How Financial Advisors and Fund Managers Can Work Together for Client Success
October 3, 2023
Financial Advisor and Fund Managers Collaborating

Picture this: a financial advisor standing in the hub of a wheel, arm in arm with their client. They have a map with all of the client’s aspirations and goals. Stretching out in front of them are fund managers both private and public, with potential investment opportunities, ready to help make the wheel turn.  

While this analogy may sound trite or cheesy (because it kind of is), it’s also an accurate way to think about the relationship between financial advisors and fund managers. 

Let’s unpack the intricate ways in which these professionals can collaborate, harmonizing their expertise for the benefit of their clients and investors. As we dive into the world where guidance meets execution, where foresight marries precision we’ll discover how financial advisors and fund managers can work together to pave the path to client success.

 

Understanding Their Roles

First things first, we should set the table to define who we are talking about when we say “Advisor” and “Manager”. A lot of terms get used in multiple ways, so being specific is really helpful here. 

Financial Advisors:

  • Financial advisors are professionals who provide financial planning and/or investment advice to individuals, families, and businesses.
  • They assess their clients’ financial situation, including income, expenses, assets, liabilities, and future goals and make recommendations to the client about investment products based on the client’s objectives, risk tolerance, market conditions, etc. 
  • Advisors may create customized financial plans, covering areas such as retirement planning, tax strategies, estate planning, and investment management.
  • They serve as a bridge between clients and various financial products and services, helping their clients make informed decisions.

Fund Managers:

  • Fund managers are responsible for managing investment funds, which pool together money from multiple investors to invest in a diversified portfolio of assets in a fund or special purpose vehicles (SPV) for single asset investments. For the purpose of this article, we’re thinking primarily about managers in the private sector. 
  • They make investment decisions based on the fund‘s objectives, risk tolerance, and market conditions. For private investments, there are often direct conversations with potential investors. Fund Managers also care about the client’s financial life, but their primary concern is meeting investment objectives. 
  • Fund managers conduct extensive research, perform due diligence, and monitor the performance of the investments within the fund.
  • They aim to generate returns that align with the fund’s objectives and investors’ expectations.

 

How Financial Advisors & Fund Managers Can Collaborate

The foundation of successful collaboration between financial advisors and fund managers lies in aligning knowledge about potential investment strategies with client financial goals. This has become table stakes in the public arena as crafting core portfolios based on typical client personas has become much easier to do in our modern times. However, most clients are looking for much more than a typical 60/40 portfolio, given how easily they can access the same financial products through online tools.

Many advisors look to differentiate themselves through tax efficiency, holistic planning, or service. Most of them are looking for ways to offer more value to their clients. One way to achieve value addition is by offering access to more ‘sophisticated’ investment opportunities.  Private companies become a clear answer to additional diversification, values-based investing concerns and the unquantifiable dinner party story sharing. However, for financial advisors, a foray into the world of private companies is fraught with compliance, investment management and operational unknowns. While many advisors are aware that the number of publicly held U.S. companies has declined by 50% since the late 1990s and that private equity funds have soared from fewer than 1,000 PE funds to nearly 4,000 in 2019, knowledge doesn’t solve for the unknowns.

How can private fund managers help financial advisors bridge the compliance, management and operational unknowns to incorporate private offerings into core and satellite strategies? 

 

Compliance Requires Diligence

A primary requirement to stay compliant is conducting diligence. Advisors need to show that they’ve performed the proper amount of research on both the investment and their clients. The idea of ‘doing your own research’ is most certainly a part of the broad cultural zeitgeist, but in the world of wealth management, your research has specific requirements.

Fund managers can assist financial advisors by providing relevant information about who they are, their track record as managers, the investment itself and the details of the PPM. Advisors will need to demonstrate an emphasis on evaluating investment procedures and risk management for the assessment of performance outcomes. Providing this information for them in written or video format to learn is incredibly helpful.

Additionally, the advisor will need to show how this fund makes sense to their individual client’s portfolio. Of course, all of this diligence work is going to need to be captured and archived for future reference should it be necessary to show it to a regulator. 

All of the necessary due diligence can empower an advisor to proceed with confidence when considering investments or partnerships with companies that exhibit strong leadership, integrity and communication across their book of business.

 

Management Requires Coordination

It’s one thing to help a client get through the initial requirements for investing in a private deal and a whole other process to manage that investment for the life of the fund. In the public world there are standards and norms – data feeds with the relevant information. In the private world, there are still many pdfs and paper statements that have to be collected, opened, interpreted and entered into a client system of record. 

Fund managers can work best with financial advisors by adding the advisor as an interested third party on the account, keeping their reports standard for OCR solutions to read them and/or sending data via spreadsheets or API. 

 

Operations Requires Workflows

Building workflows and repeatable processes inside of a financial advisory firm is one of the important ways to scale. The very nature of alternative investing can provide drag on the system advisory firms are creating. Fund managers greatly benefit from standardizing and digitizing the data in order to streamline the workflows for themselves and investors’ financial advisors. 

Fund Managers who are organized and design repeatable processes will be much better equipped to meet the needs of financial advisors. 

The partnership between financial advisors and fund managers is a critical component of a successful future for wealth management. By combining expertise and working together, advisors can elevate client portfolios and give investors the kind of experience they desire while fund managers connect to accredited and qualified investors to whom they likely would not have otherwise been introduced. This collaborative effort helps investors navigate the complexities of the financial markets and ultimately achieve more than just financial success.

Mammoth Technology is bridging the gap between investors, financial advisors, and fund managers through an intuitive, integrated platform where diligence and data can flow to the right people at the right time. Mammoth is designed to help onboard investors, manage cap table data, facilitate tax document distribution, synthesize accounting service details, and more. 


See how Mammoth’s Integrated Alternatives Platform can help you today. Click here to schedule a call.

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