If math and economics were among your favorite subjects in high school, a career in finance might appeal to you. Finance is a broad industry, with a wide assortment of opportunities for analytically minded professionals. One such opportunity is a career in investment management. What is investment management? Keep reading this career guide for an in-depth exploration of this profession and a look at the pathways to becoming an investment manager.
What Is Investment Management?
Investment management is the process of selecting investments to build a portfolio designed to meet specific investment goals such as maximizing return within given risk parameters for the invested funds. An investment manager may be either a person or a company providing this service. Investment management professionals are also sometimes referred to as portfolio managers, investment fund managers, asset managers or fund managers.
Many individuals choose their own stocks and funds to invest in. This process is referred to as investment management or portfolio management even when they haven’t hired a professional to curate their portfolio for them. However, hiring a professional is often a wise course of action, particularly since many people do not have time to pay close attention to their own portfolios.
The ultimate responsibility of investment management professionals is to grow their clients’ financial assets. However, they do not take the same approach with every client. Instead, they seek to ensure that their investment strategies are aligned with their clients’ individual needs, goals and preferences.
Now that you know the answer to the question, “What is investment management?” you might be curious about how investment managers make money by growing their clients’ money. Often, these professionals charge a portfolio management fee for their services. It’s also common for them to take a percentage of the profits they generate. This means that the better their clients’ portfolios perform, the more money they earn for themselves. There are also other types of payment structures including salaried and flat feed.
Some investment firms only serve certain types of clients. For example, some firms specialize in working with individuals, while others manage the investments of major corporations, universities, charities or trusts. Still other investment managers specialize in working with particular types of investments.
What Does an Investment Fund Manager Do?
Another way to consider the question, “What is investment management?” is to take a look at the specific job duties of professionals in this field. There are three main areas of responsibility:
- Client evaluation: Each of a fund manager’s clients has unique needs, goals and preferences. The manager must conduct a thorough assessment of each new client along with periodic re-assessments of existing clients to ensure that clients’ investment strategies are aligned with their needs. For example, younger clients saving for retirement may be comfortable with high-risk, high-reward investments, whereas older individuals are more likely to prefer low-risk investments that protect their existing retirement funds.
- Investment strategizing: Based on a client evaluation, the fund manager creates a diverse portfolio intended to grow the client’s money.
- Investment monitoring: Investment analysts calculate the potential risks and returns of various investments. Then, the investment manager evaluates this data and adjusts the portfolio accordingly.
Within these main categories, there are many more individual tasks that portfolio managers typically perform on a regular basis. These may include any of the following:
- Research stocks and funds to explore new product offerings, earnings statements and other new developments that may affect the value of investments.
- Prepare reports for clients that explain the progress of their current investments and outline new investment possibilities to add to their portfolio.
- Meet with prospective clients to explain what investment management can do for them and outline a proposed way of building their portfolio.
- Meet with current clients to explain the progress of their portfolio, answer questions and develop new portfolio initiatives.
- Enroll in continuing education courses and obtain or renew licenses and certifications to enhance professional knowledge and skills.
Although every portfolio manager must follow the best practices of the industry, those who have been in the business for a while may develop their own strategies and approaches. For example, when assessing clients’ portfolios, an investment manager may take a “horizontal” and/or a “vertical” approach.
A horizontal approach involves evaluating one particular asset or fund and then making any needed changes across all client portfolios that contain that asset. A vertical approach involves scrutinizing a client’s entire portfolio to ensure that it is well-diversified and in a position to meet the client’s goals. In both approaches, an asset manager must continually re-evaluate client portfolios to keep them at peak performance.
How to Become an Investment Manager: An Overview
If you’re still in high school, your journey to becoming an investment manager should start with a visit to your guidance counselor. Talk to your counselor about your career goals and review your academic progress to date.
Your counselor may recommend shifting your course load to include relevant classes like finance, economics, statistics and accounting. Humanities classes are also important for aspiring financial professionals as the written and oral communication skills they teach are invaluable. You will need these skills to interact successfully with your future clients and colleagues.
In high school, you can begin exploring part-time job and internship opportunities. Reach out to investment firms and related companies near you to find out if they have any openings. In addition, it can be helpful to begin reading financial publications and newspapers to develop your understanding of financial concepts and terminology.
After high school, you will need to earn a finance degree at an accredited school. Your degree program should teach you all the fundamentals of finance and investment strategies, although you will continue to grow your knowledge throughout your years in the workforce.
There are a number of licensure requirements that affect portfolio managers. You should plan on acquiring relevant work experience in addition to pursuing licensure and certifications. During these early years in the workforce, you should set aside time each week to study for your licensure exams.
What Are the Important Characteristics and Skills of a Portfolio Manager?
As you work through high school and college, you can actively cultivate the important characteristics and skills of a portfolio manager. A successful investment manager needs to bring a variety of qualities to the workplace, such as the following:
- Communication skills: These are a top priority for portfolio managers as their job is typically a client-facing one. They must ensure that all their clients receive regular progress reports regarding the state of their investments. Clients are often unfamiliar with investment concepts and terminology, so they will need explanations. In addition to interacting with their clients, portfolio managers must communicate effectively with coworkers, including other investment managers and financial analysts.
- Analytical reasoning: Investment management professionals must have a keen eye for numbers. They must be able to analyze and interpret raw data and apply their findings to their clients’ portfolios.
- Informed prediction: Part of investment management involves taking a look at past and current data. Another part involves applying that information to predict future trends. This process allows portfolio managers to adjust clients’ portfolios for optimal performance.
- Calm demeanor: Markets fluctuate — sometimes wildly. Yet, investments are typically a long game. Investment managers ideally possess a calm temperament that helps them avoid panicking and making ill-advised investment decisions when the markets fluctuate.
- Organization: The daily tasks of investment management have been greatly enhanced by technology. However, while modern professionals do not typically have to deal with rows of filing cabinets full of client files, investment managers still need to be well-organized. Specifically, they must be able to juggle large amounts of data and multiple ongoing projects at once without losing sight of priorities.
Do You Need a Finance Degree for a Career in Investment Management?
Yes, you need a finance degree to pursue a career in this field. It’s possible to get your foot in the door at an investment firm with a Bachelor of Science in Finance. Look for a program at an accredited university that offers a rigorous curriculum aligned with industry standards. Some of the topics you study are likely to include the following:
- Financial risk management and insurance
- Organizational behavior and management
- Ethical and legal issues in business
- Investments and portfolio management
- Economics of money, banking and financial markets
These bachelor’s degree programs do not typically include an internship or practicum requirement. However, it’s certainly in your best interests to pursue similar hands-on learning experiences. Beginning in your sophomore year, you should start applying for internship opportunities at investment firms, financial advising firms and related businesses.
These internship experiences will serve as valuable additions to your resume. In addition, you’ll build professional connections that you can rely on as you search for your first post-graduation job.
After you’ve gained some work experience in the field, you may decide to go back to school. Earning a graduate degree can allow you to pursue advancement to a higher-level position at your current firm or at a company that appeals to you even more. Alternatively, you may decide to start your own investment firm. A Master of Business Administration (MBA) in Finance degree is a valuable option for investment managers.
Do Portfolio Managers Need to Be Certified or Licensed?
In general, aspiring portfolio managers should plan on pursuing licensure or certification after school. However, certification requirements for portfolio managers vary from one state to the next, so be sure to check with your state’s financial regulator.
In addition, note that many licensing exams require candidates to have employer sponsorship. In other words, you will need to land a job with an investment firm or similar company before you can qualify to sit for those exams.
Portfolio management licenses are overseen by the Financial Industry Regulatory Authority (FINRA). Exactly which licensure examinations you need to take depends largely on your career goals and job responsibilities. For example, to trade brokered certificates of deposit (CDs), you would need to take the General Securities (Series 7) exam to qualify for registration.
There are a few ways to become registered while working as an investment manager. For some individuals, the SIE/Series 7 path is a wise choice as it can be taken prior to employment. Others may decide on an investment advisor representative (IAR) path and work at a registered investment advisory (RIA) firm. Others may have a designation that allows them to waive certain examination. In other cases, individuals may also be required to register with the Securities and Exchange Commission (SEC) as well as complete other registration or examination.
Register With Your State’s Securities Agency
Each state has its own securities agency, and you will need to register with yours in order to practice as an investment manager. The process of registering varies from state to state. In general, however, you can expect to submit an application with supporting documentation, pay the application fee and undergo fingerprinting for a background check.
Obtain a Chartered Financial Analyst (CFA®) Designation
The CFA® charter is widely considered to be the gold standard among portfolio managers. Holding this designation may qualify an individual to pursue senior- or executive-level positions in asset management firms. In addition, many companies prefer that their employees hold this license.
However, you won’t be able to qualify to become a CFA Charterholder immediately upon graduating with your finance degree. Instead, you will need to acquire at least four years of full-time work experience and pass three CFA® examinations that cover topics such as corporate financing, portfolio management, economics and securities analysis. You will also need letters of reference.
Where Do Investment Management Professionals Work?
Another step in the process of how to become an investment manager is exploring job opportunities. You’ll find a wide range of employers for professionals in this field, including the following:
- Investment banks
- Investment and asset management companies
- Insurance and life insurance companies
- Financial planning firms
Investment managers typically work on a full-time basis, and overtime may be required from time to time. Note that while the two main American stock exchanges (the NYSE and the NASDAQ) are only open from 9:30 am to 4:00 pm EST Monday through Friday, investment managers may work from 8:00 AM to 5:00 PM. Even when the stock market is closed, these busy professionals are hard at work monitoring their clients’ portfolios and planning investment strategies.
Grand Canyon University’s Colangelo College of Business offers a diverse array of finance degree programs for students who aspire to become financial professionals. Apply to enroll in the Bachelor of Science in Finance degree program and work through a 21st-century curriculum that prepares you for a rewarding career in the finance industry. Click on Request Info at the top of your screen to learn more about our Christian learning community.
The views and opinions expressed in this article are those of the author’s and do not necessarily reflect the official policy or position of Grand Canyon University. Any sources cited were accurate as of the publish date.