Should you hand over the management of your assets to a boutique fund management firm? Most small businesses and investors seem to think so. For one, a boutique offers a significant advantage in performance if it is compared to larger firms that specialize in asset management. In addition, it offers investment processes that are more differentiated and disciplined as well.
According to an article in the Financial News, banks are now more accommodating in including boutiques on their distribution platforms. In addition, online correspondence and the latest advancements in internet technologies also make them easily accessible for individual investors.
Here are other reasons why hiring the services of a boutique wealth management firm makes sense –
When it comes to asset management, a boutique management firm is a more convenient prospect for individual investors mostly because the people who manage it already have a considerable amount of experience in marketing or investing. In addition, the managers who are in charge of such a company already have experience working in larger investment firms before they decide to offer their expertise in a more specialized work environment.
A Specialized Talent Pool
The flexibility such a firm offers enables it to attract the best talent in investing especially investment managers who prefer having more power over investment processes. An investment management firm exhibits at least three specific criteria –
- A smaller presence in headcount and Assets Under Management (AUM) as compared to global wealth management companies
- Boutique firms offer highly specialized approaches to investing. For instance, they might focus on specific sectors or serve particular types of clients
- Instead of being owned by private investors, a boutique asset management firm is in part, or solely owned by an investment team
All of these perks can result in a considerable amount of investment advantages for a client whose risk profile is similar to what the firm offers.
Why such a firm offers superior services is apparent. Their managers have vested interest in ensuring that the firm does well since they might invest their own personal assets in the portfolios that they manage.
Enterprise versus Boutique Wealth Management
Large wealth management firms bring a variety of resources to the table. There is no doubting the fact. Their approaches are based on teams that include financial planners, tax professionals, relationship managers and other financial experts. Such vast areas of expertise would offer better prospects to individual investors, right? Unfortunately, that is not always the case. When it comes to asset management, a bigger pool of expertise is not always better.
It is easy to see why; a larger advisory firm would operate as a scalable model of efficiency more often than not. Its main objective would be to manage and build a growing pile of assets. A boutique investment management firm, on the other hand narrows its view of its clients thereby allowing it to offer services that are higher in quality that what a company might offer at the enterprise level.
Remember, while larger wealth management firms might offer economies of scale, technology and compliance, their services rarely translate into performance advantages for the clients whom they serve.