Investment Management

True Tamplin, BSc, CEPF®

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on February 15, 2024

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What Is Investment Management?

Investment management is the practice of managing assets to achieve specified investment goals. The assets in question are frequently liquid or categorized as securities but can include other commodities.

Developing a plan for acquiring and disposing of short-term or long-term investments is essential to investment management. Banking, budgeting, and tax services are also included within its scope.

Individuals and institutions can use investment management services with specialized solutions available. Some financial institutions give investment management services to ordinary or average clients. In contrast, others cater to high-net-worth individuals.

Investment Management Services

Investment management services include managing portfolios of various investments, such as stocks, bonds, mutual funds, and other securities, to generate returns over the long term.

These services often offer a range of options to help clients achieve their financial goals, including:

Asset Allocation

Asset allocation divides an investment portfolio among various asset categories, such as stocks, bonds, and cash.

Crafting an investment portfolio is a very personal endeavor, as the selection of assets largely depends on age, risk capacity, and desired outcomes.

Financial Statement Analysis

Financial statement analysis is an essential process that aids decision-making.

External stakeholders gain insights into an organization's overall health and value by examining a company's financial statements. At the same time, internal parties can use it to track finances.

Stock Selection

A stock selection strategy could be ideal for investors looking to maximize gains.

One can leverage those perceived advantages without hedging or diversifying into different industries by purchasing stocks and placing them in a portfolio based on their strengths.

Investment Monitoring

Tracking investments and measuring the portfolio's performance compared to measurable objectives is essential.

Report investment is executed at regular intervals, usually quarterly, and review the portfolio program yearly.

Portfolio Strategy and Implementation

Portfolio managers must be able to select, prioritize, and oversee programs & projects that adhere to the organization's strategic objectives and delivery capacity.


Types of Investment Management and the Costs Involved

There are various investment management services, each with its unique set of costs and fees.

Traditional Financial Advisors

Traditional financial advisors are licensed professionals who provide personalized investment advice and portfolio management services.

Depending on the investment portfolio size, they often charge a percentage of assets under management (AUM) as their fee, ranging from 1% to 2%.

Online Financial Advisors

Online financial planning services provide a range of financial guidance and support, including investment management.

These services can be a convenient and cost-effective alternative to traditional financial advisory firms.

For clients who want to access financial advisors, fees start at 0.30% of assets under management.

More comprehensive planning with an experienced Certified Financial Planner (CFP) starts at $400 annually in flat rates.


Robo-advisors are an investment management service that uses computer algorithms to manage investments.

Many robo-advisors charge a fee for their services, usually between 0.25% to 0.50% of the assets they manage. However, some robo-advisors are free to use.

Since the services typically have lower fees than traditional financial advisors, this can be a good option for investors with smaller investment portfolios.


Advantages of Investment Management

Consider the following benefits of investment management if you need help deciding whether to self-invest or engage with a professional.

Offers Professional Analysis

Investment managers have the expertise and knowledge to analyze financial markets, identify investment opportunities, and make informed decisions on behalf of their clients.

Boosts Income

Investment managers can help to increase the income from an investment portfolio by identifying investments with higher returns and implementing strategies to maximize income.

Minimizes Tax Liabilities

Investment managers can help minimize tax liabilities by reducing taxes on investment income and short-term or long-term capital gains.

Reduces Risks

Investment managers can help to manage risk in an investment portfolio by diversifying investments and implementing strategies to reduce volatility.

Outperforms the Market

Investment managers can help to outperform the market by actively managing an investment portfolio and making informed investment decisions.

Disadvantages of Investment Management

While investment management is effective for compounding your earnings, it is not without risk.


Investment management services can be expensive in the form of high expense ratios and sales charges.

Management Abuses

In some cases, investment managers may abuse their position and engage in unethical or illegal practices, such as insider trading or misrepresenting investment risks.

Volatile Investments

Investments in financial markets are subject to volatility and can lose value. Investment managers may be unable to prevent or mitigate losses in all cases.

Operating an Investment Management Company

Starting your investment firm can be quite profitable. You can succeed with proper preparation, execution, and hard effort. The following are the steps to create a profitable investing company.

1. Select a Name for Your Investment Company

The first step in establishing your investment firm is to select a unique business name.

2. Create a Business Plan For Your Investment Company

Developing your plan guarantees you thoroughly understand your market and strategy. The strategy also includes a road map for you to follow and, if necessary, submit to funding sources to raise funds for your firm.

3. Choose Your Investment Company's Legal Structure

Select a business structure for your investment firm and register it, as well as your business name, with the Secretary of State in each state where you do business.

4. Obtain Startup Capital for Your Investment Company

Personal savings, family and friends, credit card financing, bank loans, crowdsourcing, and angel investors are the primary sources of finance for an investment firm to consider.

5. Choose a Location for Your Company

When looking for a place for your investment firm, finding a location that will benefit your organization is critical such as a city with a robust economy receptive to new enterprises.

6. Register Your Investment Company with the Internal Revenue Service (IRS)

You must register your company with the IRS, which will result in the IRS awarding you an Employer Identification Number (EIN).

7. Establish a Business Bank Account

Opening a bank account in the name of your investing organization is critical.

8. Apply for a Business Credit Card

To help you separate personal and company costs, you could obtain a corporate credit card for your investing firm.

9. Obtain the Necessary Business Licenses and Permits

To establish an investing firm, you must first register with the Securities and Exchange Commission (SEC) and obtain the necessary state securities license.

10. Purchase Commercial Insurance for Your Investment Company

The sort of insurance required to run your investment firm is determined by the type of business you run.

11. Purchase or Lease the Appropriate Investment Company Equipment

You will need a computer, a phone, an internet connection, and promotional materials to establish your own investment company.

12. Create Marketing Materials for Your Investment Company

You will need marketing materials to acquire and retain clients for your investment firm.

13. Purchase and Install the Software Required to Run Your Investment Firm

You will need a financial analysis program to make informed selections regarding which stock markets to invest in.

You will also need a customer relationship management (CRM) tool to keep track of your clients and their portfolios. Finally, you will need an accounting tool to keep track of your finances.

14. Open for Business

You are now prepared to start your investment firm.


Examples of Investment Management Firms

The well-known investment management firms operating in the market are:

  • BlackRock Capital Investment Corporation provides middle-market businesses with various financing options, including senior and junior secured debt instruments, loans, and equity securities.
  • Vanguard is noted for its low-cost investing solutions. It offers a variety of financial products, such as mutual funds, exchange-traded funds (ETFs), and individual retirement accounts (IRAs).
  • Charles Schwab is noted for its competitive pricing and sophisticated technology and provides brokerage and advisory services, retirement planning, and banking.
  • Fidelity Investments is noted for its extensive research and analysis capabilities and offers a variety of products and services such as mutual funds, ETFs, IRAs, and brokerage services.
  • JPMorgan Asset Management is the asset management branch of JPMorgan Chase, one of the largest banks in the United States. It has a substantial presence in the institutional investment industry and serves private investors.

Is Investment Management Right For You?

Investment management is right for you if you are hesitant to make investment decisions. This is regardless if your investments are held in a single account or if you have a mix of these accounts.

You can hire one if you want someone else to monitor your portfolio and rebalance assets when the asset mix deviates from the initial formula.

Suppose you are dealing with complicated concerns like inheritance, retirement income planning, tax tactics, estate planning, or experiencing a significant shift in income. In that case, consider getting professional help.

In addition to portfolio management, you want an advisor to assist you with other financial needs, such as cash-flow planning, insurance, or debt management.

Before seeking investment management services, it is essential to carefully consider the costs and fees involved, as well as the reputation and track record of the firm.

The Bottom Line

Investment management is the practice of managing assets to achieve specified investment goals.

Investment managers provide various services, including asset allocation, financial statement analysis, stock selection, investment monitoring, and investment strategy and monitoring.

There are three types of investment management: traditional investment advisors, online financial advisors, and robo-advisors. They charge differently, ranging from 0.25% to 2% of the AUM.

There are several advantages and disadvantages of hiring the services of an investment manager. Finding the balance between costs and income is important to determine if investment management is recommended.

An experienced financial advisor can help clients navigate the complex world of investments. They can provide professional guidance to help your wealth and achieve your financial goals.

Investment Management FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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