Investment Management Consulting (IMC)

Investment Management Consulting (IMC)

As with our lead service offer of personal financial planning, investment management consulting is also a core competence at Cumbie Advisory Services, Inc (CASI).

We practice fundamentally differently from our typical financial planner and financial advisor peers in this regard. We are not investment managers, money managers, or asset managers. We are also not wealth managers, a popular marketing term that attempts to simultaneously hybridize and elevate a combination of financial planning and money management.

As investment management consultants, we assist our clients in understanding and prudently accessing the world’s capital markets in a thoughtful, structured manner, through various money management firms as indicated per client situation, and in a manner consistent with the clients’ personal financial planning context. Our planner selves hone in very quickly on our clients’ planning context and the nature of investment management indications and assignments arising therefrom. Then, our investment management consultant (IMC) aspect of ourselves kicks in and we assist clients in the development of investment policies that clarify investment management indications and thus assignments to be let to third party investment managers. We then provide support to our clients not only in the area of manager selection and hiring, but also in monitoring, and of course when required, due to assignment change, performance concerns, or other reasons, manager replacement.

As referenced in the Philosophy section of this website, IMC’s origins were in the institutional investing world. Pension committees for large corporate retirement plans recognized the need to level the playing field knowledge and understanding-wise, between themselves as typically corporate executives/business people and the multitude of specialist professional money managers constantly “parading” in front of them in search of assignments. The essential problem they faced was one economists know as asymmetry of information, and the degree of asymmetry of information between these purveyors of and consumers of investment management services was daunting to the point of overwhelming. In fact, just the specialized nature of investment management jargon and the statistical torturing of data alone were enough to leave even fairly business and finance savvy pension committees in a constant state of lurch, wondering if they were doing the right things. This reality spawned the investment management consulting profession in the United States in the last few decades of the 20th century.  For more on this notion of asymmetrical information between buyer and seller, please see the description of Lemon Theory under the description of our personal financial planning services. 

While the roots of the IMC profession as described above were in the corporate and thus large scale institutional investment world wherein fiduciaries routinely let multi-hundred million and even multi-billion dollar assignments to managers, the IMC profession, with the considerable help of modern information technology tools has brought institutional style IMC practice and process to individual investors. This makes sense as individual investors will typically face far steeper asymmetry of information, and thus un-level playing field hurdles than do large retirement plan fiduciaries.

So, as IMCs, we enable our individual investor and small institutional clients to economically access and intelligently interface with and prudently utilize the services of dedicated, and in some instances, specialist money management firms. This is as opposed to allowing your retail financial planner, financial advisor, or stockbroker to run your money. We have securities and investment advisory licensed professionals here, have been at this for a long time, and thus understand both models very well. We have a few respected planner peers across the country who do run money for their clients and who we believe do good work. Having said that, we have consciously and very intentionally chosen to operate differently in this regard and maintain an independent arm’s length objective stance with respect to the professional management of our client’s financial assets. Most of the top registered investment advisor money managers who attract our attention and get through our screens are much larger and more deeply resourced firms, staffing and technology/systems-wise than most retail practitioners we know.

IMC fees are typically based on a percentage of assets under consult and are usually charged to the account under our advisory purview quarterly along with manager and custodial fees. In the instance of our firm, IMC fees we charge do not exceed 1% (100 basis points) per annum, or .25% (25 basis points) per quarter and are subject to substantial discounting based primarily on the amount of financial assets involved.

Again, this is an area of exceedingly asymmetric information, wherein one simply does not know what one does not know. In our experience, very few individual investors have a sufficiently deep understanding of traditional and behavioural economics, capital markets functioning, and investments in general to enable them to meaningfully and prudently differentiate one money management offering from another, much less the resources to customize assignments and then objectively monitor and properly benchmark managers through time as they attempt to execute those assignments. As with personal financial planning, the nominal cost of IMC services does not tell the whole picture. When done properly, investment management consulting, like personal financial planning, should entail the incurrence of no net cost after the value-add of the consulting work itself is considered. If IMC fees are indeed a true net economic cost to the investor, then the expected value-add, whether it be in the form of tax efficiency, mistake avoidance, risk management, cost control, investor communications, performance monitoring, or none of or all of the above, is simply not happening and the engagement is a nonsensical one and prompt revision or discontinuation is indicated.

As with personal financial planning, investment management consulting done right pays off by bringing best practice in the form of knowledge base and process to the situation. Because of the mathematical “law of losing”, investing is an area where it is particularly important to conduct one’s business in a manner that steers way clear of disasters. And there are far more disasters out there than the big name ones you occasionally hear about in the news. Retaining the services of a qualified, objective investment management consulting organization is the best way we know of to avoid investment disasters. And utilizing the services of a qualified personal financial planner is also an excellent idea in this regard. We combine the best of both these worlds and offer both of these related, yet separate services to our clientele in a very mutually beneficial, synergistic manner.

Please contact us to visit about how professional investment management consulting services might fit your situation, and help to level the playing field between you and the money management world, and in turn, help you close, or at least minimize the widely researched and typically surprisingly large gap between theoretically available investment returns and actually realized investor returns.