Over the past several years, I’ve been wrestling with a couple of issues. The first is outsourcing a portion (or all) of my investment management duties. The second is transitioning away from mutual funds and using more ETFs. In this post, we’ll discuss the first issue and next week, we’ll cover the second.
Outsourcing Your Portfolio Management
Outsourcing has two significant points to consider. First, it will free up your time so you can concentrate on marketing, financial planning or whatever else you choose to do. And, when you go on vacation, you’ll know the money is under the care of a quality management team. These are positives in my view.
On the other hand is the consideration of cost. If you hire an individual or firm to manage your client accounts and they simply use mutual funds or ETFs, the fee they charge will reduce your revenue unless you increase the fee your clients pay. It is this latter issue that has caused me to stay with the status quo. That is, until recently.
Is Outsourcing Cheaper?
Over the past several years, I have been using a particular conservative allocation fund for smaller accounts, and at times, I’ve compared its performance to some portfolios I manage. Sometimes I win, sometimes I don’t. However, after six years of monitoring this, I am sold on this company’s track record, investment philosophy, etc. Hence, I plan to use their separately managed account (SMA) platform soon.