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How Important Is A Fund Manager To Your Portfolio’s Success?

How Important Is A Fund Manager To Your Portfolio’s Success?

By David Pritchard

At the end of my last blog post, I discussed the value of financial advisers and fund managers. However, for those less familiar with the world of financial investments, these two terms might be confusing. What exactly is the difference between a financial adviser and a fund manager?

Financial advisers

A financial adviser is somebody who deals directly with both investors and the public to advise them on all aspects of their finances: investments, pensions, life insurance, inheritance, and tax to name a few. They deal with their clients individually and maintain an ongoing relationship with them in exchange for payment. 

This pay is either an ongoing fee paid directly to the adviser or sometimes through the products themselves. The adviser’s priority is the client and they focus squarely on them – they do not receive commissions from the investments and pensions they sell (this was stopped in the UK well over ten years ago). 

There are two types of financial advisers: an independent adviser or one who is tied to a particular provider.

Think of it like a supermarket with professional shoppers. A tied adviser can only offer you the supermarket’s own brand. With an independent adviser, however, you can explore everything on offer and put a wide range of products and brands from different providers in your trolley in order to fit your tastes, needs and budget.

For this reason, independent financial advisers are, and have always been, the gold standard of advisers.

However, in order to provide clients with the best advice on the market, we need to have access to the best fund managers.

Fund managers

A fund manager’s job is to manage the collective money that their combined investors invest in their funds in a particular way or within a particular sector. 

Some funds will invest into commercial property, others into fixed interest such as corporate bonds, gilts, high-yielding gilts, and so on. A UK equity income fund manager – a popular fund – might manage anything from 100 million pounds to 20 billion pounds, for example.

A fund manager will decide what funds they want to invest into. This involves researching the market, listening to economists, and also talking to the companies they are considering investing in so they can learn more about the company – their profitability, their performance, their cash flow and levels of debt, and so on. They will then choose individual shares in this particular type of fund to invest into, while updating their research and monitoring those companies on a regular basis.

How fund managers and financial advisers interact

There are over 3,000 funds available in the UK today – there’s no shortage of funds and no shortage of fund managers. However, regular monitoring and assessment – and when needed, switching in and out of fund managers – is really important. The job of a financial adviser, particularly a good one, is to talk to and assess the fund managers you have invested with, and make sure they are still the best choice for you.

At the end of the day, there should be no cost to switching in and out of funds thanks to the platforms we independent advisers use. What we consider to be particularly important is that the fund managers are staying aware and analysing their own performance. 

Some good fund managers are the lucky ones who happen to hit on the right area of investment at the right time, making a lot of money for their clients in the process. Other fund managers do a massive amount of due diligence on the shares or investments that they are going to put their clients’ monies into. These fund managers are very good at analysing what is happening and what isn’t. 

More than just a computer

These active fund managers are not always common. Quite often, investments done in the city nowadays are actually carried out by computers. This can be risky – a computer cannot intelligently analyse the full picture, only react to pre-programmed inputs. This can result in a market freefall if a share drops below a certain threshold and every computer simultaneously decides to sell.

Active fund managers, on the other hand, are actual people researching the market with a team of analysts who know what they’re doing. They will have good track records and experience in their areas.

Ultimately, however, a financial adviser’s job is to get the best deal we can for our clients. This involves reviewing funds on a regular quarterly basis. If a fund performs badly for three months, then as long as I know where and why, I can live with that. However, if it underperforms compared to its peers over six or nine months, that is more serious. We need to know why it is doing that, what changes the fund managers will be making to turn things around, and when they feel those funds will be competitive again. 

If we can’t get those answers, then we are in a position to recommend our clients to switch out for a more competitive alternative. It is extremely important to make sure that your adviser, particularly if they are independent, is in regular contact with your fund managers, and assessing how well they are doing, in order to make decisions as to whether they should keep your money invested or move over to another fund.

Your ongoing service contract

This should be all part of the ongoing service contract that you have with your adviser. So make sure your adviser is assessing your portfolio, make sure they’re reviewing it on a regular basis, and that they’re in contact with the fund managers to ensure that they are getting you the best possible returns for your investments.

Personally, I have run Applewood Independent for 25 years and have roughly 35 years’ experience as an independent financial adviser. I know all the companies and fund managers, and we have regular meetings with them to stay on top of all the best funds for our clients.

Our job is to give great advice to our clients in order to make the most of their money within their risk profile, and to achieve their aims over their timeline. To do that, we have to have the best investments available, and that means having access to the best fund managers around.

If you want to learn more about fund managers and the role they play in your investments, listen to our latest episode on our new podcast A Dab Of Investment, where I go into more detail about what a fund really is, and how they impact your portfolio.

If you’d welcome our input, expertise and experience, please get in touch by emailing me at

The views expressed in this article are those of the author and do not constitute financial advice. Applewood Independent Ltd is authorised and regulated by the Financial Conduct Authority. For financial advice designed for you and your specific circumstances, please contact the author using the contact details provided in this article or, alternatively, contact the Applewood Independent Ltd office on 01270 626555.

The value of your investment can go down as well as up, and you may not get back the full amount invested.

Past performance is not a guide to future performance.