Should You Hire a Specialist Investment Manager for Part of Your Portfolio?

Most investors think of hiring an investment manager as an all-or-nothing decision. You either give someone responsibility for your entire portfolio or manage it yourself.

But there's another approach worth considering: hiring a specialist to manage just one part of your investments.

Think about how we approach other areas of our lives. You might have a primary care physician who oversees your general health, but when something requires specialized expertise, you see a specialist. Investing doesn't have to be so different.

Why Would You Need a Specialist?

The first question to ask yourself is what you actually need a specialist for. Are you looking to generate more income, pursue higher growth, or add diversification to your existing investments? The answer will help determine what kind of specialist makes sense for you.

Not every part of your portfolio needs to accomplish the same thing.

Some investments may be intended to preserve wealth, provide income, or fund expenses in retirement. Others may be intended for long-term growth, where you're willing to accept greater fluctuations in value in pursuit of higher returns.

A manager who is good at building a diversified, long-term portfolio may not necessarily specialize in active trading, managing market downturns, or pursuing more aggressive growth opportunities.

These are different disciplines, and each requires a different set of skills.

How Would This Work?

Suppose you have a $2 million investment portfolio managed by a financial advisor.

You might decide to allocate $300,000 to a specialist investment manager whose focus is pursuing higher growth through a more active investment approach.

Your existing advisor could continue managing the remaining $1.7 million, overseeing your broader financial plan, retirement needs, and overall investment allocation.

The specialist would have a narrower responsibility: managing the portion specifically designated for growth.

What Should You Look For?

Before hiring a specialist, I'd focus on two questions.

First, does the manager have a clearly defined investment approach, and does it align with what you're trying to accomplish? The manager should have the expertise and experience to help you achieve it.

Second, does the strategy complement what you already own? Hiring another manager makes little sense if you're simply adding more of the same investments at a higher cost.

You should also consider fees, liquidity, taxes, and how the managers will coordinate.

The Bigger Picture

The objective isn't necessarily to replace your existing financial advisor or complicate your investments.

It's to recognize that different parts of your wealth may benefit from different investment approaches.

For investors with substantial portfolios, hiring a specialist for a carefully sized portion can be a sensible option, provided the risks are understood and the overall portfolio remains aligned with their financial goals.