How to Choose the Best Money Management Company

Many people have some money saved that is just sitting in a savings account and earning a paltry amount of interest. Perhaps you are one of these people? Banks are notorious for not paying high interest rates to their customers, especially since the great recession. This causes many people to seek alternative ways to invest their savings so they can put their money to work for them. Obviously, there are few decisions that are more important than choosing a money management company to invest your money for you. You are literally putting your financial future in the hands of the company you choose. If you decide to go it alone, then check out my book: Stock Market Investing for Newbies. Otherwise, it you seek the help of a professional company then you will want some tips. Here are a few of the most important things to think about as you are looking at various money management companies.

Do they have a high rate of return?

It goes without saying that you want to find a money management company that has a proven history of making a lot of money for their customers. What is the average rate of return that the company achieves? This should be the first thing that you take a look at. Nothing else will matter if the company is not able to give you a high rate of return. It will be easy for you to research the average rate of return that each company has achieved. Have they even been able to beat the S&P-500 average over the past 5 or 10 years? About 85% of money management firms are unable to do this! That’s why for many folks I recommend just investing in a market index fund by yourself.

For those that are uncomfortable with this, you can pay fees to have the “experts” do this for you. It does pay to do a bit of homework though. The investment industry is carefully monitored to prevent fraudulent transactions from taking place. But bad apples do slip through the cracks now and then. Most are caught and filtered out before they will have a chance to swindle you. This is good because it protects investors and it makes it easy to find out which companies can make you the biggest return on your investment.

When was the company founded?

This is another key factor that you need to take into consideration. You should avoid handing all of your money over to a company that just got into the investment business a couple of years ago. With longevity, you can feel more comfortable that it isn’t a fly-by-night operation. There are literally thousands of legitimate money management companies out there for you to work with. For a specific example, Fisher Investments has been around since 1979–that’s over three decades of experience for FI. Many other companies have been around over 100 years!

Has the company had legal problems?

You should never invest your savings with a money management company that has been convicted of criminal activities in the past. This should go without saying, but I’m going to say it anyway :-). You need to perform a thorough background check on any company you are thinking about investing with. It is in your best interests to learn as much as you can about any company that will be handling your money and deciding how it will be invested. There are many companies that have a clean history with no legal infractions. There is no reason for you to do business with a company that has been involved in any illegal activities. Would you do business with the founders of Enron?

What is their commission?

Finding a money management company that has a history of making a large amount of money for their investors is a great thing. However, you also need to pay attention to their commission. Try to find a company that charges a reasonable fee for their services. Many money management firms seem like a good deal on the surface, only to hit you with huge fees. Many firms actually under-perform the S&P-500 when the fees are taken into account. Be wary!