 

Having the managers’ capital invested pari-passu with yours may lower the likelihood of the manager taking inappropriate risks when they feel the “pinch” along with their investors when performance is poor. 

The other component that is often overlooked is the net after-tax returns of a portfolio. After all, that’s what investors are left holding after paying Uncle Sam, the investment manager and any other associated fees. I'm always thinking about, and focused on, the potential tax consequences of any investment at year-end. I take portfolio risk management very seriously and believe that a good risk manager takes tax implications into account since it can be a significant permanent impairment of invested capital.  These are just a few of the factors that investors—and the advisors guiding their clients—need to pay closer attention to. After all, it's the client’s money, not the money manager’s.