PRIVATE MONEY MANAGEMENT IS BROUGHT TO THE NOT-SO-RICH
By Dolores Kong
07/02/2000
The Boston Globe
Private money management, once an exclusive service
for those with at least half a million dollars, is now
available to anyone with a mere $50,000 to $100,000
and an Internet connection.
The Web is bringing down minimum account sizes and
making the world of money managers less of a private
preserve for the really rich or institutional
investors. Now the simply well-to-do individual can
get in on the game.
The latest Internet address for private money
managers, www.myMoneyPro.com, launched last week and
promises to offer services "at historically low
account minimums," beginning at $50,000.
"It's access to the best money managers in the
country," said Viggy Mokkarala, vice president of
marketing for the Sunnyvale, Calif.-based Internet
company that premiered Monday.
MyMoneyPro.com joins such other sites as
www.WrapManager.com and www.RunMoney.com. These sites
offer between just over a dozen to more than 100 money
managers with whom they have relationships, out of a
universe of thousands of such managers.
There are also Web sites set up by some of the
individual money management firms themselves. And
there are sites that rate the managers and provide
details and contact information for them, such as
www.ManagerReview.com and www.NelNet.com.
The growth in Web sites relating to private money
managers parallels the increase in assets in
individually managed accounts.
Between 1998 and 1999, assets under management in such
accounts grew $97 billion, to $425 billion, according
to statistics released in February by the
Washington-based Money Management Institute, a
national trade association.
But private money managers, whether visited online or
off, still may not be for everyone who meets what
seems to be an ever-dropping minimum account size.
Some people who have enough to join the private club
may opt out because they're happy with their mutual
funds, or they may know how to successfully manage
their money themselves.
Some of the chief reasons the well-to-do seek out a
money manager: tax planning, individual investment
advice, and special attention that only money can buy.
But perhaps the biggest reason the wealthy opt for a
privately managed account over an actively managed
mutual fund held in a taxable account is control over
capital gains.
In a mutual fund, everyone's money is pooled together,
and the fund manager's buy and sell decisions are made
without consideration for an individual shareholder's
tax situation.
In an individually managed account, the private money
manager buys and sells individual securities on behalf
of the well-to-do client, usually with the aim of
minimizing what may already be a hefty tax bill.
The private money manager typically gets compensated
with a certain percentage of the money under
management, at a rate that can be equivalent to or
less than the cost of investing in a mutual fund.
"Anybody who has a substantial amount of money and who
needs a level of service beyond what they can get with
a mutual fund would probably be using a money
manager," said Peter Walker, publisher of Money
Manager Review, which analyzes the performance of
thousands of private managers and offers both a print
and online subscription.
Walker's Web site, www.ManagerReview.com, provides a
lot of free information about individual managers and
the money manager hiring process but allows only paid
subscribers access to the detailed performance and
rating data.
Here's a summary of some of the Internet sites
relating to private money management:
- www.myMoneyPro.com: A banner headline on this site
proclaims "Our Top Independent Money Managers," but
they're not necessarily number one and they're not
rated by myMoneyPro.com. Rather, according to the Web
site's press material, the management firm "must have
delivered sustained performance in the top 25 percent
when compared with its peers during the previous three
to five years, according to national ratings services"
such as Money Manager Review or Nelson Investment
Management Network. To view the managers, their
investment philosophies, and other details, you need
to register and get an access code.
The 15 money managers who have signed up so far with
my MoneyPro.com are also not personally handling the
accounts for investors who register through the Web
site. Rather, they are "subadvisers" who share their
model portfolio with the Internet company, which then
constructs an investor's portfolio according to the
model of the particular money manager the investor
picks.
The investor can customize the portfolio, however, by
providing special instructions about particular
investments or tax concerns.
An account is set up in an investor's name through
Fidelity Investments. Fees range from as low as 1.05
percent to as high as 3.5 percent, depending on the
account size and the money manager you pick. There are
additional flat fees for changing money managers in
less than a year and for accounts under $100,000.
MyMoneyPro.com shares some of its fees with the money
managers, but otherwise does not compensate them. The
managers do not pay the Internet company.
- www.WrapManager.com: To view the "over 55 top tier,
professional money managers" available through this
site, you need to register or open an account. At the
time of this review, however, there were some glitches
trying to submit a registration or open an account - a
prompt asked for more information, but there was no
field in which to put that material. As a result,
access to data about the "top tier" money managers was
denied. But the site, a registered affiliate of The
Investment Center Inc., in New Jersey, did reveal to
all visitors that the minimum account size is $100,000
and the "all-inclusive fee" is 1.25 percent.
- www.RunMoney.com: Launched in May "Because Wall
Street is No Place for Pedestrians," this site also
requires a minimum $100,000 investment, but its annual
"all-inclusive fee" ranges from 1 percent to 1.5
percent, depending on the size of the account. While
the most detailed information is reserved for those
who register, the casual visitor to this site can find
out more information than at myMoneyPro.com or
WrapManager.com, such as some basics about the 120
portfolio managers available here and a comparison of
mutual funds and individually managed accounts from a
fee and tax basis. The neatest feature is a "Mutual
Fund Buster" that allows you to enter your mutual fund
holdings, then calculates how much more in taxes and
fees you'll pay over 20 years in those funds compared
with an investment in a similarly styled individually
managed portfolio.
- www.ManagerReview.com and www.NelNet.com: If money
is no object, and you can afford the usual $500,000 or
higher minimum account sizes for the best private
money managers as rated by Money Manager Review or
Nelson Investment Management Network, you can check
out the rating services at these Web addresses. Some
of the information about the managers is available for
free, but the more detailed data usually requires a
paid subscription.