In this article, we’ll discuss one way of measuring investment manager value.
Sometimes prospects tell me about their current investment manager. One thing I hear a lot is, I don’t really know how my accounts are performing. How can I tell if I’m getting value from my investment manager?
One way is to examine whether your returns are beating the benchmark established for your risk tolerance. Don’t know what benchmark to use? Ask your investment manager about an appropriate benchmark given your risk tolerance.
You’re also paying a fee to have your money professionally managed. So, how can you tell if the fees are worthwhile? Look to see if your returns are beating benchmark by more than you pay in fees. In other words, what is the $ amount that you earned above benchmark for the year (“excess returns”)? Compare that to the $ amount you paid in fees for the year.
Tree Fort Financial measures our investment results against a benchmark, so our clients know how much value we provide.
Tree Fort Financial measures our excess returns compared to our fees as a ratio, and since inception in 2003, we have generated several times our fees in excess returns, per this PDF. Past performance is not indicative of future returns. Please see additional information on this PDF.
If you have questions about this process or would like to learn more, reach out. I’d be happy to chat!