Roles of Portfolio Managers

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infinitybenzo

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Hello!!!
According to the CFAI and my local CFA Society, majority of the CFA charterholders are portfolio managers. On my last CFA meeting, I had a chance to talk to couple of PMs. My understanding is that a PM with a CFA charter is no different than a financial advisor. Like financial advisors from wirehouses, PMs meet with their clients and manage their accounts.
What are the differences between a financial advisor or an RIA with say, a CFP and/or an MBA to a PM with a CFA charter?
Also when I look at PMs at say, JP Morgan Asset Management, these guys actually manage a mutual fund or funds. Most of these guys have a CFA charter and an MBA from an impressive business schools. Are these PMs any different than PMs that manage client portfolios? What is the route to take to become a PM for JP Morgan and what is the route to become a PM at a private wealth management?

Thank you in advance for your inputs and insights.
 
Let’s get some things right here. A portfolio manager selects securities to invest in though a variety of analysis, dart throwing, and voodoo. They have a fund as their responsibility.
A financial advisor reads a script on a phone to get clients to put their money in said fund. They may have some ideas and strategies utilizing different allocation across funds, but that is about it. I imagine most FA do not pick stocks for clients.
A PM has a 11 inch sausage while a FA is probably a 5.5 inch sausage. Anyone with a series 7 is a FA, but not everyone with a CFA is a PM.
 
Isn’t the major difference that one does discretionary investing and one needs client approval for all the trades?
 
Thanks CFAvsMBA. From what I heard, some FAs manage wrap accounts where they manage porfolios of individual stocks and bonds. I have a friend who is a financial advisor with Merrill with a BA degree managing portfolios of index and mutual funds as well as individual stocks and bonds. He is studying for CFP would like to continue to be an FA.
Don’t PMs do that? PMs I met told me he meets with clients, manage their accounts comprising of mutual funds and some individual stocks/bonds.
 
@florinpop so if discretionary is the only difference between a PM and an FA then a PM and an RIA is pretty much the same right?
 
I am skeptical of your claim that a “majority” of CFA charterholders are portfolio managers, but that’s off topic. “Portfolio manager” has many meanings. Some PMs manage small portfolios on behalf of retail clients. Other PMs are bosses of large funds - Raj Rajaratnam was a portfolio manager. It’s not useful to define the role of a portfolio manager based on the title alone, since the title is so unspecific.
 
As an FA you’ll realize there’s very little loyalty. Clients chase high returns and as soon as they think you can’t produce, they’re gone.
PM’s have more stickiness to them depending on their clients. Endowments and longer term investors are much more comfortable with the general ups and downs, and as long as you beat the S&P by some minor margin, they’ll stay
 
CFAvsMBA wrote:
Let’s get some things right here. A portfolio manager selects securities to invest in though a variety of analysis, dart throwing, and voodoo. They have a fund as their responsibility.
A financial advisor reads a script on a phone to get clients to put their money in said fund. They may have some ideas and strategies utilizing different allocation across funds, but that is about it. I imagine most FA do not pick stocks for clients.
Not neccesarily. You can still be a financial adviser and manage discretionary investment portfolios as one of the other guys on here mentioned. There are a number of varying shades of what is a financial advisor - not all of them are salesmen. As an example, I manage about 100 discrete investment portfolios containing a mix of stocks, bonds, cash and whatever other asset we think is appropriate for the client. Given the number of portfolios we obviously adopt a fairly passive investment strategy, though we’re not index huggers and nor do we just buy 10 ETFs and leave it at that. Though I still wouldn’t call myself a portfolio manager, even though each one of those 100 accounts is a small portfolio.
 
Wow. PMs and FAs are a world apart. Some RIAs fancy themselves PMs, and at the bigger shops they’re close but it’s still a strecth. Guys at the wires do not call themselves PMs nor would anyone in the home office like it if they did. JPM Private Client is closer to an RIA set up, but again, it’s a stretch to call them PMs.
At the very least you should have a composite index you’re managing before you get to call yourself a PM. Fund, SMA, SICAV, etc. would make you legit for sure. Ultimately, PMs have a product they’re responsible for, managing it to a specific goal with a benchmark. RIAs, FAs, brokers, whatever, don’t do that.
 
Ohai,
I just looked at the jobs charterholders hold from the CFAI website and from my CFA Society website. I may be wrong but it says that 21% of charterholders are PMs. I wouldn’t know for sure.
Sweep the Leg,
So, people that are in the private wealth mgmt, who manage client portfolios are not really PMs? They are more like financial advisors? What about the guys who actually manage mutual funds? These guys call themselves PMs too.
I am just not clear what PMs do compared to FA/RIA and who we can call PMs for sure.
 
PMs at RIAs are closer to financial advisors.
PMs at MFs/HFs etc are closer to pure investors.
 
Palantir,
ohhh I see. Basically, IAs at RIA who call themselves “portfolio managers” are more like FAs. And people who call themselves “PMs” at mutual funds are investors or pure PMs.
 
A mutual fund manager is a PM. An RIA (or any other FA) that has full discretion is still not a PM. There’s a lot more to portfolio management than just putting some securities together and seeing how they do. A huge part of a PMs job is to manage daily cash flows and liquidity (especially for the mutual fund guys). They also have to manage a fund based on their prospectus. And, though I wouldn’t consider it a requirement, they generally manage a team of analysts as well.
Some FAs and just about all RIAs have full discretion over their clients’ portfolio, but they’re still in an advising capacity. Each client is different. They have different goals and needs and their assets have to be managed as such. These advisors don’t have a “portfolio” they manage. They manage client accounts.
Now, some RIAs do blur the line since you have some that specialize in certain areas (I know one that does only small value). Those guys are closer to the PM role. Obviously the RIAs that go the hedge fund route would be considered PMs. But that’s way different than a Northwestern Mutual (or even a Merrill Lynch) advisor that buys some mutual funds, SMAs, and ETFs for a client and calls himself a PM.
Again, it really comes down to whether or not what they manage is a stand-alone product. If it is - mutual fund, SMA, hedge fund, even just a composite - then you could safely call them a PM. Yes there is some grey area, but not much. The differences are pretty profound.
 
most FAs do just slang mutual funds or offer equity suggestions for their clients mostly in-line with research dept suggestions and ratings. it doesn’t necessarily matter whether you have discretion over the accounts or not as the same service can be provided assuming you work out a fee-based relationship. i get why FAs get such a bad wrap but HNW wealth managers are just FAs catering to a fancier clientele. if you’re a CEO of a company do you really have the time to do all the work and attain all the knowledge needed to perform complicated financial transactions (options strategies, manage concentrated positions, properly invest new funds, etc) and communicate these transactions thoroughly and astutely to your accountant or the CRA/IRS?
a clear distinction needs to be made. FAs at big banks usually have bad intentions as they are hired to pump product. FAs at wealth managers (WMs) usually have good intentions as they have no requirement to pump product and most come to independent WMs for this reason. if an FA is backed by a team, he/she will usually provide good service, plenty of investment options (equities, options, FI, insurance) and advice (tax, investment planning, financial planning, estate planning). Some FAs are also PMs but usually need a team to operate in-house portfolios well. good FAs can have discretion and offer you choice (discretion is available at independent WMs or WMs like Merrill as described by infinity above). crappy FAs always don’t b/c they work for a big bank.
if you guys need more info just ask. i work for an independent WM and am well versed on what exactly an FA (and his team) can and can’t do.
 
Sweep and Matt thank you for your insights and informations. For someone who likes to ultimlately go into RIA to become an IA one must start as an FA?
I personally want to be a PM for a mutual fund. That is my goal. I know it is hard blah blah blah but what is the best route to take for me to have a chance to become a PM for a MF?
 
Basically find a job analyzing securities/portfolio analyst work/get a top MBA. Easier said than done right? I’m trying to do the same!
 
Matt likes anaysis is hitting the nail on the head.
Larger RIA’s may mange billions and have “portfolio managers” on staff but a true PM is really a mutual fund manager style position. FA’s are sales people.
Also, the biggest difference is that PM are generally over acheivers, very smart, from top MBA programs w/ their charters. They’re the cream of the crop. Many FA’s dont even have a college degree and have little knowledge of markets. Maybe a well qualified one has a CFP + BA from a decent school. FA’s sell what PM’s are putting together.
 
Thank you all for great responses and insights!!
Palantir, good luck to you too!!! PM for a large mutual funds!! FIght on!
But first I need to get a job in an equity analyst role :( sadddddd
 
a bunch of idiots arguing over a definition of a term, who really gives a damm?……from the looks of it, none of you manage money or make decisions with other people’s money cause if you do, the title really doesn’t matter now does it……
 
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